Ripple effects of Shohei Ohtani's contract: How the Dodgers will and won't profit off MLB's biggest star
Ohtani is one of the most valuable assets in sports, but there are some surprising ways the Dodgers won't benefit from having him in the lineup
It says a lot about Shohei Ohtani's record-obliterating, $700 million contract that when the Los Angeles Dodgers' business department was asked about the possibility, they reportedly didn't bat an eye.
More than any other baseball player, Ohtani is a business unto himself. He's a great player, yes, but that's not the only thing the Dodgers were looking for while in pursuit of him. Any team that signed Ohtani — and there were at least two others that reportedly agreed to his terms — would've acquired one of the most valuable assets in sports from a marketing and cultural perspective, the kind of guy who makes $50 million per year in personal sponsorship revenue.
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At the same time, there are some ways the Dodgers definitely won't be profiting from Ohtani, and some of those might surprise you. Here's how the Dodgers' new normal breaks down on the financial side.
Will profit: Slapping sponsor logos anywhere they can
Let's play a game. Watch the first three plays in MLB's 2022 Ohtani highlight reel and count how many Japanese companies ponied up to place their logos in Angel Stadium.
The answer is five. Bandai Namco, Daiso and Yakult were all in the high-priced spots behind home plate, while Yokohama Tires, Funai and Yakult, again, were all in left field. We can expect that business is now headed straight for Dodger Stadium, likely with a higher price due to the Dodgers' preexisting cachet in Japan (going back to Hideo Nomo) and the signing of Yoshinobu Yamamoto.
The fun doesn't stop there, though. Two revenue streams the Dodgers haven't embraced in their history are jersey patches and naming rights for Dodger Stadium. We're not saying either will happen, but Ohtani presents the perfect opportunity to break that glass.
As Bill Shaikin of the Los Angeles Times laid out, the L.A. Lakers and New York Yankees have both sold jersey patch sponsorships for roughly $25 million per year. The Dodgers could likely punch at that weight as well.
Renaming Dodger Stadium seems a lot less likely, but Shaikin suggests that something like Honda Field at Dodger Stadium could be doable. The Dodgers reportedly explored selling their naming rights in 2017, at the price of $12 million per year. Shaikin speculated that they could now be in the neighborhood of $20 million per year.
Won't profit: Selling jerseys
Here's a fun fact: The Cincinnati Reds have received as much money as the Dodgers for every Ohtani jersey sold outside of certain official team stores.
That's because MLB's licensing deals with companies such as Fanatics and Nike reward every team equally. That means the 8,350% spike in Dodgers merchandise sales in Japan following the Ohtani signing was very good for MLB overall, rather than for the Dodgers.
That said, it's not like a swarm of Ohtani Dodgers jerseys being released into the wild is bad for the Dodgers. Brand awareness is everything in businesses like professional sports, and Ohtani is obviously very good for brand awareness.
Will profit: Affording other players
Much has been made about Ohtani's deferring $680 million of that $700 million until after his contract's completion. There's good reason for that.
It needs to be said plainly: It's almost unfathomable how much money Ohtani gave up by doing this (though maybe we shouldn't be surprised, given that he gave up a nine-figure deal by joining MLB in 2018 rather than after he turned 25). The MLB Players Association has estimated the actual present-day value of Ohtani's contract to be roughly $438 million, while MLB pegged it at $460 million. Either way, we're talking about more than $200 million in value lost.
That's because it's much more valuable to have money now than later. Beyond the matter of inflation, there are so many ways to turn money into more money (government bonds, investing in an index fund), but Ohtani is passing on those for 10 years, presumably to help the Dodgers build a better team around him.
Every company in the world would pay their employees like this if they could get away with it — and the Dodgers are making the most of it. They probably would've spent big this postseason even without those deferrals, but the situation is now impossible to ignore, given what they've done with Yoshinobu Yamamoto (12 years, $325 million), Tyler Glasnow (five years, $135 million), Teoscar Hernandez (one year, $23.5 million) and James Paxton (one year, $11 million). By average salary, those last three players will combine for $61.5 million next season — or $6.5 million less than what Ohtani is deferring.
"It was important to Shohei that this wasn't the one move we were going to make," Dodgers president of baseball operations Andrew Friedman said at Ohtani's introductory news conference. "I think anyone who's watched us operate over the years, we're trying to add really good players at every turn."
We don't know what Ohtani will do for the Dodgers over the next 10 years, but it seems very possible that he will increase the team's value enough to make that deferred money pay for itself.
