Under The Knife 3/27/23
Boring Insurance and Shohei Ohtani
Buster Olney busted out a big number in talking about Shohei Ohtani’s next contract. Yes, it’s bigger than it was at the end of last year and on the heels of what still somehow feels like a breakout WBC, it’s hard to argue.
Only doesn’t say here, but let’s assume he’s talking about a 12 year deal, or a $50m AAV. There’s lots of ways to structure this - backload, front load, or even deferred, depending on which team does it. It’s not even that hard. Looking at the Angels, the team will free $20m next year (the difference between Ohtani’s $30m in 2023 and the theoretical $50m in ‘24) by merely letting Hunter Renfroe and Geo Urshela walk. Both have value, but I’d argue they’re easily replaceable and hold much less value than Ohtani.
But what if a team got really creative? What if a team could add Ohtani to their team and drop their payroll over the course of the entire contract? It’s possible, though those of you that like to criticize Bobby Bonilla better look away.
The numbers? Ignore the ones you normally do and focus on the offer. Imagine Stu Sternberg (or any owner) looking across the table at Ohtani and his agent and saying “I will pay you $10 million dollars a year for life.” Would Ohtani take it? That number could be purchased as an annuity for roughly $225 million dollars*.
Does that make sense? Would that kind of guarantee move Ohtani, or his family? It would be less money than the theoretical 12/600 and Ohtani could control how it was invested or spent, which could be higher or lower, and the time value of money is real. The owner would have to have enough cash on hand to fund it, which might limit some ownership. On the other hand, some owners could basically self-fund it and pass it on to their kids or the next owners, in the way the Bonilla contract was structured.
As for how the contract would hit the payroll, it’s simple. MLB uses AAV, which would be $10m regardless of how that was funded. That’d take $20m off the Angels payroll and there’s hardly a team who doesn’t have a pitcher dropping off in the next few years that is owed more than that, like Madison Bumgarner ($23m, then $14m in 2024 so it would be a near wash for Arizona) or Corey Kluber (conveniently a 1/$10m deal in Boston), just to show a couple examples. I don’t see a team who couldn’t make it work.
Is this sort of structure likely? No, but neither is a unicorn like Ohtani. The theory is that Arte Moreno, Hal Steinbrenner, Steve Cohen, or Peter Seidler will just sign on the dotted line, like normal, and then direct deposit about $4.2 million into Ohtani’s account (minus taxes and fees, of course) every fifteen days. Maybe another team might get creative to try and lure the best player in the world.
Want a real wild card in this scenario? If the Athletics move to Las Vegas, they would be the fifth team in a state without state income tax. Given the current A’s payroll, it’s hard to say they could do more to create interest than signing Shohei Ohtani and making sure that we see Ohtani-Trout at bats for the next decade.
*I’m making some assumptions. The first is that Ohtani will live the standard life expectancy for a Japanese male (79), plus a four percent interest rate on the annuity.
Ok, out of the theoretical and on to the injuries:
REMEMBER THE RULES
As we get to the end of spring training and to the point where teams are locking in their Opening Day rosters, it’s always a good time to review the rules that affect how injuries are managed. You’ll see a lot of players go on the various Injured Lists over the next few days, but the reasons aren’t always the same. Keep in mind that the ILs are functionally about roster limits - the 26 and 40 man - rather than injuries per se, but the “phantom IL” really doesn’t exist. Each and every injury has to be certified by a doctor and submitted to the Commissioner’s Office. Teams can ask for a check, but usually don’t, knowing they’ll probably need some leniency in the future themselves.
The rules on ILs haven’t changed this year. We still have 10-day for players and 15-day for pitchers, with a 60-day for everyone. The days are from the date of the first missed game if done immediately, but no more than three days if made as a retroactive move. (Ex: A player is injured on July 1. He is placed on the 10-day IL on July 4. He would be eligible to return on July 11.)
The 10- and 15-day IL clear a spot on the 26-man active roster, while the 60-day IL clears a spot on the 40-man reserve roster. When a player comes off the IL - termed “recovered” - then a player must come off the appropriate roster to keep it at or below the limit. Teams often keep their 40-man rosters a man or two below the upper limit to have room to claim a player off waivers without being forced to make a move, and because there’s no penalty for being below outside of the Rule 5 draft.
The 7-day IL for concussions remains in place with no changes. There have been discussions about making this a more open IL, since teams haven’t used it for what they term “minor concussions” if it appeared a player would be back in a shorter period. If a player is on the concussion IL for 10 days, he is automatically transferred to the 10-day IL, though the active roster spot remains unchanged due to the transfer.
As well, rehab assignment rules have not changed. These are optional assignments, meaning a player can decline to go. The player can be sent to any level, often based on schedule, stadium, and proximity. Players have 20 days of rehabilitation time before they must be activated to the 26-man roster or returned to the IL, while pitchers have 30 days.
KYLE WRIGHT, SP ATL (inflamed shoulder)