It's simple: he REALLY wants to win and he doesn't care that much about money because he already made more than he can spend in a lifetime. He wants the club he plays on to put up a roster that can win. Had he signed with the Angels he could not be certain that the 'extra' money from the deferrements would be put into improving the team, cause he's been there for 6 years and saw how they handled both money and human resources. 'Badly' is an understatement.
I disagree. It's both. He wants to win AND he wants a ton of money. He didn't sign the largest contract in history with the largest AAV ever just because money doesn't matter to him. But honestly, good for him. He deserves the money and to win.
@@ImStillJohnny This is pretty much as uncaring about money as we've ever seen from a superstar athlete though. Remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
The contract value and his terms on his endorsement deals ARE HIS AGENT'S JOB. Shohei since Japan only eats, sleeps, and practice and the result is big money follows him. Ever since his dad made him focus on baseball rather than swimming, Shohei since he was a teenager realized how fking good he was and can be has since called his own shots for his career. He's already given up a potential $200m in pay by leaving Japan early, for the sake of competing at the highest level.
13:42 Trevor hit the nail on the head here on why there is so much outrage. Everyone heard $700M over 10 years with a $70M AAV and assumed that was upfront and readjusted their valuations on ohtani. Then the deferral info came out and made it seem like they took the upfront deal and deferred 97% of it to get around the CBT, when in reality the deferrals were baked into the $700M number when it first dropped. This was really more like a $460M 10 year deal in todays money but that money is deferred and the interest/inflation rate takes it to $700M valuation in 10 years time. That $460M valuation is in line with what almost every analyst said - maybe on the lower end based on team preference, but not egregious in any way. But because of the timing of information coming out, people felt like the dodgers pulled a fast one on them and reduced what their CBT would have been by $25M when that wasn’t the case at all.
Well said. Something I keep hearing that I swear is looked at wrong is that he's getting $680M with no interest. It keeps coming up across so many sites and videos. The $680M includes interest and has tax break implications assuming he leaves California in 10 years for another team or retirement. Plus factor in his off the field earnings and reports on how he and his family handles his finances, this guy isn't about the money as much as he's about playing the game and winning.
@@84kapuaaexactly! Yeah when people are saying that the $680M is going to be interest free it’s a misunderstanding of where that $700M valuation was pulled from in the first place. They’re assuming that the dodgers or any other team were going to pay him $700M for 10 years straight up and then decided to defer the payment retroactively, which is not true. That number is the post interest number. What’s funny too is that the initial response from everyone when the $700M 10 Year news came out, was that the Dodgers severely overpaid and no team could have possibly competed, and that he should have been closer to a $45M-$55M AAV because of his second TJ surgery. Then when it turns out that the actual current day valuation is in line with what everyone originally expected, the goalposts are flipped and suddenly its a crazy low valuation and an unfair, borderline cheating move by the Dodgers to have Ohtani for so little (even though it’s still the largest contract & AAV based on current valuation). And I agree with you that Ohtani is clearly more focused on winning instead of squeezing the most value he can out of a team. He’s choosing to help the team build instead of maiming them through his whole contract, which I think should be applauded, not demonized. People are also saying Ohtani is greedy for taking so much money from a big team but that he’s also virtually cheating by helping them afford him + other players to win championships. It’s so weird to get mad at one of the greatest players of all time for not joining a team he’d have to rebuild, as if he owes it to the league and baseball fans around the world. He already tried that with the Angels and look how that worked out!
The problem has nothing to do with the money. It's no secret that teams like the Dodgers can outspend almost any other team. The problem is the pay structure, they're doing fucking yoga to ditch the luxury tax which was implemented to level things out between big money and small money teams. So now we have a big money team using rules intended to help small money teams to fuck harder those small money teams. You've taken probably 24 teams out of the running in perpetuity. THAT'S the problem. Nobody can outspend the Dodgers and now they don't have to worry about a luxury tax either. Fuck at least the Astros just straight up cheated and didn't try to get it cleared through the league, then when they got caught cheating at least they pretended to care that they got caught.
@@andrewaaberg482those 24 other teams never had a chance anyway bc their owners dont spend + generate enough revenue to sign the best free agent of all time. what do u want him to do? take a contract that severely underpays him to play on a middling team that doesnt have the market or branding that a big market team does? this is sports and big markets are what appeal to the best players bc they want to play in front of the large audiences and get their moneys worth
It happens more frenquently than before, and as usual when Trev explains something Jimmy just talks about something else and that ends what Trevor was saying... I don't hate Jimmy but still pretty annoying when that happens, he does the same with BBD btw.
Shohei was offering this to all teams that he was willing to sign with. He would not do this for the Pirates, Marlins, etc. Since he wanted to stay on the West Coast, with a team that can give him consistently the ability to play in October and was already comfortable in Southern California, Shohei chose the Dodgers. Also, he makes $30+ million in endorsements
I mean my opinion on this doesn’t matter cause I didn’t play sports past middle school, so my brain is wired completely differently from people that spend their entire childhood trying to make the bigs. But with so many players talking about how a freak injury could end your career so they want all the money upfront, I personally would rather have the money come in for years after.
I don't think anyone else will do it to this extreme, but I imagine a lot of players may start taking Scherzer-esque deals in order to help their team's CBT burden and to help bring in more talent.
Jimmy is talking about the tax percentage, Trev was talking about real world spending… now they can spend over the tax and still only spend like 10 to Shohei’s payroll plus tax
I love this episode so much. Trev trying to explain that even though the tax penalty is there, there aren't real dollars to apply the penalty to (thus the deferment) while Jimmy and Jake are on another island completely brought me tears of joy.
I saw a Verducci interview where Ohtani said he wanted to defer all his salary His Agent said well you can’t play for free So the Dodgers offered 70 million, Ohtani countered for free… they ended up with the 2 million salary
I'm not surprised really...This contract can only be agreed upon by such a man with a rare character such as Shohei. While everyone is focused on MONEY, Shohei has a special spiritual reasoning within him that allowed this. I believe the Dodgers will be blessed beyond their wildest expectations due to Shohei's selfless decision. Be prepared for even GREATER things from this man.
a lot of Americans assume everyone is as greedy and money driven as them. they can not grasp that some people view success differently. we’re not all like that though. I’m so happy someone like shohei is in LA (:
@@TMess203 If he wanted to get as much as he can, there's no way he defers this much money though. Thinking financially, remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
@@DW-op7ly If he didn't care about money he wouldn't have asked for 700m, stop. No one is disagreeing he played with the money so the Dodgers could add more just cut it with the he us such a Saint stuff.
The solution for what Jake wants involves deferring the money further into the future. There is no way to pay Shohei 46M this year and only have the CBT hit be 46M (unless there is just no deferred money). If he wanted to take 10M/year or whatever amount more, and the CBT hit be only 46M, the remaining money would have to be deferred even further in the future.
It's not that he went to the Dodgers. Its that they already had a 100 win team and get to add arguably the best baseball player ever for 50% lower than the annual average a year. Can't blame him or the Dodgers, but everything about it sucks for everyone else.
@@jondough42069 Specifically put in place by the players themselves. Lol People are acting like this problem hurts the players when they are the reason it exists. The only people who are currently mad about it are fans.
He is happy making money, money is not everything in life thats why he is who he is. He will get a lot of marketing advertising from USA Los Angeles and Japan. He is a very smart player and it was his goal and dream to play for the Los Angeles Dodgers.
Personally, as someone who gets all of my baseball news from either the Jomboy Media collective, Cubs beat writers, and Foolish Baseball, I was pissed because I didn’t get how the CBT works until now. It’s basically like Shohei is getting a 10y/$460m in the sense of how this effects the dodgers future negotiations. It’s not like a 10y/20mil contract. As an econ guy personally once you guys clarified that it all clicked for me. When you get down to it the $700mil is just funny money. It’s not real. Inflation means that the depreciation of that $700m over the next 20 years is in actuality just like being paid $460m over the next 10 years. I think this actually becomes a bad time for Ohtani (relative, obviously, he’s still crazy rich regardless) if we hit a terrible recession (which we might), and our inflation skyrockets (which it might) his contract might further devalue.
Yes, Trevor got it!! $46MM is theoretical. $2MM is actual. Sure, Dodgers will happily pay the tax when they go over the threshold because they are only paying real money of $2MM. So they can use the “savings” to pay for more players and the tax.
18:08 the benefit of deferring is that the AAV hits the CBT over the next 10 years but because they don’t have to pay ohtani most of that money, they have more cash flow to actually pay other players. Then it’s the reverse once the deferrals hit - the dodgers will be paying out that money (so a bigger hit to cash flow) but it will not count towards CBT since it already was counted towards CBT the previous 10 years. Basically deferrals allow teams to not be hit negatively on CBT and cash flow at the same time, which is beneficial.
