Ohtani Thread - Special Sheriff's Edition (Update: confirmed going to the Dodgers)

[John_Havok]

I don’t get why if he’s deferring 98%, why does he still count against the cap for $46m if deferred money doesn’t count.

 

It does count, it's just spread out over more years

[Stangstag]

I don't think so, mentioned it a few times now that I'm reading over this thread, IDK.

 

He’s joking about the whole thing of how all the media is saying Ohtani to the Dodgers is “better for baseball”

[Spanky99]

He’s joking about the whole thing of how all the media is saying Ohtani to the Dodgers is “better for baseball”

 

Ah... I missed that s***. I gave up reading the thread as it in itself was a shitshow. I mean in the end the Dodgers outbid us, s*** happens, but this deferral s*** seems like it's going to be a shitshow moving forward, a bad precedent to a league that wants competitive balance, yikes.

[Stangstag]

Ah... I missed that s***. I gave up reading the thread as it in itself was a shitshow. I mean in the end the Dodgers outbid us, s*** happens, but this deferral s*** seems like it's going to be a shitshow moving forward, a bad precedent to a league that wants competitive balance, yikes.

 

Yeah I don’t like this at all, and i’d assume most of the other owners sans Cohen/Steinbrenner will hate this too. What’s even the point of the luxury tax if there’s “loopholes” and deferrals. Small market teams don’t even stand a chance unless they can develop elite talent consistently.

[Olerud363]

Ah... I missed that s***. I gave up reading the thread as it in itself was a shitshow. I mean in the end the Dodgers outbid us, s*** happens, but this deferral s*** seems like it's going to be a shitshow moving forward, a bad precedent to a league that wants competitive balance, yikes.

 

Given current long term interest rates I believe I heard the contract is only worth 450 million, we actually don't know for sure because we don't know what interest rates will be the next 10 years.

 

It's quite likely the Jays outbid the Dodger for Ohtani in terms of present value, perhaps significantly depending on how much deferred money was in their offer.

 

Beyond the repercussions of the salary cap there is no way this contract should be legal. Imagine if the San Diego Padres, did something like this a few years ago. Or the Florida Marlins, who couldn't afford to pay a huge contract did it, just to kick the can down the road. Then imagine the player gets injured or becomes un-tradable and at the same time a financial crisis hits, or teams get in trouble with the TV contract as is happening, or the owner passes away (like happened in San Diego) and who-ever inherited the team has to pay.

 

We assume the Dodgers will be financially stable 10 years from now, and will pay the money. However no way you could ever risk something like this with a mid-to-low-market team. A team could literally go bankrupt over it.

 

If the team has to pay out the contract year to year in the near term, we assume they won't do anything crazy they can't afford, but if they can kick the can down the road a decade teams could do all kinds of crazy things.

 

Dodgers are only being allowed to do it because they are a top 3 financially stable franchise. Hell, you could look at it this way. The league is allowing the Dodgers to not only dodge some of the competitive balance task, but the Dodgers are getting an interest free loan from Ohtani to pay other players.

 

Another important point is, how does the agent get paid? Is the agent getting paid as if the contract is worth 700 million in real terms? Is the agent getting paid in 10 years too? Not likely. Or are they getting like a 5% (35 million) fee right away? I think it is the latter. And this is insanely unfair to other players. Ohtani is probably rich enough that he can pay his agent now, or in the couple of years, but another player couldn't wait 10 years for his money. They have to pay the agent right now. So because Ohtani is essentially independently wealthy he is getting a competitive advantage over some dominican guy who needs to support his village and can't wait for the money.

[Olerud363]

Dodgers are only being allowed to do it because they are a top 3 financially stable franchise. Hell, you could look at it this way. The league is allowing the Dodgers to not only dodge some of the competitive balance task, but the Dodgers are getting an interest free loan from Ohtani to pay other players.

 

This part is wrong. Technically this is legal in the CBA and apparently players want the option to defer money. So the league would have no choice but to allow any player to do this. No one ever thought of it much because no one thought a player would want to wait a decade or more for their money.

 

Now that the can of worms has been opened you could see all kinds of crazy things happen. Or maybe not. Hopefully players (or atleast agents) are smart enough to know that if the next Jeffrey Loria offers you 1 billion in 10 years, that you might not want to trust what will happen 10 years from now.

 

Though that brings us back to why it should be illegal. Players would only do this with a team they view as financially stable I guess. What would happen if say the Marlins offerred this contract and went bankrupt before the payments were due? Would the league have to take over and pay? So all other owners would be on the hook? hmmmm... Maybe this will be something that has to be eliminated afterall.

[Terminator]

It’s kind of shocking to find out teams can do this but the Dodgers are going to be paying a guy who isn’t playing for them 68 million bucks a year for TEN YEARS. That’s going to be monumentally ugly.

 

Yeah it won’t count for the luxury tax (if that’s even a thing by then) but regardless of how it’s set up they are still going to be paying for this deal eventually.

