The New York Mets have just made history. A little more than a month into the MLB offseason, they have signed Juan Soto to the most expensive contract in the History of sports. Forget Cristiano Ronaldo, Lionel Messi, Tiger Woods, or anyone else, Soto is set to be one of the richest athletes ever after his 15 year – $765 million dollar contract comes to an end. As the public looks on Soto’s signing with a mix of emotions: disbelief, disgust, excitement, and hatred, it brings up the question if too much money is being thrown at athletes. The answer: yes and no.
Shohei Ohtani: The Economic Impacts of a Global Superstar
During what was a record-setting offseason in 2023 in which Shohei Ohtani was signed to a ludicrous 700 million dollar deal for 10 years, the same question as the one this year was being brought up if the LA Dodgers had spent too much money on the best athlete to ever come out of Japan. The answer? Surprisingly, no. Due to his unfathomable scope in Japan, Ohtani will end up making a ridiculous amount of money for the Dodgers during his 10 years in blue. Ohtani’s contract structure will end up saving a bunch of capital for the Dodgers due to the way his contract is structured too, he is set to only earn 2 million dollars per year until 2034 and then 68 million dollar yearly payments for the ten years after the contract technically ends. In a complicated way, the contract will also save Shohei money from California income taxes once he goes back to Japan after his career is done, but that’s a whole different situation to talk about later. Through deferred payments, the Dodgers will have one of the best players of all time on their payroll for only $2 million per year until he leaves.
Back to talking about the money Shohei Ohtani will be making during his stint with the Dodgers. If you were to tune into a regular season Dodgers game in 2024, there would be a 100% chance that you would see Japanese products being advertised during the game. Just during the 2024 season, the Dodgers signed deals with Tokyo Tires, Nippon Airways, and Daiso among other brands, and according to USA Today, the amount of money that the Dodgers have raked in just from sponsorships on the outfield walls has jumped from $500,000 in 2023 all the way up to 6.5 million dollars in 2024. In addition to what are thought as insignificant sponsorships like the outfield walls, the city of Los Angeles is seeing a boost in Asian visitors, primarily from Japan. Although Shohei Ohtani merely moved crosstown from the LA Angels, they were an unsuccessful team, and there wasn’t much to root for. According to the Los Angeles Tourism and Convention Board’s Bill Karz, as of October 24th, 80-90% of the 230,000 visitors from Japan in 2024 had watched a Dodgers game during their stay.
The economic result from this phenomenon is evaluated to rival that of the Taylor Swift’s Eras tour, and will keep raking in cash for the Dodgers and the City of Los Angeles for years.
Juan Soto’s Record Contract
With the economic benefits brought up regarding Shohei Ohtani, is there a similar impact with Juan Soto, the new money king in baseball? Maybe not as much as Ohtani, but more analytical. Up to the ludicrous signing of Ohtani mentioned earlier in the passage, he was already at the end of his 20s and on the edge of 30. His contract is for 10 years at a 70 million dollar AAV (Average Annual Value), and while Soto might have beat him out in a grand total by more than 60 million dollars, per year, he will end up collecting an AAV of $19 million less than Ohtani. That’s only 8 million dollars higher than previous contract leaders Max Scherzer and Justin Verlander at $43 million a year, and Soto will provide hall of fame value for the 15 years he resides at Citi Field. For the reader that loves advanced metrics and statistics, in 2024, Soto posted a batting run value of 79, good for the highest in the league, a 7.9 bWAR, 178 OPS+, and other insane stats. While he certainly doesn’t bring as much money to cities and organizations in the way that Shohei Ohtani does, he, in my opinion, is worth almost every penny. He’s still only 26 years old, and if he hasn’t reached his prime yet, the rest of the league have a good reason to be spooked. He could very well be the second-best player the 21st century has seen besides Shohei Ohtani, but 15 years is a lot of time for something to go horribly wrong. Too often these days, young athletes are burning out and getting seriously injured way too early, but if Soto fails to be in the group of burnt out stars in their late 20s, his contract north of 760 million dollars could look like one of the best deals in MLB history.
What About the Rest of the League?
Looking at all of the money going into the offseason, the casual fan looks at someone like Frankie Montas, a tenured veteran who has seen his glory days fade for what is most likely forever, and wonders how in the world he managed to persuade anyone that he was worth 34 million dollars over two years. As I sit in my chair at home, I sometimes wonder the exact same thing. How on God’s green earth did average players earn the right to be paid this much money? In reality, MLB teams have been doing this for the past 10 years with little notice from the general public.
Let’s make a comparison. Two unknown players to the average fan, and one that even I had never heard of before. Both ten years apart. Frankie Montas and Brandon McCarthy. McCarthy was signed to arguably a more idiotic deal in 2014, he was successful a couple years before his $48 million/4yr contract, but in the two years leading up to his inking, McCarthy was consistently bad. He posted up an abysmal 4.53 ERA in his 2013 campaign, and while 2015 was better with what included a hot streak at the end of the season, he only finished with a 4.05 ERA. Nothing to be excited about, and an overpay when looking back on his career.
Adjusted to today’s money, Brandon McCarthy’s $12 million/year contract is around 15 million dollars with inflation, only 2 million dollars cheaper than Frankie Montas, who has had similar stats to McCarthy up to this point in his career; a former hot pitching topic that had regressed a bit until his contract signing just a couple weeks ago.
Now the final question: Has general spending actually been up? Of course, and it always has! According to the US GDP and the highest AAV MLB contracts since 1980, MLB contracts have been consistently gliding over the US economy, and have been doing so since the mid-1990s. The recent spike in 2024 has been exaggerated by the Shohei Ohtani signing, and the sentiment that the markets have just begun to rise as of the last couple of years is completely false. Teams need to pay more for players, and if they aren’t willing to go high enough, they will get boxed out by teams willing to pay more like the Dodgers. It’s a tough world to be anyone or anything, and even tougher to be an MLB franchise. Sure, everything has become more expensive, but that’s how the world works. Over 20 years, the dollar is surely going to buy less. As baseball becomes more of a business, money becomes more of a focal point in conversations, and some people want to get rid of the conversation. So, to answer the burning question at the start of the article; If you want to win, expensive signings have to be worth it.