The money he’s getting is different than it is luxury tax wise. Money wise, he’s getting 20 million over the next 10 years and then 680 mil. after the contract is up. Luxury tax wise: the AAV ultimately ends out as 46 per year which reflects upon the current 326 million first luxury tax threshold.
@@theamwindowthe contract aav is taken at its average value throughout the contract. Works the same for heavily backloaded deals. Difference here is the deferred payments, which are discounted at 4% per year to work out the overall value of those payments now. This works out to 430M which is then made to be 43 per year against the CBT
@@theamwindow the luxury tax taxes in the decision of the average annual value of the contract. With all the referrals and taxes it wounds up to be 46 million per year. That’s how much it affects the Dodgers luxury tax. The 680 differed is the physical amount they are paying him after his contract, not related to the luxury tax. That way the Dodgers can save physical money to spend on others
Shohei simply did what Tom Brady did, and what I've always said I would do if I was a player at the top of my sport: take less money or do things to relieve you're team's cap burden in order to help the front office build a juggernaut team. Once you have THAT much money in the bank, I think it makes sense to do things like this. Championships will probably make you happier than having a fully maxed out contract. Championships will increase your marketability, allowing you to make more money outside the sport. It also gives you a better chance of building your legacy to potentially going down as one of the GOATs of your era. Basketball is a bit of a different animal, but I've said for a while now that this is a strategy that Lebron should have deployed starting around 2018 when he went to LA. He was probably worth damn near a half a billion at that point. If he had taken the veteran minimum or a MLE level contract, the Lakers would have had a ton of flexibility to get AD plus another superstar or two. He could have guaranteed himself another 3-4 championships and likely would have surpassed Jordan.
The AAV calculation is meant to determine the value of the contract in 2023 dollar value. A way to understand it is that $680M in 10 years is worth less than it is today. And the final $68M he’s getting in 2043 is worth even less.
By all accounts, Shohei and his team came up with this idea. The only thing selfish about this is that Shohei decided the Dodgers give him the best chance to play in as many playoff chances possible. Sure if this was a movie, Shohei going to Toronto or SF, it would be cooler but the only "bad" thing here is Shohei wants to win. That is the only selfish part of it. Or is it?
As we know now, Shohei gave this offer to all teams looking to get him. If he didn't choose your team then they didn't do good enough within the last decade for him to decide it had a chance to win. I can't see any other player deferring that much money an extra 10 years. Nobody in their right mind would wait that long for a payday, no matter how rich they already are. Hence why literally no other players have ever done this in baseball history.
@@SuperCatacata Totally my speed my man. But I also understand all the envy and the overall sense that the Dodgers can do this because of all the competitive advantage of being the Dodgers. Most of the outrage of cheating will die down but I wonder if Ohtani broke baseball for good or ill....
You're missing the fact that he won't pay US or California income taxes on 680 million if he retires as expected to Japan. Meanwhile, everyday folks paying 28 to 36% of their salaries. Seems like the more money you make the more taxes you avoid.
@@josephfernandez6402Japanese taxes ain’t cheap either, goes up to 45%. So if he becomes a Japanese tax resident after 10 years, he pays tax on his worldwide income which is hefty. Unless he goes to Singapore or the Cayman Islands.
Shohei is already making bank off the field with sponsorships and commercials. He knows he's making more money than he can spend, so he wants to make sure he can also win championships. The only ways he's losing out is if he wants to own a team one day. Then he would've been better off taking the money upfront
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Everyone said Shohei going to Canada was bad for baseball but fail to realize that this deal is bad for baseball. It's unfair and it makes baseball less competitive. Period. It will drive fans away because no one wants to see the Dodgers win 5 consecutive titles.
I'm starting to think Ohtani loves the Dodgers more than I love the Dodgers & I've loved them for 33 years. That's ok with me. :) Merry Xmas baseball enjoyers
True. If he came to US 16months later, he could get enormous money but he abandoned the money and came here when 24 years old. He donates most of his money anyway.
Ohtani’s contract is easy. $700m over 20 years equals $460m over 10. He will count $46m for the salary cap. Lower cap hit means the dodgers can sign more players. For Ohtani it’s happiness now and $680m later. Or as Jet Passan said, “It’s the most team friendly $700m contract ever.”
MLB uses the ten year treasury bond for accounting. Put another way $1 million now is worth more than $1 million ten years later. You can make more money if you have the money now. Time value of money.
@@jliving02inflation estimates. Money today is worth less than it will be in 10 years. Easiest way to put it is that they’re estimating that by the time the contract is up $70 will be worth more like $46 in today’s money due to inflation.
An average player signs an overpaid contract, no one bats an eye. A once in a lifetime superstar signs the team friendliest contract ever, everyone loses their minds 😂
I think the reason people are upset about this is absolutely heightened by the fact that it’s the dodgers. Yes, every team and every owner ‘can’ spend more money than they do, but in this world where they all have their own spending practices, the dodgers are one of the only teams that could afford to pay a player $70million a year. And in terms of competition that would effectively be a balancing agent. Yea, not all teams can afford to pay a player 70 mill a year, but even the dodgers can only be paying so many players that at once. Such a high AAV contract is supposed more or less force the dodgers to put all their eggs in the Ohtani basket. The dodgers now have the best player in baseball and still have some of the most money to throw around in baseball, and that’s simply anticompetitive. Don’t try and tell me that every team can do this. The royals are never going to have the money to do this. The two teams in the World Series this year are currently without long-term TV deals. Only the teams that are the wealthiest (and thus the most competitive) can afford to do this, and they shouldn’t be able to get more competitive for, in the short term, free. That said, I think the only realistic way to combat this is to compel teams to pay the luxury tax on the true AAV. The dodgers and Ohtani can wait to pay out as long as they want, but the dodgers should have to pay taxes on the full 700 mill during the duration of the contract.
Ohtani doesn't care about money AT ALL, he has said this in the Japanese media several times before. All he wants is to win and to be considered the greatest of all time. Simple as that, that's why he doesn't do anything except play baseball. He doesn't even care about endorsement money, but he and his agent know that he needs to maintain a certain image to keep the train going.
To say he doesn't care about money "AT ALL" feels like some false worship. He cares about money. Otherwise he would have taken league minimum and been done, not sign the largest contract in history. It's ok to say he cares about both money and baseball. That doesn't take anything away from him. Money is important and good for him for getting a buttload of it.
@@azcardguy7825 It's not that he literally doesn't value money, but if money was a priority for him, there's no way he defers this much money. Just financially, remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
if the dodgers were willing to pay $70M per year for the first 10 years, and if ohtani said he'll defer most of it, then ohtani basically took a $232M pay cut to keep the dodgers competitive. it's that simple. that's all it is. -$232M=($46.8M-$70M)x10=(AAV - salary without accounting for the time value of money) x number of years. i think the players union should be upset about this deal because a player felt that he needed to take a pay cut because of the luxury tax threshold. on the other hand, if the $70M per year for the first 10 years was never on the table, all this is just optics. i.e. this is not really a $700M contract. it is essentially a $468M contract, and the dodgers are getting charged as a $468M contract. illustratrion: any team that can pay $468M over 10 years can do the same thing as the dodgers. they just need to save $44.8M (=AAV minus $2M) each year and put it in an interest bearing account. then after 10 years, they'll have $68M to pay their player each year. any player can do it as well - a player that gets signed $468M over 10 years can save $44.8M of the $46.8M each year, and 10 years later, the player will have an income stream of $68M per year. of course you need to adjust the math for taxes, but the same argument holds. overall, i think the $468M (or $700M) over 10 years seems fair for ohtani given his injury this year. i.e. ohtani is getting paid what we thought he would get paid, between $450M to $500M because of the injury.
"He isn't going to pay his California taxes!" Yeah because he won't actually be making the money for 10 years. Are these people stupid? You want him to pay taxes on money he doesn't have yet? Wtf man. Simply having a contract saying you will eventually be paid a certain amount of money doesn't mean you're actually paid that amount of money yet; you have to actually be paid money to...be paid money. He will have to pay taxes at some point to some government once he actually realizes the income. It might be Japan idk. He'll be paying taxes on the $2 million per year still, to California. He'll also pay California taxes on the tens of millions of dollars he gets in endorsements and any other form of income he brings in.
It's very stupid to say "Ohtani lost money by not taking the money up front" when clearly nobody was actually offering him $700 million up front. Teams were probably in the ballpark of $400-$450 million up front, and instead, Ohtani chose to get $450 in an unconventional way that allows his team to be competitive, for him to live off advertising money now, and then live off the $68m/year in retirement. The initial number of $700m/10 broke people's brains and has people reframing this through that lens when it never should have been seen as $700m.
