Big news in the sports world this weekend.
Shohei Otani signed a record contract with the LA Dodgers
$700 million for 10 years,
the largest contract in U.S.
team sports history, surpassing the
$426,000,000 twelve year deal for LA Angels outfielder Mike Trout,
Otani's former teammate, and $450 million ten year deal for
Kansas City Chiefs quarterback Pat Mahomes.
Joining us now with more on how this monster deal
impacts the economics of baseball is Patrick Reese,
Washington University in Saint Louis,
Director of Sports Business Program and Sports Impacts Founder and
President Patrick,
Great to have you here.
So if any player is worth it,
Ohtani is worth it, right?
Kind of a singular talent,
but put it in perspective in terms of what it
means.
Is it? Is it a good deal for the Dodgers?
How does it fit into current Major League Baseball economics?
Well, it's certainly a great deal for the Dodgers and
more importantly,
for Major League Baseball. I'm actually in Los Angeles now,
and I can tell you being on the ground here
that there's just enthusiasm.
But I say great for Major League Baseball because you
had a star in Mike Trout,
who is kind of buried in Anaheim.
Anaheim is kind of a graveyard for Major League Baseball
stars.
And now that Otani is with the Dodgers just a
few miles away.
And yet, what a world of difference it makes for
the entire league,
because every time he goes on the road,
he's going to be a marquee.
The Dodgers, I have a history of working with Japanese
stars,
so I think this is where the Dodgers will see
the greatest increase in their revenue going forward is an
international revenue growth and corporate partnership growth.
Dodgers, they have sold 3.7 million in ticket sales the
last several years,
tops in baseball, about 82%
attendance capacity. And I think that's going to be closer
to 90%
based on the enthusiasm here in this market for Shohei
Ohtani.
Yeah. And presumably visiting as a visiting team,
the Dodgers will draw really well as well.
Now people looking at this saying look,
$70 million annualized over the life of this contract.
I mean, there's some whole teams that don't have a
$70 million payroll.
Now there are some adjustments here it where the payments
are going to be spread out.
So tell us about that.
And and again, is it not just a case of
the rich teams getting richer here?
Well, I'll tell you, that's what I thought at first
to talk about two things.
The deferred payments. This is not the first time that
the Dodgers have engaged in deferred payments.
Mookie Betts, Freddie Freeman, two of their other stars and
likely future Hall of Farmers.
They've engaged in those kinds of deferred payments so that
the team can still have room to fit additional talent.
The locals tell me they need relief pitching.
So hopefully some of that money that Ohtani is deferring,
they can spend elsewhere. But the other issue here is
is truly
If you look at last season again,
when money just felt like this,
you worry that the big market teams are dominating.
But last year, of the 12 teams that made the
postseason,
six of them were either 17th in payroll or below.
They were in the bottom half of league payroll.
Two of the teams, Baltimore and Tampa,
were 28th and 29th in payroll,
and the World Series participant,
Arizona Diamondbacks, were 21st. So you still have to spend
your money shrewdly and you still have to scout and
develop players.
Yeah, there is a bit of a sense out there
that good draft picks over years and a lot of
the good analytics can help out here.
And you know, there have been a couple of $200
million payroll teams as much as a decade ago and
there were only two last year.
So I agree with you in general,
but are the overall economics going to break here at
some point?
Because baseball does not necessarily have the richest TV packages.
And and in terms of how much there is to
go around for,
for the league itself, is it not going to shrink?
Well, that's again, it's always a concern for me.
Again, I don't anticipate other teams are going to be
throwing this kind of money because truly Ohtani is a
Unicorn with this ability to both hit and pitch Babe
Ruthian. So you're not going to see that kind of
money being played paid to other players in this free
agent season.
But when you look at the economics of baseball,
especially the regional sports networks have crumbled.
So you don't expect that the money is going to
come from there.
I I think ultimately you will see the next National
Meteorites deal will be an increase.
But baseball has fallen behind the times as it relates
to football and basketball.
It will never again in this country be one of
the top two sports,
football and basketball now have that firmly,
firmly cemented. Now quickly, I mean I imagine part of
the rationale here is Otani is a global phenomenon.
You would, Yes, absolutely. I mean,
the Otani just captures the imagination.
We already know that there's a rich history of Japanese
ballplayers coming to this country and and succeeding.
And so they're seeing that as an opportunity.
All of these sports, right,
All the professional sports league want to grow internationally.
And also, let's not forget about private equity capital that's
flooding into pro sports more so than ever before.