The details behind baseball superstar Shohei Ohtani's new contract
JUANA SUMMERS, HOST:
Details of baseball superstar Shohei Ohtani's new contract are coming out, and they make for some interesting math. The headline, of course, was that the Dodgers will pay Ohtani $700 million. What we've now learned is that he'll be paid only $2 million a year for 10 years. To help us make sense of this, we are joined by Jeff Passan of ESPN. Hey there.
JEFF PASSAN: Hey, Juana. Yeah, where did that other $68 million a year go was the real question and something that's confusing a lot of people right now.
SUMMERS: Yeah. Help us unpack this because, I mean, when I read this headline that he'd inked this $700 million deal, my first impression was, that is a heck of a lot of money. And my second question was, is he actually worth it? Can you address both of those?
PASSAN: It was a heck of a lot of money - more than any other athlete in professional sports history had been guaranteed. And there was a reason for a number that big. It's because the Dodgers are not going to be paying 680 million of it for another decade plus. And Major League Baseball's collective bargaining agreement, Juana, allows for an unlimited amount of money to be deferred so long as a player is willing to do so. And as we know, there's a very simple tenet in economics - a dollar today is worth more than a dollar tomorrow. Well, a dollar today is worth a lot more than a dollar 10 years from now. So that $700 million number - in reality, it's more like $450 million in net present value, and that's the number that Major League Baseball, in its accounting, is going to use.
SUMMERS: OK, lots of numbers there. But, I mean, this $680 million in deferred money - help me understand why a deal like this makes sense for a player like Ohtani.
PASSAN: It makes sense for only a player like Ohtani. And it makes sense because he is an international superstar who's making more than $50 million off the field with things like endorsements and marketing deals. And he's become not just the face of baseball, but a star internationally on a similar scale to a LeBron James or to a Lionel Messi - somebody who is recognizable across the world.
And Ohtani went to the Dodgers with this contract structure in mind. It allows them to save about $25 million that they can then turn around and reinvest into other players. Remember, Ohtani, Juana, spent the first six years of his career with the Los Angeles Angels. They were terrible. And there's been few teams in baseball that have won over the last decade quite like the Los Angeles Dodgers, and this positions them in both getting Ohtani as well as having the contract to win even more.
SUMMERS: This is a juicy story for folks like me and you who love this sport about this incredible player. But for people who don't follow baseball like we do, what's the big takeaway here?
PASSAN: Well, the takeaway is that if you are the definition of the word unique, which is what Shohei Ohtani is - because if you don't know about him, he hits and he pitches. He is Babe Ruth in modern times, and there are plenty of evaluators who believe he's better than Babe Ruth ever was. And he has changed the game during his six years here. I think it's a banner day for baseball fans who want to see the sport grow. And for all of the fans who sit there and wish that Shohei Ohtani had signed this contract with their team, I apologize. I live in Kansas City. It would have been wonderful to see him here. But it almost felt like he was destined to become a Dodger, and now that's exactly what he is, Juana.
SUMMERS: Jeff Passan is a senior MLB insider for ESPN. Jeff, thanks so much.
PASSAN: Pleasure's always mine. Thank you.
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