Jimmy and Jake are trying to figure out how he gets $46M per year throughout the 10 years while still making $700M. If Shohei gets $46M per year, there would be no deferments and the contract would be $460M not $700M
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
@@gentlemanjake8005 yes, I’m getting lazy to the point I copy pasted..too many negative comments can’t keep up. Good for the sites algorithm I suppose 😂
I think people are upset more so from a competitive stance. Why would I even watch the Rockies if I’m a Rockies fan if the dodgers can just sign every good player? Competitive balance just got even more out of wack.
As a Dodgers fan i really don't think they are signing any more relievers. Their relief crew is set. The Dodgers don't really believe in paying top dollar for big name relievers. The 2nd half of last season their relievers were lights out. That was their only bright spot in the playoffs. If they need help by the trade deadline they will go that route. They need starting pitching badly. Not sure if they are in on Yamamoto or if he will want to play in Ohtani's shadow. It could go either way and neither outcome would be surprising. They will acquire at least one top end starter and probably a middle of the rotation guy before the season starts.
It's not that difficult to understand. Money today > then money tomorrow Over the last 100 years, money has lost on average 4% per year. 700/10 paid at l2/10 amd 68/10) Would mean that after all the years of inflation are accounted for, it would be the same as if he was given 460 million over 10 years. However, he will avoid a 12.8% California state tax each and every year on the 68 million. He would move to Japan for the final 10 years, and so yes, California and the U.S. miss out on a lot of taxes.
The one thing I never got was if the dodgers are operating as if they’re paying 46 mil for shohei or if they’re paying 2 mil for him. I think that’s what Jake was getting at, if they’re gonna operate like they’re paying 46 mil for him, then he should get as much of that 46 mil as possible now, and differ the rest of it.
Trevor got it right. The Dodgers have a real budget of the money they're really paying. In that budget Ohtani is making 2 mil, so they're gonna take the 44 m they're saving to sign more players.
@@Alex-dl6it ok, im not super knowledgeable of baseballs luxury tax system, but that kinda implies the dodgers dont care about the luxury tax, and they only care about actual cash on hand, is that right?
You're both right. The less deferred, the higher the current AAV. If you defer less than $680m, then the current AAV increases beyond $46m (cause it's at today's value rather than the value 10 years from now. But it's also the case that the $46m currently counting against the AAV isn't real money (only $2m is), so the AAV climbs by $46m, but the actual money being spent is only $2m. In 10 years, the actual money will be getting spent (i.e. being paid to Ohtani), but not impacting the AAV. The contract is effectively $46m for 10 years ($460m). Ohtani has loaned them $440m and they are paying him back $680 over 10 years at the end of the contract (in 10 years time). There's no interest, but the amount owed to Ohtani increases in line with projected inflation (from $440m to $680m). And Ohtani doesn't have to pay tax until he is receiving the money.
I think there is a possibility! Ohtani said this amount is “laughable” and he most likely won’t needed even after retirement (he makes 40-50M in endorsement any way, remember. And he dosent buy Yatches, private planes or palaces..(he rented a house for 20K/month for 6 yrs)
If Dodgers invest $390 million at 6% compounded interest over 10 years it will come out to $700 million at the end of his contract. Ohtani is helping his team in hitting, pitching and finance.
Shohei Ohtani makes more than 35 million in endorsements and such per year. When he is done with baseball he's going to need the equivalent of that. the deferred money is alright with him because his endorsement money is so high, to say he doesn't care about money when he made 70 million in 2023 is kind of naive. He's smart as hell for this, played the game perfectly. ALSO the Dodgers know the money Shohei's brand will bring in over the next decade will more than pay for the deferred portion of the contract. Shohei makes about 37-40 mil with contract + endorsements from 2024-2033 and then 68 million for 2034-2043!
Plenty of sports players also get a shit ton from endorsements. NONE of them are deferring their contracts like this to benefit the team. Sick of people acting like it's so understandable for him to do this. It's not. It's honestly nuts to do this.
@@SuperCatacata also if HE wants to win HE knows the Dodgers need money. He is still getting paid though lol. This is in no way a selfless act and I'm sick of people acting like it is. He gets to win and he gets to make over 700 million in a baseball career 😂
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Sure you can vary the frequency of compounding and rate, but the exact numbers are not necessarily known values. 5% compounded yearly are simplifying assumptions meant to provide an example of how the calculation would be made. The only things that really matter are the principal 46M ish and the final value 68M and my simple calculation maintains those values.
@@TheMogulman31 I'm 90% sure they are using the risk-free rate. It's one of the t-bills not sure what term. 10yr would make the most sense which is 4.227% right now.
@@HKim0072 sure that's great, but again the point is to present a simple example to demonstrate the principle (pun intended), speculating on the exact values is beside the point
What pisses me off is the guy at MLB who decided that $44m is equivalent to $68m in 10 years…. Seems like a great deal for the dodgers vs actual inflation (im a finance bro)
I don't understand how shohei benefits from this other than "wanting to win". Couldn't you get better returns for that money in that span versus getting it at around inflation rates?
After some research, I’ve come to the conclusion that this is circumvention. I would have been fine if during 2034-2043 the dodgers had a CBT hit from Ohtani’s contract, but they don’t. In essence, Ohtani signed a heavily backloaded 20 year, $700 million contract, but the dodgers only pay CBT taxes on $460 million of it. The Padres wanted to offer Judge 14 years to lower AAV and CBT, but it gets vetoed as circumvention. Dodgers (and many other teams) say okay, we’ll do 20 years, but the last 10 years we will call “deferral years”, and that’s how we’ll avoid paying a higher CBT tax and payroll. I’m willing to be convinced otherwise, but the way I see it, over the next 20 years the dodgers will pay Ohtani $700 million, but for CBT purposes are only paying him $460 million for 10 years.
I don't think trev understands that shohei doing this allows the dodgers to keep adding pretty much however many stars they want while smaller market teams can't do that
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Former Marlins Pres David Samson says Ohtani contract reopens civil war between small- and large-market teams that led to 1994/5 MLB lock out. Legal, but unimagined in CBA negotiations.
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
The Dodgers make: - $240M a year in their local TV deal - $205M in ticket sales - $60M in national TV deal - Sponsorships = ??? - Concessions / parking = ??? They are probably pulling in $550M at least per year.
And the long and short is he wanted to play for the dodgers, plain and simple. Like Jake was saying and Jimmy was calculating he could have easily gone somewhere else for higher payments now with same AAV or deferred longer with Dodgers for same. Just wanted to play in LA so is taking the reduction just for that
As a Giants fan, I'm not bitter towards Shohei or the Dodgers for this contract. Just sad my favorite player has signed with the Dodgers for the second time (Mookie Betts a few years ago). 😢
Unsure where the 4% is coming from - doesn’t the cba require the use of 5% to calculate the PV of deferments? Also if the dodgers think that they can make more than 5% ROI (they can - dodgers basically print money) then it’s the best for them to defer the money. Shohei basically gets a 5% return on 97% of his current pay, which he might prefer instead of being paid now and investing it himself.
Standard Present Value analysis is based off the risk-free rate which gets tricky...because the risk-free rate moves. Now days, way more than usual. (It's based off US treasury bonds.)
@@HKim0072while I see how Ohtani’s money is risk free, I disagree that you would use the rates of treasury bonds to determine the present value of the $680 million. The CBA calls for a 5% interest rate when calculating the present value of deferrals.
@@andrewk7004 JPM prime rate was over 7%. They must have revised it. Btw if they use 5%, they get even more luxury tax space. The contract AAV will go even lower. _For purposes of this Article XVI, full funding of the present value of deferred compensation obligations shall mean that the Club must have funded, for the duration of and without interruption in each year, the current present value of the then outstanding deferred payments, discounted by 5% annually. If the prime interest rate in effect at The J.P. Morgan Chase Bank on the immediately preceding November 1 is 7% or higher, the Parties shall meet and confer regarding this Article XVI discount rate and may, with due notice to the Clubs, amend such discount rate effective the next succeeding July 1._
In 2015 Max Scherzer deferred 50% of his salary… five years later in 2019 his team won the World Series. He invested in his team and it paid off. Did he get hated for it or cause the baseball world to go crazy? Shohei Ohtani is not the first to invest in his team by taking deferred compensation, there is a list out there with other players who are doing the same… but because the amount of Ohtani’s is so huge some folks are going nuts. Looks like jealousy or stupidity but it’s ugly to read so many hateful hurtful comments towards a player who loves baseball so much he came to this country to play at 23 years old giving up a significant amount of $$$. It’s not about the money for him… it’s for the love of baseball. Thanks guys for trying to explain, you guys are awesome. btw, if the dodgers save all the money they earn from Ohtani’s presence, they’ll probably have more than enough in 2034 to pay him for more than ten years. 😊
It's like most players take the cash option winning lottery ticket. All players could do this, just most don't have the endorsements like Ohtani has. In todays bucks, he's at like 45m, which is nice.
