MAKICHUK: Did Blue Jays 'dodge' a bullet in Ohtani gamble?

Shohei "Sho-Time" Ohtani has signed with the Dodgers.
Shohei "Sho-Time" Ohtani has signed with the Dodgers.Los Angeles Angels photo

Toronto Blue Jays fans were deeply disappointed this week when the Los Angeles Dodgers signed free agent phenom, Shohei Ohtani, perhaps one of the greatest modern day players to ever play the game.

A man who can bang out home runs and pitch solid games — a cross between Reggie Jackson and Justin Verlander.

His talent is immense and it garnered an insane contract offer from the Dodgers this past week. Ohtani would sign a deal worth a record US$700 million over 10 years, after a courtship process in which the Blue Jays were among the final suitors.

But the terms of the final deal are strange, if not bizarre.

In an effort to enable the Dodgers to continue spending around stars Mookie Betts and Freddie Freeman, Ohtani readily agreed to defer all but US$2 million of his annual salary until after the completion of the contract.

The deferred money, $680 million, is to be paid out without interest from 2034 to 2043.

This was all agreed upon within the parameters of the Collective Bargaining Agreement, which states that there are no restrictions on how much money can be deferred.

There is no hard cap in the MLB, but there is a Luxury Tax.

If there was no money deferred, the Average Annual Value (AAV) on Ohtani’s contract would be US$70 million — a fairly big hit.

By structuring the contract in this way, the Dodgers eased their burden relative to the Competitive Balance Tax (CBT). For 2024, the league’s CBT is US$237 million and with the structure of this deal the Dodgers would currently be under it.

A club that exceeds the CBT threshold is subject to an increasing tax rate depending on how many consecutive years it has done so.

Now, as a loyal Detroit Tigers fan, I’m not crying in my beer that the Jays didn’t sign Ohtani. Although he would have been entertaining to watch.

Players like this don’t come around often.

But the very idea of it didn’t seem right to me.

A billion CDN is a lot of coin, folks. There is a lot one could do with that money, instead of giving it to a 29-year-old foreign player who just had Tommy John surgery.

It could go into minor league player development or many other good causes. Just think how it could help food banks across Canada.

Shohei Ohtani — the Babe Ruth of our time?
Shohei Ohtani — the Babe Ruth of our time?Los Angeles Angels photo

That aside, one economist is saying that it is not only a good thing, the Jays missed the Ohtani boat, but a blessing in disguise.

Off the field, some who study the business of sport were bullish on the potential payoff of such a deal for Jays’ owner Rogers Communications Inc., saying the increased sales of tickets and merchandise could justify his salary.

And there is no doubt, baseball fans in the so-called centre of the universe, would have leapt onto the Ohtani bandwagon.

But Concordia University's Moshe Lander said that despite all the hype, Rogers likely dodged a bullet.

"The economic impact is much, much smaller than people would have you believe," Lander told CBC News.

He claims that some of the potential boons for the company were greatly overplayed.

While Rogers could have raked in new revenue through advertising, especially given Ohtani's significant following in his native Japan, Lander told CBC News that wouldn't have been enough to offset the massive financial commitment for one player.

He said Japanese advertisers may have sought to associate with the Blue Jays the same way they did with the Los Angeles Angels during Ohtani's time with that team, however "that money doesn't exclusively go to the Blue Jays" due to the league's revenue sharing agreement between its 30 franchises.”

"I'm struggling to see the financial case for why Toronto would want this," said Lander.

While the Blue Jays' contention to land Ohtani may have seemed out of left field, Norm O'Reilly, dean of the Graduate School of Business and professor of sport management and marketing at the University of Maine, said it's not surprising a company such as Rogers would have been in hot pursuit.

Research shows that four in ten people in developed countries make decisions surrounding which brand of products they purchase at least in part based on their sponsorships in the sports and entertainment sector.

"Rogers is not dumb, right? They would know the specifics and they would be doing an analysis," O'Reilly told CBC News.

"For those seven million people in the GTA who are getting a phone or deciding which phone to keep, that could make them stay with Rogers regardless of a price comparison."

But Lander questioned what Rogers could have actually gained. Signing "Sho-Time," as he is sometimes called, may have been a bridge too far.

He said the company doesn't have the resources to break into international markets such as the US or Japan and unlike other ownership groups, it doesn't sell a product that could be considered "global in nature."

"What exactly is it going to accomplish trying to advertise itself to the rest of the world?" he said.

"It's not the type of thing where you're going to want to take advantage of people looking up and saying, 'I wonder what Rogers is.' Even if people realize that it's a Canadian media company, why would anybody around the world care about a Canadian media company?"

It is also good to remember, one player does not make a team.

The Angels, with the mighty Ohtani, never made the playoffs.

The Halos never even won the battle to reach the .500 mark in Othani’s first five seasons. Their best year was Ohtani’s first year, when they finished 80-82 in 2018.

Ohtani, it is said, is tired of losing. He wants to win.

But a torn ulnar collateral ligament will prevent him from pitching until at least the 2025 season.

The two-time American League MVP and two-way baseball machine will get to work as a hitter straight away, however.

When Ohtani won American League MVP honors for the second time in 2023, he shined mostly brightly at the plate. Ohtani hit 44 home runs and would have likely cleared 50 if not for his elbow injury.

On Sunday, fans in his homeland lined up to buy special editions of newspapers announcing the move. The population of Japan is close to 125 million — that’s a lot of potential Dodgers jersey sales.

One thing is for sure though, if the Dodgers reach the post-season, you can bet all eyes will be on Ohtani. Obscene millions aside, he has yet to write his legend.

Related Stories

No stories found.
Western Standard