$700 Million, WTF? (What the Finance?)

Wow, just wow.

Baseball just changed, perhaps more. Shohei Ohtani just signed the biggest contract in the history of professional sports. This contract is one quarter billion (that’s right B) higher than any other in American Sports. That was higher than Patrick Mahomes’ $450 million. Mahomes used to be the most famous member of the Kansas City Chiefs until Taylor Swift came along.

The contract is unique as most of the money is deferred. It would be best if you were an attorney and accountant to figure it out. Ohtani makes so much money from his endorsements in Japan he makes me think of a Bill Murray movie called Lost in Translation. (yes, this is a film recommendation). Off the field at home, he earns something like $50 million a year.

All these amounts are incomprehensible to the average baseball fan. Forbes magazine indicates the average American salary is $59,478 a year. You can do all the figures per inning, per pitch, per at-bat, and it is ridiculous, maybe even obscene. This is relatively new in a century and a half of major league baseball.

The first ‘highest-paid player’ was a whopping $2,000 a season in the mid-1870s. This was 2.3 times what the average worker made. In 1912, Honus Wagner and three other players earned $10,000, and in 1921 Ty Cobb made it up to $25,000. The next year Babe Ruth hit the $50,000 barrier in 1922. In 1930 he made $80K, $5,000 higher than President Herbert Hoover. When he was asked about it the Babe replied, “Why not? I had a better year.” America was in the first full year of the Great Depression.

Joe DiMaggio was the first player to earn $100,000 in 1949 and 1950, but it would take almost a decade and a half before Willie Mays topped that at $105,000, in 1963. I always found it interesting that Joltin’ Joe insisted he was announced as “The Greatest Living Ballplayer.” Additionally, I always wondered what Willie Mays thought of that. Wasn’t it enough for Joe to be in a Simon and Garfunkel song?

Salaries began to break the bank in the mid-1970s. The top salaries rose exponentially, Dick Allen $200,000 (1973), Mike Schmidt $560,000 (1977), Noland Ryan $1,000,000 (1980), Mike Schmidt $2,000,000 (1987), Albert Belle $10,000,000 (1997). Since then, they have continued to grow. Remember this Adam Smith, the owners pay these salaries, and we go to the ballpark and pay $8 for a hotdog and twice that for a decent beer- not to mention the cost of tickets, parking, etc.

Ohtani’s case is somewhat different. He is pitching and hitting at the same time. Babe Ruth started as a pitcher from 1914-1918, playing the field as well as some outfield in 1918 and 1919 when he was traded to the Yankees. He only pitched FIVE games in fifteen seasons with the Yankees after that. Ohtani is doing something no one has done before, and damned well. Others have tried it, unsuccessfully at the major league level. In high school, and occasionally college the best player will pitch and play the field. At MLB, at this level, this is beyond unprecedented- it’s historical.

I love the state WAR (Wins Against Replacement). Ohtani led MLB with a 9.0. His hitting was 6.6, pitching 2.4. In hitting he finished fifth among ALL players and tied for fiftieth among pitchers, which is still very good- in comparison on my Chicago Cubs, Nico Hoerner earned a 5.1 hitting, leading the team. Justin Steele was the top pitcher at 3.8, together they are an 8.9, less than Ohtani doing BOTH. He is the Twix of baseball, a hitter and a pitcher, like a cookie and a candy. In 2022, his pitching stood out with 5.6 on the mound and 3.8 in the batter’s box. He is two players in one.

Another comparison is Texas Ranger pitcher Max Scherzer. In 2023 he earned $58.3 million pitching in 27 games with a WAR of 3.3. Do the per game, per inning, per pitch. Ohtani’s contract isn’t that ridiculous in that perspective.

America, the planet, has a problem with income inequality. I go to sports to escape all that serious stuff and I don’t think I am alone. It will be interesting if agents like Scott Boras try to use Ohtani as a baseline to negotiate contract with other players because it just doesn’t add up.

Play ball! How long until opening day?