Deferring payments is ok, but the team salary should be based the average contracted years. Ohtani gets $2M this year, But the taxes should be based on the $70M.
You're getting berated because you said that this contract is good for baseball. The only people this contract is good for is current dodger players and the dodgers owner. This contract is 100% bad for baseball.
How can it be a regular thing😂can you think of ANY player who will defer 97% of his salary to be paid out ten years later? This will be the first and the last like this Unicorn players talent
This is just a cash flow issue workaround. Yes - for luxury tax purposes / how the league calculates payroll it counts as 40something mil. BUT - they are also not paying him 40mil a year. Just 2mil. So while on paper the league says their payroll accounts for it - in reality they aren’t actually paying him anything more than 2 mil annually. Watch every single big franchise exploit the shit on this going forward for big FA’s if thats how it works out. EDIT: essentially him taking 2 Mil annually amounts to short term 20mil over 10yr as far as actual cash payouts work. Players Association should be kinda pissed. Sorry, but this is so against the spirit of what the soft cap was put in place to prevent.
I don’t think a lot of people knew about the unlimited deferred money that was part of the last CBA, I hadn’t realized it but if it’s in there than it sucks balls but owners can’t complain about it bc they negotiated/approved it
Owners are not going to complain it’s a good deal for them as they get to defer payments over a longer period…. The only one taking a hit is the player Ohtani in this situation
Situation A: Ohtani gets 46 million a year for 10 years, straight up. That is the CBT impact and the actual money paid. Situation B: Ohtani's actual contract. Ohtani gets 2 million a year, which corresponds to 46 million in CBT terms. In this situation the dodgers can still pay 44 million dollars in actual paid money. So they could sign an extra player for 30 million, for example. In this case the CBT would go through the roof but they would still only be paying 32 million. Even if they get hit by CBT tax for 14 million dollars, which is huge, they would still be paying 46 million dollars in real money. In both situations they are paying the same amount but in the second case they have two players instead of one. At least that's my interpretation of how good this is for the Dodgers, taking the CBT into consideration.
We don’t know what money or the luxury tax will look like in ten years so the money the Dodgers will have to pay Ohtani after the contract is up may not seem as much as it looks now
Trev has it right about real cash flow budget that the other two keep ignoring. Let's say hypothetically the Dodgers have a real cash budget of 200m for 2024. With Ohtani only getting paid 2m of that 200m budget. If he got 46m today then that real cash budget is suddenly closer to 250m. That is the point the other 2 are missing. The Dodgers have real cash flow budget savings to spend on other players. Also, another point they're missing too is the 700m is a fake total number. Ohtani was never getting a 70m aav over 10 years without the deferrals. So them trying to say take 40m today and the rest later is not a real scenario because the Dodgers were never going to offer 700m/10 years straight up. They would have only offered 460m/10 or 500m/10 etc. The 700m number is just too look good on paper and headlines.
Some people said Shohei can avoid the California tax once he is finished with the Dodgers. The lump sum will then kick in. Shohei will be living in Japan or one of the states that doesn't have state taxes.
It's not a large benefit. Factors like inflation, and not being to start investing the money now but 10 years later will outweigh any tax benefit. Plus, if he lives in Japan, Japan will levy it's own large tax.
This deal is Ridiculous and a rare time I completely disagree with Trev. It’s horrible for the game and doesn’t stop other superstars from doing the same. He’s making nowhere near 700 million so that contract is fake he really signed for around 500
@@Adam-gh3biPlayers sign contracts with deferred money all the time, though not to this degree. Freddie Freeman will be paid by the Dodgers until 2040, and Ken Griffey Jr. is still being paid by the Reds.
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Jimmy eats popcorn like I do. Like a dope fiend. 😂🍿
Three meat heads talking finance and present value of money. Now I've seen everything!
I learned absolutely NOTHING from this podcast but I enjoyed every second of it.
It’s so true. These hooligans talking past one another about math, is hilarious!
The full Talkin Baseball experience
I'm halfway through and I'm right there with you lol
Shohei saw how Trout’s contract doesn’t help a team win. It’s genius
Technically Shohei’s AAV is higher than Trouts.
The dodgers just spend smarter and develop talent better than my Angels.
I wonder if Trout had some heart to heart with Shohei. Like "Don't make the same mistake I made..."
@@theflash4490 but not practically, which is the point
Arte Moreno is at fault for the Angels situation, it's not Trout's fault.
You mean rendons contract? Or pujols, or Hamilton? Haha
It's simple: he REALLY wants to win and he doesn't care that much about money because he already made more than he can spend in a lifetime. He wants the club he plays on to put up a roster that can win. Had he signed with the Angels he could not be certain that the 'extra' money from the deferrements would be put into improving the team, cause he's been there for 6 years and saw how they handled both money and human resources. 'Badly' is an understatement.
I disagree. It's both. He wants to win AND he wants a ton of money. He didn't sign the largest contract in history with the largest AAV ever just because money doesn't matter to him.
But honestly, good for him. He deserves the money and to win.
@@ImStillJohnny This is pretty much as uncaring about money as we've ever seen from a superstar athlete though. Remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
Anthony Rendon. Unforgivable
The contract value and his terms on his endorsement deals ARE HIS AGENT'S JOB. Shohei since Japan only eats, sleeps, and practice and the result is big money follows him. Ever since his dad made him focus on baseball rather than swimming, Shohei since he was a teenager realized how fking good he was and can be has since called his own shots for his career. He's already given up a potential $200m in pay by leaving Japan early, for the sake of competing at the highest level.
13:42 Trevor hit the nail on the head here on why there is so much outrage. Everyone heard $700M over 10 years with a $70M AAV and assumed that was upfront and readjusted their valuations on ohtani. Then the deferral info came out and made it seem like they took the upfront deal and deferred 97% of it to get around the CBT, when in reality the deferrals were baked into the $700M number when it first dropped. This was really more like a $460M 10 year deal in todays money but that money is deferred and the interest/inflation rate takes it to $700M valuation in 10 years time.
That $460M valuation is in line with what almost every analyst said - maybe on the lower end based on team preference, but not egregious in any way. But because of the timing of information coming out, people felt like the dodgers pulled a fast one on them and reduced what their CBT would have been by $25M when that wasn’t the case at all.
Well said. Something I keep hearing that I swear is looked at wrong is that he's getting $680M with no interest. It keeps coming up across so many sites and videos. The $680M includes interest and has tax break implications assuming he leaves California in 10 years for another team or retirement. Plus factor in his off the field earnings and reports on how he and his family handles his finances, this guy isn't about the money as much as he's about playing the game and winning.
@@84kapuaaexactly! Yeah when people are saying that the $680M is going to be interest free it’s a misunderstanding of where that $700M valuation was pulled from in the first place. They’re assuming that the dodgers or any other team were going to pay him $700M for 10 years straight up and then decided to defer the payment retroactively, which is not true. That number is the post interest number.
What’s funny too is that the initial response from everyone when the $700M 10 Year news came out, was that the Dodgers severely overpaid and no team could have possibly competed, and that he should have been closer to a $45M-$55M AAV because of his second TJ surgery. Then when it turns out that the actual current day valuation is in line with what everyone originally expected, the goalposts are flipped and suddenly its a crazy low valuation and an unfair, borderline cheating move by the Dodgers to have Ohtani for so little (even though it’s still the largest contract & AAV based on current valuation).
And I agree with you that Ohtani is clearly more focused on winning instead of squeezing the most value he can out of a team. He’s choosing to help the team build instead of maiming them through his whole contract, which I think should be applauded, not demonized.
People are also saying Ohtani is greedy for taking so much money from a big team but that he’s also virtually cheating by helping them afford him + other players to win championships. It’s so weird to get mad at one of the greatest players of all time for not joining a team he’d have to rebuild, as if he owes it to the league and baseball fans around the world. He already tried that with the Angels and look how that worked out!
Exactly back at ya! At least some out there see it for what it really is. @@leopluridon7
The problem has nothing to do with the money. It's no secret that teams like the Dodgers can outspend almost any other team. The problem is the pay structure, they're doing fucking yoga to ditch the luxury tax which was implemented to level things out between big money and small money teams. So now we have a big money team using rules intended to help small money teams to fuck harder those small money teams.
You've taken probably 24 teams out of the running in perpetuity. THAT'S the problem. Nobody can outspend the Dodgers and now they don't have to worry about a luxury tax either. Fuck at least the Astros just straight up cheated and didn't try to get it cleared through the league, then when they got caught cheating at least they pretended to care that they got caught.