Will profit (but only a little): Selling tickets to Dodgers games
The first step in justifying any big contract is looking at the tickets sold (e.g. Bryce Harper). But that won't help much with the Dodgers.
Under its current ownership, Los Angeles has consistently topped MLB in attendance, an effort helped by Dodger Stadium having the league's highest capacity at 56,000. The team averaged 47,731 in attendance last season and peaked at 49,066 fans per game in 2019, the season before the start of the COVID-19 pandemic.
There are thousands of additional Dodgers tickets that could theoretically be sold, but it's worth wondering how much of a boost Ohtani can deliver over the course of 10 seasons when the Dodgers have been a hot ticket for the past decade. Still, we can expect there to be several sellouts in early 2024.
Won't profit: Broadcasting games in Japan
Ohtani is Japan's national hero. Controlling broadcasting rights for a country's national hero in that country is usually lucrative. But the thing is, it's not the Dodgers who will benefit from that.
While the Dodgers control and profit off their broadcasting rights in the United States, MLB owns all of its teams' international broadcasting rights, which it packages together. It then splits the revenue evenly among the 30 clubs.
There will undoubtedly be high interest in Japan for Dodgers games next year, but, as with the jersey sales, the Dodgers will receive only 1/30th of the profits.
Will profit (maybe): Wooing Roki Sasaki
If MLB fans think the Dodgers using their Ohtani deferral savings the way they have is unfair, things could get even worse if the Dodgers land their dream scenario next offseason. All of this should be prefaced with the fact that it's purely hypothetical and maybe even unlikely, but let's talk about Roki Sasaki.
With Yamamoto headed to MLB, Sasaki is the most hyped MLB prospect in the world. He throws 100 mph, offers an ungodly splitter, sometimes mixes in a highly effective slider and uses it to do things pitchers just shouldn't be able to do — like nearly throw two perfect games in a row.
It has been long assumed that Sasaki won't come stateside until 2027 due to MLB's current rules on posting NPB players. If the 22-year-old waits until he's 25 to move to MLB, he can sign with any team he wants for an unlimited amount of money. If he comes over before that, he'll be bound by MLB international bonus pools and lucky to receive more than $5 million. As it stands, he still has some developing to do in NPB, but Yamamoto's $325 million deal suggests Sasaki will be amply rewarded by an MLB team.
But let's say Sasaki doesn't really care about money. Let's say he pushes his NPB team, the Chiba Lotte Marines, to post him next year. Let's say he decides to do exactly what Ohtani did in 2018 and let teams woo him on merits beyond the stacks of money they can offer.
In that case, it would be pretty good to be the Dodgers, who have won consistently for a decade, boast Sasaki's two highest-profile Team Japan teammates, play in the city with the largest Japanese-American population in the continental United States and have a proven track record of developing pitchers.
Well, that might happen. The buzz out of Japan is that Sasaki wants to be posted next year and might even have a legal avenue to force the Marines to do it. He recently signed a one-year deal to remain in Japan for 2024, but there are no firm indications of his plans for next offseason.
Again, this all should be taken with a boulder-sized grain of salt. Sasaki might decide that the hundreds of millions of dollars do mean something to him. He also might have any number of reasons for wanting to play for an MLB team other than the Dodgers. But if you're the Dodgers, having Ohtani and Yamamoto on board would be mighty nice in trying to recruit a player worth a nine-figure deal but whom you can pay peanuts.
Won't profit: Increased cable ratings
The slow decline of cable ratings and subscriptions is one of MLB's most dire long-term threats. Adding Ohtani is a very good way to ensure the value of your product, but then again, the Dodgers were already pretty well protected.
A decade ago, the team made another mind-boggling deal in the other direction when it reached an agreement with Time Warner for a 25-year cable deal worth $8.35 billion, or $334 million per year. As Sports Business Journal laid out, Charter Communications, the company that now owns Spectrum Sportsnet LA with the Dodgers, would have to go bankrupt to get out of paying that nine-figure sum per year. That means the Dodgers faced very little risk of going the way of, say, the San Diego Padres, whose broadcast rights were dropped by Diamond Sports Network as the embattled company went bankrupt.
Given that Charter receives all the ad and affiliate revenue from Sportsnet LA, the Dodgers with Ohtani will bring in the same amount of money that they get every year from their cable deal (which remains a considerable amount). Meanwhile, Charter was probably as happy as anyone to see the team sign Ohtani.
