Did the Dodgers overpay for Shohei Ohtani? Examining his $700 million deal

It was no secret that Shohei Ohtani would likely sign the largest contract in baseball history this offseason, even after an elbow injury required surgery that will keep him off the mound for 2024. The ceiling of such a contract, though, was left to speculation.

Identifying a handful of teams that stood out as realistic fits for Ohtani was always going to be easier than trying to project where the years and dollars on the final deal would land. Pondering the size and structure of his eventual deal required far greater imagination.

Our usual instinct when evaluating the potential earnings of top-level free agents is to look for recent precedents set by the game’s best players and increase accordingly. But Ohtani’s unparalleled ability to function as a revenue stream for the organization beyond the production he provides on the field made any estimate of his value to a franchise far more complex than a strict dollar/WAR calculation.

This left many across the industry struggling to peg not just what Ohtani is objectively worth, but what teams would actually be willing to pay. We’ve seen bidding wars for elite free agents that result in the player securing an extra year or another few million dollars on an annual basis. For Ohtani, though? There was no telling how high the ownership groups for the most aggressive bidders would be willing to go.

Well, now we know: 10 years, $700 million guaranteed, with no opt-outs.

Whew.

Whether top dollar was Ohtani’s top priority this winter didn’t really matter. A bidding war among finalists was always the logical outcome once we reached the final stages. That’s just the nature of negotiations on the open market.

But the final total — the staggering, breathtaking total that is the highest in sports history — makes one thing very clear: Both player and team were eager and willing to commit to each other to the fullest extent.

Many wondered whether even the most interested clubs would have hesitancy to commit to a 29-year-old Ohtani long term, with his future as a two-way sensation undeniably cloudy following the second elbow surgery of his career. Others postulated that Ohtani himself might seek greater flexibility in the form of opt-outs in the scenario that he can prove his two-way prowess again in 2025 and then cash in to an even greater extent.

In the end, there was no need for the two-time MVP to bet on himself with a short-term deal. The Dodgers presented an offer that demonstrated a full-fledged trust that his two-way talents would re-emerge eventually. They are not paying $70 million a year for the next decade for a designated hitter. There is an undeniable risk that such an outcome materializes, but that could not be the mindset for the winner of the Ohtani sweepstakes.

The Dodgers are paying full freight and then some for the best version of the best baseball player we have ever seen. It’s a version we might not see from him again for a while, but one Ohtani himself undoubtedly has the utmost confidence in restoring to the big-league stage in due time. Clearly, so do the Dodgers.

“But I think that the thing is, for us, it’s, you’re making a bet on the person, and the player as well,” manager Dave Roberts elucidated at last week’s winter meetings. “But when you’re committing, you know, this type of length and dollars, we’re all-in on the person. I think that we’re willing and excited to make that bet and hopefully it comes to pass.”

What does Shohei Ohtani’s signing mean for the Dodgers?

Normally, when top free agents sign megadeals, we can reasonably assess either the average annual value or the total dollar amount as a new standard for the best players in the game to strive for in future negotiations on either the open market or in extension talks. In this case, Ohtani’s deal has blown so far past the previous record for a total guarantee of $426 million (Mike Trout’s 2019 extension with the Angels) that it will likely be years before we see any player command a deal. In on-field terms, this would be like Ohtani breaking Barry Bonds’ single-season home run record of 73 next year by hitting 120 homers.

The only remote comparison here in terms of smashing a previous record to such a laughable degree is Álex Rodríguez’s landmark 10-year, $252 million deal with the Rangers following the 2000 season. That contract more than doubled the previous record of $121 million set just days earlier by Mike Hampton with the Rockies, and would not be topped again until A-Rod himself opted out and signed a new $275 million deal with the Yankees seven years later. It would be another seven years before Giancarlo Stanton’s 13-year, $325 million extension with the Marlins became the first contract to clear the $300 million threshold in total value. Four years later, Trout signed his deal with Angels that stood as the record until now.

As was the case with A-Rod, it could be quite a while before we see another player sign a contract that surpasses Ohtani’s. Juan Soto’s free agency next winter will be unique in its own right considering his unusual youth for a free agent and historically significant track record as a hitter. It might also tell us a lot about how quickly the rest of the industry could catch up to Ohtani’s number.

An MVP-caliber campaign this year with the Yankees could set him up for a massive payday. And if he is seeking the largest and longest possible contract, his agent Scott Boras could realistically push a Soto deal several years beyond the 10-year pact Ohtani just agreed to. That could easily push a deal past $500 million. Six hundred million, though? If you squint, perhaps. Seven hundred million just seems preposterous — as it likely will for any player for years to come.

Who would you start a franchise with, Juan Soto or Ronald Acuña Jr.?

The one crucial wrinkle to Ohtani’s historic agreement with the Dodgers is a reportedly “unprecedented” amount of deferred money intended to ease the annual burden on the front office and enable it to improve the roster without venturing too far into the luxury tax. The exact details of the deferrals are unknown, but early indications suggest a competitive balance tax number closer to $50 million, far less than the $70 million AAV more commonly used to calculate a contract’s CBT hit for deals without deferred money. Even still, a $50 million AAV would comfortably clear the record $43.33 million set by both Max Scherzer and Justin Verlander with their recent Mets contracts, albeit on far shorter terms.

No matter how you slice it, Ohtani’s agreement is a mind-blowing deal for a mind-blowing player. After repeatedly defying our expectations of what can be achieved in this sport, Ohtani’s overwhelming impact on and off the field has secured him a contract beyond what any of us thought possible. In that sense, should we really be all that surprised?

It was seven years ago that Dodgers president of baseball operations Andrew Friedman offered a guiding principle when it comes to free agency in our sport: “If you’re always rational about every free agent, you will finish third on every free agent.”

Soon, Friedman will sit at a podium at a press conference alongside his prized addition, and his past words of wisdom will loom large. Ascribing rationality and reason to a $700 million contract for one player might seem difficult at first glance. But for the Dodgers, signing the unicorn that is Ohtani, the singular talent whom they have pursued relentlessly since he was a teenager, was the most rational course they could possibly take — no matter the cost.

Jordan Shusterman is half of @CespedesBBQ and a baseball writer for FOX Sports. He has covered baseball for his entire adult life, most notably for MLB.com, DAZN and The Ringer. He’s a Mariners fan living in the Eastern Time Zone, which means he loves a good 10 p.m. first pitch. You can follow him on Twitter @j_shusterman_.