 

Say we got used, call us a victim, etc. But at least Ross price checked those f***ers and in 10 years when they are paying out the ass the rest of the league can thank us.

[Olerud363]

ItÂ’s kind of shocking to find out teams can do this but the Dodgers are going to be paying a guy who isnÂ’t playing for them 68 million bucks a year for TEN YEARS. ThatÂ’s going to be monumentally ugly.

 

It's a somewhat dangerous gamble. However probably not dangerous for the Dodgers. If the Dodgers go to hell the world has gone to hell.

 

The thing I am wondering is say a rich but crazy moron buys the Kansas City Royals, and signs Blake Snell, Bellinger, and Hader to 10 year 400 million dollar contracts, 95% of money deferred 10 years. Then 10 years later the bills come due but the KC Royals can't pay them.

 

I guess it won't happen because of common sense, but OK maybe there is a lesser version where they sign Bobby Witt Jr. to an extension with a lot of deferred money.

 

I read up on the CBA and this is legal, but now that the Ohtani thing has lit a spark what are the chances some other team does some wizardry but gets themselves in real financial trouble in 10 years?

 

Or then if you say... No. That will never happen. Only dual goliaths, where both the player is loaded already, and the team is loaded will do this s***.

 

Then there is a moral hazard. Only the rich can do this, and poorer teams are at a further disadvantage.

[Krylian]

Yeah I don’t like this at all, and i’d assume most of the other owners sans Cohen/Steinbrenner will hate this too. What’s even the point of the luxury tax if there’s “loopholes” and deferrals. Small market teams don’t even stand a chance unless they can develop elite talent consistently.

 

Loopholes are there to be found. If the Dodgers are smart enough to figure out a way to manipulate the system in their favor then congrats to them. Life isn't fair. I always wish my teams come up with ways to give them a competitive advantage. If they don't, someone else will anyway.

[Olerud363]

Ah... I missed that s***. I gave up reading the thread as it in itself was a shitshow. I mean in the end the Dodgers outbid us, s*** happens, but this deferral s*** seems like it's going to be a shitshow moving forward, a bad precedent to a league that wants competitive balance, yikes.

 

Do we know the Dodgers did outbid us? It's a bit of mental gymnastics to wrap our heads around the true value of the contract, but I guess the best estimate is it's actually equivalent to 460 million over the next 10 years. I'd love to know what the Jays offer was in 'present value'.

[Laika]

It’s kind of shocking to find out teams can do this but the Dodgers are going to be paying a guy who isn’t playing for them 68 million bucks a year for TEN YEARS. That’s going to be monumentally ugly.

 

Yeah it won’t count for the luxury tax (if that’s even a thing by then) but regardless of how it’s set up they are still going to be paying for this deal eventually.

 

Say we got used, call us a victim, etc. But at least Ross price checked those f***ers and in 10 years when they are paying out the ass the rest of the league can thank us.

 

Dodgers ownership group is basically a hedge fund, right? Guggenheim

[Terminator]

Dodgers ownership group is basically a hedge fund, right? Guggenheim

 

Yeah it’s a bunch of rich people grouped together. Seems like a lot of NFL franchises are being bought by similar ownership groups now too.

Edited December 12, 2023 by Terminator

[Olerud363]

Dodgers ownership group is basically a hedge fund, right? Guggenheim

 

So the mega-stars who want a ring give basically a 5% interest loan to a hedge fund?

 

If we assume Ohtani's value was 10 years 460 million that is what happened. If we assume Ohtani's value is more than that, than he is giving the Dodger's owners (the hedge fund) a below market interest rate on a loan.

[wamco]

Over/under Ohtani innings pitched during this contract : 1000 ip

[Eat My Shatkins]

Over/under Ohtani innings pitched during this contract : 1000 ip

 

Under.

 

Definitely under.

 

So far he's averaged 96 IP per season over 5 MLB seasons, and those were his prime aged 25-30 years.

 

No way he averages higher than that from ages 30-40, especially since the first season will be 0 IP.

Edited December 12, 2023 by Eat My Shatkins

[Terminator]

So the mega-stars who want a ring give basically a 5% interest loan to a hedge fund?

 

If we assume Ohtani's value was 10 years 460 million that is what happened. If we assume Ohtani's value is more than that, than he is giving the Dodger's owners (the hedge fund) a below market interest rate on a loan.

 

Yeah that’s one way to look at it. It’s not that big of a deal really. It helps them during the Ohtani years (they could afford everything anyway) and it will hurt them when he’s gone (they’ll be able to afford that as well).

[Marew]

I would bet a line would be about 500 for ohtani innings if that was an even money bet

[Laika]

So the mega-stars who want a ring give basically a 5% interest loan to a hedge fund?

 

If we assume Ohtani's value was 10 years 460 million that is what happened. If we assume Ohtani's value is more than that, than he is giving the Dodger's owners (the hedge fund) a below market interest rate on a loan.