@@andrewaaberg482those 24 other teams never had a chance anyway bc their owners dont spend + generate enough revenue to sign the best free agent of all time. what do u want him to do? take a contract that severely underpays him to play on a middling team that doesnt have the market or branding that a big market team does? this is sports and big markets are what appeal to the best players bc they want to play in front of the large audiences and get their moneys worth
trevor 100% had it and jimmy and jake were trying to tell him hes wrong lmao, trevor was right the whole time
It happens more frenquently than before, and as usual when Trev explains something Jimmy just talks about something else and that ends what Trevor was saying... I don't hate Jimmy but still pretty annoying when that happens, he does the same with BBD btw.
Shohei was offering this to all teams that he was willing to sign with. He would not do this for the Pirates, Marlins, etc. Since he wanted to stay on the West Coast, with a team that can give him consistently the ability to play in October and was already comfortable in Southern California, Shohei chose the Dodgers.
Also, he makes $30+ million in endorsements
This will not be a common contract. Ohtani makes so much off sponsors. He is able to defer all the money. No other MLB player comes close.
Judge is the closest and he only gets 4 Million off court ohtani gets 40 Million 😂
I mean my opinion on this doesn’t matter cause I didn’t play sports past middle school, so my brain is wired completely differently from people that spend their entire childhood trying to make the bigs.
But with so many players talking about how a freak injury could end your career so they want all the money upfront, I personally would rather have the money come in for years after.
I don't think anyone else will do it to this extreme, but I imagine a lot of players may start taking Scherzer-esque deals in order to help their team's CBT burden and to help bring in more talent.
@@beanie3427I think that's still a long reach. The player would have to not care about money because he is technically losing money in the long run.
Jimmy is talking about the tax percentage, Trev was talking about real world spending… now they can spend over the tax and still only spend like 10 to Shohei’s payroll plus tax
I love this episode so much. Trev trying to explain that even though the tax penalty is there, there aren't real dollars to apply the penalty to (thus the deferment) while Jimmy and Jake are on another island completely brought me tears of joy.
Its painful and also enjoyable at the same time. Jimmy is still lost.
I saw a Verducci interview where Ohtani said he wanted to defer all his salary
His Agent said well you can’t play for free
So the Dodgers offered 70 million, Ohtani countered for free… they ended up with the 2 million salary
Trev coming out looking real smart this 'ep. Jake and Jimmy gaslighting him for 40 minutes straight was pretty entertaining though.
Joking right?
Jimmy is a you know what… always a hater
What? Trevor was completely wrong the entire time 😂
@@azcardguy7825 Trev is far more correct than both Jimmy and Jake
Trev👏👏👏
I'm not surprised really...This contract can only be agreed upon by such a man with a rare character such as Shohei. While everyone is focused on MONEY, Shohei has a special spiritual reasoning within him that allowed this. I believe the Dodgers will be blessed beyond their wildest expectations due to Shohei's selfless decision. Be prepared for even GREATER things from this man.
Ohtani is getting 700m. Please stop acting like in the end its not about money yet again. He is a regular ass human that wants as much as he can get.
a lot of Americans assume everyone is as greedy and money driven as them. they can not grasp that some people view success differently.
we’re not all like that though. I’m so happy someone like shohei is in LA (:
He wants to win… if he wanted as much as he could get he wouldn’t have deferred his salary
@@TMess203 If he wanted to get as much as he can, there's no way he defers this much money though. Thinking financially, remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
@@DW-op7ly If he didn't care about money he wouldn't have asked for 700m, stop. No one is disagreeing he played with the money so the Dodgers could add more just cut it with the he us such a Saint stuff.
This is such a great example of every water cooler conversation that is happening today across the country!!! 23:43
I’m afraid you’re right, so many people can’t figure out relatively simple math and mostly because they don’t try.
ive never felt the "not a math pod" more than today
Just hopping on to listen to my favorite known math pod
okay we need an accountant (or probably Nez ) on the show 😂
Financier*
If its the dodgers or yanks, everyone will always be pissed. If he had gone to Toronto with this contract, no ones saying anything
The solution for what Jake wants involves deferring the money further into the future. There is no way to pay Shohei 46M this year and only have the CBT hit be 46M (unless there is just no deferred money). If he wanted to take 10M/year or whatever amount more, and the CBT hit be only 46M, the remaining money would have to be deferred even further in the future.
It's not that he went to the Dodgers. Its that they already had a 100 win team and get to add arguably the best baseball player ever for 50% lower than the annual average a year. Can't blame him or the Dodgers, but everything about it sucks for everyone else.
Funny to see everyone complaining about the Dodgers when this was all the player's idea 😂
On god, he offered this deferment plan to every team he met with too
They're just jealous and making a big deal out of it.
If it came to his team, he would definitely defend it 😂
Pretty sure this new deferral rule was supposed to help small market teams compete. Not help the big market teams get bigger 😂
Not a new rule.
@@onespeedliteit’s a new agreement that there is not a limited amount you can defer.
No, deferrals help owners that are Finance guys who are making a greater return on their money outside of baseball.
@@jondough42069 Specifically put in place by the players themselves. Lol
People are acting like this problem hurts the players when they are the reason it exists. The only people who are currently mad about it are fans.
He is happy making money, money is not everything in life thats why he is who he is. He will get a lot of marketing advertising from USA Los Angeles and Japan. He is a very smart player and it was his goal and dream to play for the Los Angeles Dodgers.
Personally, as someone who gets all of my baseball news from either the Jomboy Media collective, Cubs beat writers, and Foolish Baseball, I was pissed because I didn’t get how the CBT works until now. It’s basically like Shohei is getting a 10y/$460m in the sense of how this effects the dodgers future negotiations. It’s not like a 10y/20mil contract. As an econ guy personally once you guys clarified that it all clicked for me. When you get down to it the $700mil is just funny money. It’s not real. Inflation means that the depreciation of that $700m over the next 20 years is in actuality just like being paid $460m over the next 10 years. I think this actually becomes a bad time for Ohtani (relative, obviously, he’s still crazy rich regardless) if we hit a terrible recession (which we might), and our inflation skyrockets (which it might) his contract might further devalue.
Yes, Trevor got it!! $46MM is theoretical. $2MM is actual. Sure, Dodgers will happily pay the tax when they go over the threshold because they are only paying real money of $2MM. So they can use the “savings” to pay for more players and the tax.
18:08 the benefit of deferring is that the AAV hits the CBT over the next 10 years but because they don’t have to pay ohtani most of that money, they have more cash flow to actually pay other players.
Then it’s the reverse once the deferrals hit - the dodgers will be paying out that money (so a bigger hit to cash flow) but it will not count towards CBT since it already was counted towards CBT the previous 10 years.
Basically deferrals allow teams to not be hit negatively on CBT and cash flow at the same time, which is beneficial.
The money he’s getting is different than it is luxury tax wise. Money wise, he’s getting 20 million over the next 10 years and then 680 mil. after the contract is up.
Luxury tax wise: the AAV ultimately ends out as 46 per year which reflects upon the current 326 million first luxury tax threshold.
too many people don't even know what this means unfortunately.
I thought he differed 68 million a year? So that would leave him at 2 million a year against the luxury tax, no? That's what I've been reading anyway
@@theamwindowthe contract aav is taken at its average value throughout the contract. Works the same for heavily backloaded deals. Difference here is the deferred payments, which are discounted at 4% per year to work out the overall value of those payments now. This works out to 430M which is then made to be 43 per year against the CBT
@@theamwindow the luxury tax taxes in the decision of the average annual value of the contract. With all the referrals and taxes it wounds up to be 46 million per year. That’s how much it affects the Dodgers luxury tax.
The 680 differed is the physical amount they are paying him after his contract, not related to the luxury tax. That way the Dodgers can save physical money to spend on others
A lot of people don’t understand this
Shohei simply did what Tom Brady did, and what I've always said I would do if I was a player at the top of my sport: take less money or do things to relieve you're team's cap burden in order to help the front office build a juggernaut team. Once you have THAT much money in the bank, I think it makes sense to do things like this.
Championships will probably make you happier than having a fully maxed out contract. Championships will increase your marketability, allowing you to make more money outside the sport. It also gives you a better chance of building your legacy to potentially going down as one of the GOATs of your era.
Basketball is a bit of a different animal, but I've said for a while now that this is a strategy that Lebron should have deployed starting around 2018 when he went to LA. He was probably worth damn near a half a billion at that point. If he had taken the veteran minimum or a MLE level contract, the Lakers would have had a ton of flexibility to get AD plus another superstar or two. He could have guaranteed himself another 3-4 championships and likely would have surpassed Jordan.
