Thursday, January 11, 2024

The Shohei Ohtani Contract

$700 million over 10 years.  It's mind boggling.  Someone asked me "How can he be worth that much?"  Here were my thoughts:

A) Because so much money is deferred, in reality it's more like a $460 million dollar contract over 10 years.  Still the largest contract in MLB history, but it no longer looks ridiculously larger than other ones (Mookie Betts, Mike Trout, Aaron Judge in the $360 million range).

B) For those not familiar with MLB vs NFL/NBA/NHL, MLB has no salary cap.  So teams can go through the roof on contracts as long as the team has money.  It does not have the same impact towards roster construction like it does in other sports with caps.

C) Although I can't remember where I read it, one of the best articles I ever read on the topic of "player value" had the following thought expriment.

Is a player who hits 30 home runs worth twice has much as a player who hit 15 home runs?

To an average person, they would think yes, they are twice as valuable.  But the real answer is no.

Last year 26 players hit atleast 30 home runs (including Ohtani), while 148 hit atleast 15 home runs.  Only 6 players (also including Ohtani) hit atleast 40 home runs.

A player who hits 30 home runs is significantly rarer than those who hit 15 home runs.  In a league with only 30 teams, there's less than 1 to go around for each team.  A team's ability to accumulate atleast one, if not more than one, of these 30 home run hitters (or one of the 40 home run hitters) increases their chances of doing well.  (Note that I'm completely ignoring the ability to generate winning value in other ways, this is an example just for thought experiment purposes.)

So why is Ohtani worth this much?

Simply put, he is the unicorn of unicorns.  A player with no comparison in MLB or any other major professional sports league.  The best hypothetical example would be a NFL player being a Pro Bowl player on both offense and defense.

WIth Ohtani you get an elite hitter and (lets say) 2/3rds of an elite pitcher in one player (because he's not full time as a pitcher).   Some approximately 1.66 elite players in 1 roster spot. [1]

That means he's much more valuable than even the average *elite player*, let alone the average player.

[1] - Since he's a DH you could maybe knock down that 1.66 elite players a bit, but still, he's greater than > 1.0 elite players in 1 roster spot.

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