 

It's honestly a f***ing stupid deal for Ohtani UNLESS the income tax savings he can get are massive (which they very well may be...)

 

For the Dodgers, it's amazing. They will make $25M annually in added marketing for the first few years, almost guaranteed, regardless of what happens on the field. So they are net +$23M or so in 2024.

 

What is 23M compounded by like 8% annually, for a decade? Like $54M?

 

The first year of marketing money basically pays for the first year of deferred payment in 2034.

The contract ALMOST pays for itself.

And I am sure "Guggenheim Partners" people think they can do better than 8 points when the prime rate is like 6%.

 

Ohtani would probably have been better off, financially, just taking a straight 10/$400 deal from a team. Then investing the money. Big caveat there being the income tax implications which, I dunno. But I cannot imagine that Japan is a "tax haven" for income tax.... California certainly isn't... Ohtani is not moving to Florida or Dubai. Unless he does. Who knows.

 

 

 

I am sure he left significant money on the table from the Blue Jays. If he rejected 10/$600M which was mostly NOT deferred, then he left hundreds of millions on the table, right.

[Marew]

Any revenue for dodgers would be gross revenue, you need the free cash flow to pay out contract. Don’t know what margins would be, but if they get 25m revenue, 5 or 10m of that may be free cash flow. Just a business owner here and salaries are a deduction but maybe I’m wrong I don’t know?

[Brownie19]

How does the deferred money work against the luxury tax caps?

[connorp]

They still have to put the $68m each year into escrow though, I read.

[Terminator]

How does the deferred money work against the luxury tax caps?

 

It’s calculated into the 10 year deal while he’s on the team. All told his tax hit is 10 year 460 mil. So 46 mil a year tax hit.

[Laika]

Any revenue for dodgers would be gross revenue, you need the free cash flow to pay out contract. Don’t know what margins would be, but if they get 25m revenue, 5 or 10m of that may be free cash flow. Just a business owner here and salaries are a deduction but maybe I’m wrong I don’t know?

 

It's all added revenue though. Are they incurring more expenses because Ohtani is on the team? Maybe, but they would be negligible.

 

Anyway, you are generally right. The point was just to illustrate the absurdity of the whole thing.

 

I am sure the hardcore math more or less tells you that $700M deferred is about the same as a reasonable contract today. Say, the Harper deal.

[Olerud363]

It's all added revenue though. Are they incurring more expenses because Ohtani is on the team? Maybe, but they would be negligible.

 

Anyway, you are generally right. The point was just to illustrate the absurdity of the whole thing.

 

I am sure the hardcore math more or less tells you that $700M deferred is about the same as a reasonable contract today. Say, the Harper deal.

 

And that changes the narrative from "Toronto got outbid", to "Toronto couldn't sell Toronto to Ohtani"

 

Fair enough. Would you rather go to a 100 win a year team with Freddie "best hitter in baseball" Freeman and the legendary Andrew Friedmann as head of baseball operations? Or a 90 win team with Vladimir "ground ball" Guerrero and Ross "beta" Atkins?

[Marew]

If what Connor is saying is true and they have to put up escrow, then the dodgers aren’t actually saving any money, just some luxury tax? The agent probably takes his cut, unless he’s getting paid from sponsorship money.

[Laika]

And that changes the narrative from "Toronto got outbid", to "Toronto couldn't sell Toronto to Ohtani"

 

Fair enough. Would you rather go to a 100 win a year team with Freddie "best hitter in baseball" Freeman and the legendary Andrew Friedmann as head of baseball operations? Or a 90 win team with Vladimir "ground ball" Guerrero and Ross "beta" Atkins?

 

It's the same thing though. The non-monetary factors are part of the bid.

[BatFlip]

They still have to put the $68m each year into escrow though, I read.

 

That sounds about right. People are assuming this is free money up-front for the Dodgers, but if you're Ohtani you take zero chances on non-payment, as unlikely a scenario as that may be. You want your money sitting and waiting for you in a protected account.

 

Sadly, this structure is all about luxury cap evasion. It's ********!

[Olerud363]

If what Connor is saying is true and they have to put up escrow, then the dodgers arenÂ’t actually saving any money, just some luxury tax? The agent probably takes his cut, unless heÂ’s getting paid from sponsorship money.

 

That makes zero sense. First they aren't putting 68 million away. They don't need to. Maybe they have to put 46 million into a 10 year treasury so the get 68 in 2034 to pay him. However why not just give him the 46 million and let him do what he wants with it... unless this is all so Ohtani can avoid California Taxes.

[Laika]

They still have to put the $68m each year into escrow though, I read.

 

Where did you read that?

 

It can be an interest bearing escrow account.

 

$68M compounded 5% annually for 10 years is like $111M haha.

[Laika]

No matter how you f*** the chicken here, the Dodgers are winning.