UTK Special 12/11/23

¥101,451,000,000

Shohei Ohtani signed and the rumors on the floor of a very big number were indeed true. It’s a very, very large number, one we knew people would react to and being even bigger, people are decrying the imminent ruin of baseball. We know this isn’t true. Even with the unknown deferrals, the straight number implies that Ohtani needs to produce 72 WAR to “even up” the contract. Given that he did 35 WAR in his first six seasons, which included a Tommy John and a COVID year, it’s pretty safe to say that absent a terrible injury or a steep drop-off, Ohtani will do at least that.

It’s the deferrals that make it interesting. The Dodgers owners run Guggenheim Partners, which largely operate insurance and investment companies. They’re uniquely positioned to put together a contract that, I’m told, looks more like an annuity than a standard deal. Think of it as a 30-year annuity rather than a 10-year contract and the money makes more sense. How it looks on its face will be interesting, but Ohtani could end up with even more than the face amount.

In the simplest terms, imagine the Dodgers took $400m and put it into an annuity over at Gainbridge. They’re currently advertising a 6.15% rate. That would mean for the next 30 years, Ohtani could take out an amount close to $28m every year. That’s $840m over the life of the annuity. Since we don’t know how the contract looks or how MLB will make them account for it, the principal amount could be even higher and of course the term and interest rates could be different. This is just an example of how it could work.