This is what a lot of people/sports fan don’t understand. Crazy power move and honestly makes a team like the Yankees seem like losers 😂
As a fan, I'm glad Lebron didn't do that and screw over parity in the league even more.
@@panner11 nba players aren’t that smart. Maybe that Greek freak could be open to that kind of deal.
@@bobdylan-t1r NBA dislikes this kind of obvious manipulation, if it ever does happen I wouldn't be surprised if the NBA disallows it.
The AAV calculation is meant to determine the value of the contract in 2023 dollar value. A way to understand it is that $680M in 10 years is worth less than it is today. And the final $68M he’s getting in 2043 is worth even less.
Talkin baseball only Trev love Shohei.
By all accounts, Shohei and his team came up with this idea. The only thing selfish about this is that Shohei decided the Dodgers give him the best chance to play in as many playoff chances possible. Sure if this was a movie, Shohei going to Toronto or SF, it would be cooler but the only "bad" thing here is Shohei wants to win. That is the only selfish part of it. Or is it?
As we know now, Shohei gave this offer to all teams looking to get him. If he didn't choose your team then they didn't do good enough within the last decade for him to decide it had a chance to win.
I can't see any other player deferring that much money an extra 10 years. Nobody in their right mind would wait that long for a payday, no matter how rich they already are. Hence why literally no other players have ever done this in baseball history.
@@SuperCatacata Totally my speed my man. But I also understand all the envy and the overall sense that the Dodgers can do this because of all the competitive advantage of being the Dodgers. Most of the outrage of cheating will die down but I wonder if Ohtani broke baseball for good or ill....
You're missing the fact that he won't pay US or California income taxes on 680 million if he retires as expected to Japan. Meanwhile, everyday folks paying 28 to 36% of their salaries. Seems like the more money you make the more taxes you avoid.
@@josephfernandez6402Japanese taxes ain’t cheap either, goes up to 45%. So if he becomes a Japanese tax resident after 10 years, he pays tax on his worldwide income which is hefty. Unless he goes to Singapore or the Cayman Islands.
Shohei is already making bank off the field with sponsorships and commercials. He knows he's making more money than he can spend, so he wants to make sure he can also win championships.
The only ways he's losing out is if he wants to own a team one day. Then he would've been better off taking the money upfront
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this.
People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Everyone said Shohei going to Canada was bad for baseball but fail to realize that this deal is bad for baseball. It's unfair and it makes baseball less competitive. Period. It will drive fans away because no one wants to see the Dodgers win 5 consecutive titles.
I'm starting to think Ohtani loves the Dodgers more than I love the Dodgers & I've loved them for 33 years. That's ok with me. :) Merry Xmas baseball enjoyers
Ohtani is not interested in money.He wants to win.
No one can sacrifice their salary like him.
Endorsements have a lot to do on this contract
True. If he came to US 16months later, he could get enormous money but he abandoned the money and came here when 24 years old. He donates most of his money anyway.
He’s not sacrificing shit. Just stop. He’s already getting $40M+ in endorsements. You’re acting like he’s living off a minimum wage to play baseball.
Ohtani’s contract is easy. $700m over 20 years equals $460m over 10. He will count $46m for the salary cap. Lower cap hit means the dodgers can sign more players. For Ohtani it’s happiness now and $680m later. Or as Jet Passan said, “It’s the most team friendly $700m contract ever.”
Why does 700 make 460?
wut? how does $700m over 20 years equal $460m over 10?
MLB uses the ten year treasury bond for accounting. Put another way $1 million now is worth more than $1 million ten years later. You can make more money if you have the money now. Time value of money.
@@jliving02inflation estimates. Money today is worth less than it will be in 10 years. Easiest way to put it is that they’re estimating that by the time the contract is up $70 will be worth more like $46 in today’s money due to inflation.
@@TheFightConnoisseurpurchasing power changes but 700million is still 700million no?
So he got a 10/460 but did it in a way that sounds bigger looks cooler and keeps his team competitive stay mad haters
I guess the other $240million he gets that the decade after ?
the deal is legal. but this definitely feels like a jumping-the-shark moment for Major League Baseball.
Yeah this kind of extreme deferment of money shouldn’t ever happen again
@maxdubs2241 why would it. He is a once in a hundred year player.
An average player signs an overpaid contract, no one bats an eye.
A once in a lifetime superstar signs the team friendliest contract ever, everyone loses their minds
😂
trev had it right the whole time. jimmy and jake were missing the point lol
it doesnt matter if it SHOULD be legal, because it is and all teams were given the same option by ohtani's camp
I think the reason people are upset about this is absolutely heightened by the fact that it’s the dodgers. Yes, every team and every owner ‘can’ spend more money than they do, but in this world where they all have their own spending practices, the dodgers are one of the only teams that could afford to pay a player $70million a year. And in terms of competition that would effectively be a balancing agent. Yea, not all teams can afford to pay a player 70 mill a year, but even the dodgers can only be paying so many players that at once. Such a high AAV contract is supposed more or less force the dodgers to put all their eggs in the Ohtani basket. The dodgers now have the best player in baseball and still have some of the most money to throw around in baseball, and that’s simply anticompetitive. Don’t try and tell me that every team can do this. The royals are never going to have the money to do this. The two teams in the World Series this year are currently without long-term TV deals. Only the teams that are the wealthiest (and thus the most competitive) can afford to do this, and they shouldn’t be able to get more competitive for, in the short term, free. That said, I think the only realistic way to combat this is to compel teams to pay the luxury tax on the true AAV. The dodgers and Ohtani can wait to pay out as long as they want, but the dodgers should have to pay taxes on the full 700 mill during the duration of the contract.
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Ohtani doesn't care about money AT ALL, he has said this in the Japanese media several times before. All he wants is to win and to be considered the greatest of all time. Simple as that, that's why he doesn't do anything except play baseball. He doesn't even care about endorsement money, but he and his agent know that he needs to maintain a certain image to keep the train going.
When you make as much he does off the field it's a bit easier not to care about your yearly AAV. A beautiful retirement plan, I guess.
$700m says he does care about money….
He doesn’t care about the money but he signed a 700mm contract?
To say he doesn't care about money "AT ALL" feels like some false worship. He cares about money. Otherwise he would have taken league minimum and been done, not sign the largest contract in history.
It's ok to say he cares about both money and baseball. That doesn't take anything away from him. Money is important and good for him for getting a buttload of it.
@@azcardguy7825 It's not that he literally doesn't value money, but if money was a priority for him, there's no way he defers this much money. Just financially, remember money 10 years down the line is worth way less than money right now due to inflation and not being able to start investing it early. It's a huge loss. Plus, remember he gave up the possible 200 million contract by posting early to the MLB, which is why he was on that
Perhaps Shohei has this deal always in mind, which is one of many reasons he did not want any numbers from his meetings leaked.
The inflation is not as big of a factor as not getting the compound interest.
if the dodgers were willing to pay $70M per year for the first 10 years, and if ohtani said he'll defer most of it, then ohtani basically took a $232M pay cut to keep the dodgers competitive. it's that simple. that's all it is. -$232M=($46.8M-$70M)x10=(AAV - salary without accounting for the time value of money) x number of years.
i think the players union should be upset about this deal because a player felt that he needed to take a pay cut because of the luxury tax threshold. on the other hand, if the $70M per year for the first 10 years was never on the table, all this is just optics. i.e. this is not really a $700M contract. it is essentially a $468M contract, and the dodgers are getting charged as a $468M contract. illustratrion: any team that can pay $468M over 10 years can do the same thing as the dodgers. they just need to save $44.8M (=AAV minus $2M) each year and put it in an interest bearing account. then after 10 years, they'll have $68M to pay their player each year. any player can do it as well - a player that gets signed $468M over 10 years can save $44.8M of the $46.8M each year, and 10 years later, the player will have an income stream of $68M per year. of course you need to adjust the math for taxes, but the same argument holds.
overall, i think the $468M (or $700M) over 10 years seems fair for ohtani given his injury this year. i.e. ohtani is getting paid what we thought he would get paid, between $450M to $500M because of the injury.
"He isn't going to pay his California taxes!" Yeah because he won't actually be making the money for 10 years. Are these people stupid? You want him to pay taxes on money he doesn't have yet? Wtf man. Simply having a contract saying you will eventually be paid a certain amount of money doesn't mean you're actually paid that amount of money yet; you have to actually be paid money to...be paid money. He will have to pay taxes at some point to some government once he actually realizes the income. It might be Japan idk. He'll be paying taxes on the $2 million per year still, to California. He'll also pay California taxes on the tens of millions of dollars he gets in endorsements and any other form of income he brings in.
Funny how trevor gets it 100% completely yet the two guys who have stated how bad they are at math are convinced that HES the one who is lost here
I am not mad at Ohtani at all but I am mad that Dodgers organization is so freaking smart and I even more mad that my Cubs didn't think of this.
Jake you’re just missing it, if shohei took $46 mil now and deferred anything, the CBT would be higher than the $46 mil.
Yes cuz eventually you’d get to $70 million AAV
Break out the bong for a big salary cap talk
It's very stupid to say "Ohtani lost money by not taking the money up front" when clearly nobody was actually offering him $700 million up front. Teams were probably in the ballpark of $400-$450 million up front, and instead, Ohtani chose to get $450 in an unconventional way that allows his team to be competitive, for him to live off advertising money now, and then live off the $68m/year in retirement. The initial number of $700m/10 broke people's brains and has people reframing this through that lens when it never should have been seen as $700m.
He’s still getting 700million though it’s just gonna take 20years to collect all of it
@@killcamz24mota92 right, that’s why I clarified “up front”
Jimmy and Jake are trying to figure out how he gets $46M per year throughout the 10 years while still making $700M. If Shohei gets $46M per year, there would be no deferments and the contract would be $460M not $700M
I agree with Trevor that you should pay as little taxes as legally possible but only for a regular person who works 9-5 not for a multi millionaire.
Yeah, Ohtani is scum if he pulls that
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this.
People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
@@mirikaku5811Should I watch it the same amount of times as you’ve left this comment?
@@gentlemanjake8005 yes, I’m getting lazy to the point I copy pasted..too many negative comments can’t keep up. Good for the sites algorithm I suppose 😂
I think people are upset more so from a competitive stance. Why would I even watch the Rockies if I’m a Rockies fan if the dodgers can just sign every good player? Competitive balance just got even more out of wack.
As a Dodgers fan i really don't think they are signing any more relievers. Their relief crew is set. The Dodgers don't really believe in paying top dollar for big name relievers. The 2nd half of last season their relievers were lights out. That was their only bright spot in the playoffs. If they need help by the trade deadline they will go that route. They need starting pitching badly. Not sure if they are in on Yamamoto or if he will want to play in Ohtani's shadow. It could go either way and neither outcome would be surprising. They will acquire at least one top end starter and probably a middle of the rotation guy before the season starts.
Most team friendly deal in sports history. If the Dodgers get Yamamoto, watch Yankees fans lose their minds.
Yankees "only" ending up getting Soto? Poor fans are starving.
It'll definitely come down too if Yamamoto wants to play in Ohtani's shadow, or if he wants to be the star.
It's not that difficult to understand.
Money today > then money tomorrow
Over the last 100 years, money has lost on average 4% per year.
700/10 paid at l2/10 amd 68/10)
Would mean that after all the years of inflation are accounted for, it would be the same as if he was given 460 million over 10 years.
However, he will avoid a 12.8% California state tax each and every year on the 68 million. He would move to Japan for the final 10 years, and so yes, California and the U.S. miss out on a lot of taxes.
Jake getting frustrated at Shohei not getting his money now instead of later lol. Clearly Shohei is fine with it, he signed his name on the contract.
What an insightful observation.
He didn't just sign his name on the contract. It was his idea to do it that way.
The one thing I never got was if the dodgers are operating as if they’re paying 46 mil for shohei or if they’re paying 2 mil for him. I think that’s what Jake was getting at, if they’re gonna operate like they’re paying 46 mil for him, then he should get as much of that 46 mil as possible now, and differ the rest of it.
Trevor got it right. The Dodgers have a real budget of the money they're really paying. In that budget Ohtani is making 2 mil, so they're gonna take the 44 m they're saving to sign more players.
@@Alex-dl6it ok, im not super knowledgeable of baseballs luxury tax system, but that kinda implies the dodgers dont care about the luxury tax, and they only care about actual cash on hand, is that right?
the 46 mil figure is only possible because he deferred that much. If Shohei defers less money, the 46 mil gets larger. That's how it works.
@@panner11 he could defer less money for a longer period of time, which is the calculation jimmy was trying to do
You're both right. The less deferred, the higher the current AAV. If you defer less than $680m, then the current AAV increases beyond $46m (cause it's at today's value rather than the value 10 years from now. But it's also the case that the $46m currently counting against the AAV isn't real money (only $2m is), so the AAV climbs by $46m, but the actual money being spent is only $2m. In 10 years, the actual money will be getting spent (i.e. being paid to Ohtani), but not impacting the AAV. The contract is effectively $46m for 10 years ($460m). Ohtani has loaned them $440m and they are paying him back $680 over 10 years at the end of the contract (in 10 years time). There's no interest, but the amount owed to Ohtani increases in line with projected inflation (from $440m to $680m). And Ohtani doesn't have to pay tax until he is receiving the money.
He didnt ask for penthouse rooms, limo rides, special treatment either like some of the superstars ask and get
WHY IS THE CAP HIT 46M per year but shohei only gets 2M per year THIS SHITNMAKES NO SENSE AHHHHHHHH
Any chance they just give him an ownership percentage in 10 years at the value of $680 million?
No, the owners are finance guys. The invest for their other job. This contract is even more of a bargain for them.
I think there is a possibility! Ohtani said this amount is “laughable” and he most likely won’t needed even after retirement (he makes 40-50M in endorsement any way, remember. And he dosent buy Yatches, private planes or palaces..(he rented a house for 20K/month for 6 yrs)
If Dodgers invest $390 million at 6% compounded interest over 10 years it will come out to $700 million at the end of his contract.
Ohtani is helping his team in hitting, pitching and finance.
Shohei Ohtani makes more than 35 million in endorsements and such per year. When he is done with baseball he's going to need the equivalent of that. the deferred money is alright with him because his endorsement money is so high, to say he doesn't care about money when he made 70 million in 2023 is kind of naive. He's smart as hell for this, played the game perfectly. ALSO the Dodgers know the money Shohei's brand will bring in over the next decade will more than pay for the deferred portion of the contract.
Shohei makes about 37-40 mil with contract + endorsements from 2024-2033 and then 68 million for 2034-2043!
Plenty of sports players also get a shit ton from endorsements. NONE of them are deferring their contracts like this to benefit the team.
Sick of people acting like it's so understandable for him to do this. It's not. It's honestly nuts to do this.
@@SuperCatacata sure, but no one in baseball makes close to what ohtani does in endorsements.
@@SuperCatacata also if HE wants to win HE knows the Dodgers need money. He is still getting paid though lol. This is in no way a selfless act and I'm sick of people acting like it is. He gets to win and he gets to make over 700 million in a baseball career 😂
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this.
People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Sincerely asked for 68 million a year after he retires.
Jake and Jimmy have no idea what they’re talking about this is amazing lmao
Dodgers and Ohtani just played the game within the game better than others. Props to them for being smarter than the rest of the field.
Really not hard math to understand, if you take a principal balance of 46M and apply 5ish% over 10 years you get 68M.
You have to compound the interest. The rate is lower.
Sure you can vary the frequency of compounding and rate, but the exact numbers are not necessarily known values. 5% compounded yearly are simplifying assumptions meant to provide an example of how the calculation would be made.
The only things that really matter are the principal 46M ish and the final value 68M and my simple calculation maintains those values.
@@TheMogulman31 I'm 90% sure they are using the risk-free rate. It's one of the t-bills not sure what term. 10yr would make the most sense which is 4.227% right now.
@@HKim0072 sure that's great, but again the point is to present a simple example to demonstrate the principle (pun intended), speculating on the exact values is beside the point
@@TheMogulman31 Not to be pedantic, but that would be an injustice to the PV calculation, lol.
What pisses me off is the guy at MLB who decided that $44m is equivalent to $68m in 10 years…. Seems like a great deal for the dodgers vs actual inflation (im a finance bro)
I don't understand how shohei benefits from this other than "wanting to win". Couldn't you get better returns for that money in that span versus getting it at around inflation rates?
you do finance for circle k get outta heree
After some research, I’ve come to the conclusion that this is circumvention. I would have been fine if during 2034-2043 the dodgers had a CBT hit from Ohtani’s contract, but they don’t. In essence, Ohtani signed a heavily backloaded 20 year, $700 million contract, but the dodgers only pay CBT taxes on $460 million of it. The Padres wanted to offer Judge 14 years to lower AAV and CBT, but it gets vetoed as circumvention. Dodgers (and many other teams) say okay, we’ll do 20 years, but the last 10 years we will call “deferral years”, and that’s how we’ll avoid paying a higher CBT tax and payroll.
I’m willing to be convinced otherwise, but the way I see it, over the next 20 years the dodgers will pay Ohtani $700 million, but for CBT purposes are only paying him $460 million for 10 years.
I’m just waiting on more moves by the World Champion Texas Rangers.
I don't think trev understands that shohei doing this allows the dodgers to keep adding pretty much however many stars they want while smaller market teams can't do that
Yeah, but that's how it's always been. Besides, no one other than Shohei can do this.
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this.
People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
@@TheGreyCrayon I think no one other than shohei can do this makes it worst for the other teams
I love the mathlete episode on his contract
This is math couch potato. Nothing athletic about this besides being bad at math.
Former Marlins Pres David Samson says Ohtani contract reopens civil war between small- and large-market teams that led to 1994/5 MLB lock out. Legal, but unimagined in CBA negotiations.
Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this.
People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.
Those CA state and local taxes are a tad unreal though.
The Dodgers make:
- $240M a year in their local TV deal
- $205M in ticket sales
- $60M in national TV deal
- Sponsorships = ???
- Concessions / parking = ???
They are probably pulling in $550M at least per year.
Jimmy was all over it with his calculations and description around 24:00
And the long and short is he wanted to play for the dodgers, plain and simple. Like Jake was saying and Jimmy was calculating he could have easily gone somewhere else for higher payments now with same AAV or deferred longer with Dodgers for same. Just wanted to play in LA so is taking the reduction just for that
As a Giants fan, I'm not bitter towards Shohei or the Dodgers for this contract. Just sad my favorite player has signed with the Dodgers for the second time (Mookie Betts a few years ago). 😢
Only conciliation is that he will be in your time zone and you can watch him live if you take a quick trip.
Trevor: “people online are mad about x”
Jimmy: 🤨
Jake:🧐
Jake: 🙂
Jake: 🤓
Jake: 🙂
Unsure where the 4% is coming from - doesn’t the cba require the use of 5% to calculate the PV of deferments? Also if the dodgers think that they can make more than 5% ROI (they can - dodgers basically print money) then it’s the best for them to defer the money. Shohei basically gets a 5% return on 97% of his current pay, which he might prefer instead of being paid now and investing it himself.
Standard Present Value analysis is based off the risk-free rate which gets tricky...because the risk-free rate moves. Now days, way more than usual.
(It's based off US treasury bonds.)
@@HKim0072while I see how Ohtani’s money is risk free, I disagree that you would use the rates of treasury bonds to determine the present value of the $680 million. The CBA calls for a 5% interest rate when calculating the present value of deferrals.
@@andrewk7004 JPM prime rate was over 7%. They must have revised it.
Btw if they use 5%, they get even more luxury tax space. The contract AAV will go even lower.
_For purposes of this Article XVI, full funding of the present value of deferred compensation obligations shall mean that the Club must have funded, for the duration of and without interruption in each year, the current present value of the then outstanding deferred payments, discounted by 5% annually. If the prime interest rate in effect at The J.P. Morgan Chase Bank on the immediately preceding November 1 is 7% or higher, the Parties shall meet and confer regarding this Article XVI discount rate and may, with due notice to the Clubs, amend such discount rate effective the next succeeding July 1._
In 2015 Max Scherzer deferred 50% of his salary… five years later in 2019 his team won the World Series. He invested in his team and it paid off. Did he get hated for it or cause the baseball world to go crazy?
Shohei Ohtani is not the first to invest in his team by taking deferred compensation, there is a list out there with other players who are doing the same… but because the amount of Ohtani’s is so huge some folks are going nuts. Looks like jealousy or stupidity but it’s ugly to read so many hateful hurtful comments towards a player who loves baseball so much he came to this country to play at 23 years old giving up a significant amount of $$$. It’s not about the money for him… it’s for the love of baseball.
Thanks guys for trying to explain, you guys are awesome. btw, if the dodgers save all the money they earn from Ohtani’s presence, they’ll probably have more than enough in 2034 to pay him for more than ten years. 😊
Trev is smart👏👏👏
probably my favorite talkin baseball episode ever.
It's like most players take the cash option winning lottery ticket. All players could do this, just most don't have the endorsements like Ohtani has. In todays bucks, he's at like 45m, which is nice.
Dodgers have to allocate that $44 a year to escrow so they are out 46 a year cash
It’s not $44m, it’s $68m. Only 46m is going toward their CBT because of creative math. It’s bullshit.
Deferring payments is ok, but the team salary should be based the average contracted years.
Ohtani gets $2M this year, But the taxes should be based on the $70M.
You are so petty! Resenting others for their money. It’s not your money and not fair? Are you a communist party member or something?
You're getting berated because you said that this contract is good for baseball. The only people this contract is good for is current dodger players and the dodgers owner. This contract is 100% bad for baseball.
I'm genuinely curious if either the owners or players (or both?) don't like this deal
It feels scummy and unfair. If this becomes a regular thing the competitive balance in MLB is going to get way worse.
No one is going to agree 2mil year when they can earn 10mil 20mil
How can it be a regular thing😂can you think of ANY player who will defer 97% of his salary to be paid out ten years later? This will be the first and the last like this Unicorn players talent
Trevor glazing up the Dodgers hard
He is just speaking facts
This is just a cash flow issue workaround. Yes - for luxury tax purposes / how the league calculates payroll it counts as 40something mil. BUT - they are also not paying him 40mil a year. Just 2mil. So while on paper the league says their payroll accounts for it - in reality they aren’t actually paying him anything more than 2 mil annually. Watch every single big franchise exploit the shit on this going forward for big FA’s if thats how it works out. EDIT: essentially him taking 2 Mil annually amounts to short term 20mil over 10yr as far as actual cash payouts work. Players Association should be kinda pissed. Sorry, but this is so against the spirit of what the soft cap was put in place to prevent.
"All this numbers that I can't figure out" - Jomboiiiii
I don’t think a lot of people knew about the unlimited deferred money that was part of the last CBA, I hadn’t realized it but if it’s in there than it sucks balls but owners can’t complain about it bc they negotiated/approved it
Owners are not going to complain it’s a good deal for them as they get to defer payments over a longer period…. The only one taking a hit is the player Ohtani in this situation
Situation A: Ohtani gets 46 million a year for 10 years, straight up. That is the CBT impact and the actual money paid.
Situation B: Ohtani's actual contract. Ohtani gets 2 million a year, which corresponds to 46 million in CBT terms. In this situation the dodgers can still pay 44 million dollars in actual paid money. So they could sign an extra player for 30 million, for example. In this case the CBT would go through the roof but they would still only be paying 32 million. Even if they get hit by CBT tax for 14 million dollars, which is huge, they would still be paying 46 million dollars in real money.
In both situations they are paying the same amount but in the second case they have two players instead of one.
At least that's my interpretation of how good this is for the Dodgers, taking the CBT into consideration.
We don’t know what money or the luxury tax will look like in ten years so the money the Dodgers will have to pay Ohtani after the contract is up may not seem as much as it looks now
Trev has it right about real cash flow budget that the other two keep ignoring. Let's say hypothetically the Dodgers have a real cash budget of 200m for 2024. With Ohtani only getting paid 2m of that 200m budget. If he got 46m today then that real cash budget is suddenly closer to 250m. That is the point the other 2 are missing. The Dodgers have real cash flow budget savings to spend on other players.
Also, another point they're missing too is the 700m is a fake total number. Ohtani was never getting a 70m aav over 10 years without the deferrals. So them trying to say take 40m today and the rest later is not a real scenario because the Dodgers were never going to offer 700m/10 years straight up. They would have only offered 460m/10 or 500m/10 etc. The 700m number is just too look good on paper and headlines.
All the haters please leave your sweet tears below⬇️
😭
LMAOOO
Dodgers gonna get knocked out of NLDS again
@@steviejohnson378 when they win it all you’ll make an excuse
Haters of what? Baseball?
Some people said Shohei can avoid the California tax once he is finished with the Dodgers. The lump sum will then kick in. Shohei will be living in Japan or one of the states that doesn't have state taxes.
It's not a large benefit. Factors like inflation, and not being to start investing the money now but 10 years later will outweigh any tax benefit. Plus, if he lives in Japan, Japan will levy it's own large tax.
He'd definitely going home to Japan
This deal is Ridiculous and a rare time I completely disagree with Trev. It’s horrible for the game and doesn’t stop other superstars from doing the same. He’s making nowhere near 700 million so that contract is fake he really signed for around 500
What other player is going to want deferred money? They want to be paid now
@@Adam-gh3biPlayers sign contracts with deferred money all the time, though not to this degree. Freddie Freeman will be paid by the Dodgers until 2040, and Ken Griffey Jr. is still being paid by the Reds.
@@Adam-gh3bi Exactly. This is something only Shohei would be willing to do.
@@TheGreyCrayonhe’s obviously in the top 1% but other guys can absolutely make it work if they wanted to. Maybe to this crazy of an extent but 50%