Article: There's the Budget, and Then There's the Budget With Shohei Ohtani

[Matthew Trueblood]

There are reasons to pause a moment before pouncing on the idea of signing Shohei Ohtani as a free agent this winter. If you're worried about the prospect on the basis of his salary and the Cubs' budget, though, stop it.

Image courtesy of © Wendell Cruz-USA TODAY Sports

It sounds outlandish, but this weekend, 670 The Score baseball insider Bruce Levine reported that the Angels' internal estimate of the annual revenue Shohei Ohtani generated for them was $100 million. I can't confirm that figure, but everyone to whom I have spoken puts the number between $70 million and $90 million. Having Ohtani not only raises the national profile of any team, but instantly creates huge marketing and advertisement opportunities in Japan. There's a feature-length documentary about the man on ESPN+ and (outside the US) Disney+ right now. This is not a normal free agent.

Given all that, this shouldn't surprise you, but it's an important thing to know: For many teams, there are two budgets for 2024 right now. There's one number the front office knows they need to stick to, and then there's another one, anywhere from $20 million to $40 million higher, that they need to stick to if they sign Ohtani. Entering the offseason, the Cubs know they're likely to exceed the first threshold of the competitive-balance tax rules in 2024. To stay below the second threshold, though, they would need to spend no more than $257 million. That's probably their de facto cap.

If they sign Ohtani, that changes. The new ceiling is the third threshold, at $277 million. Beyond that, the penalties get especially draconian, so it's unlikely that signing Ohtani would earn Jed Hoyer and Carter Hawkins any more wiggle room than that, but they would be given the flexibility to go all the way to the third threshold if they reeled in the biggest fish to hit open water since Alex Rodríguez. Part of that is the knowledge (held by all parties) that Ohtani has massive leverage, and that he will want to see evidence of a team's willingness and ability to field a consistent contender before signing. Another part, though, is the simple math described above. Realistically, he has no chance to get more than $55 million per year, and a relatively small chance to get even $50 million per year. That would just break baseball's salary scale too badly. If he's worth (taking a moving average from uncertain sources) $80 million per year, then merely having him on board is worth over $20 million each season.

Again, there are legitimate concerns here. The Rickettses might be willing to spend that way on an Ohtani-led team in the short term, but spuriously claim major losses and snap the purse shut in a few years if things don't go perfectly. Either way, Ohtani is a massive investment, and even for a team spending $300 million per year, a $50-million player is as big a problem if he's hurt or ineffective as he is a boon if he's playing as advertised. The threat that he'll be permanently diminished as a pitcher by this second elbow surgery is real. So is the danger that he'll age quickly at the plate, given all the extra energy he's put into the two-way project over the last half-decade. On balance, though, those are gambles well worth taking. The bonus any team gets by being the ones to take it almost offsets all the downside, anyway.

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[CubinNY]

 

I want to believe that if they commit to Ohtani their past behavior is irrelevant, sort of. I do think Ohtani and the Cubs are going to get protection with out-clauses. 

It is very out of character for them to actually go through with signing him. They bid for him, but how serious a bid it was is not known. It's out of character for them based on their stated positions regarding building a team. I'm still very skeptical. 

If they make the commitment and sign him, I will keep my mouth shut about their commitment to winning. 

[CubinNY]

4 minutes ago, TomtheBombadil said:

This is why I have so few doubts the Cubs are serious about landing Ohtani. The Ricketts - any owner really -  knows that signing this guy buys them a couple decades with an audience who just needed to be buttered up a little before hearing their side of things

I'm confused, do you want them to sign him or not? 

[Maddux31]

It’s the long-term ramifications that make signing Ohtani risky. Because Ricketts isn’t going to say, “Jed, Ohtani could bring another $75 million per year into out coffers, so stay over the luxury tax threshold as long as you need to. We’ll just make up the difference with the extra revenue we are getting from Shohei.”

If they were to sign Ohtani, and fill their other needs this offseason to avoid a repeat of the Angels situation, they are going to run up against that third threshold. And then the purse strings  are going to tighten as they scramble to get back down under the first tier.

The other thing nobody is talking about is the fact that the Cubs and Jed don’t have an appetite fo obscenely long contracts that run well past a player’s prime, and I doubt they would make an exception for Ohtani, especially with his uncertain future as a pitcher. I mean, the  Cubs have never even topped $200 million on a contract.

 

[gocubs218]

It’s pretty obvious they are willing to blow past 200 million for Ohtani. They aren’t going to show this much interest and then go offer him the same contract they offered Dansby. They easily coulda leaked by now that they aren’t interested like the Mariners did. They may not get him but it won’t be because they low balled him an offer. 

[Rex Buckingham]

I'm so tired of the "they haven't even gone over $200 million" comments. There have been very few players worth that kind of money available. If they're serious about winning (and all indications are in the affirmative) they'll offer a boatload of $ to Ohtani this year and/or Soto next year 

[Jason Ross]

Yeah, when it comes to Ohtani, the same argument of "X team has never given out a contract worth..." is going to come up with almost any and all. Why? Ohtani is unprecedented. We've never seen a player we know is this good at both hitting and pitching hitting the free market. I mean, Ohtani has been a free agent before, but we only had guesses then and there were some restrictions in place. There's no precedent for this. He's going to break records.

Secondly, I just refuse to believe the Chicago Cubs are seemingly this serious about Shohei Ohtani while also being that clueless. I'm a pretty regular person, but I can ballpark what Ohtani is going to cost...and it's not going to be $150m over 6 years, or whatever. If I'm smart enough to know it'll either take a mega contract approaching $400m+ over a decade or a shorter super high AAV deal...well I can only imagine that the Chicago Cubs with a full analytical team has surmised this all on their own. And yet, the Cubs are seemingly sitting down at the big boy table regardless. I think that tells you both that the Cubs understand what it will take, and have a budgetary plan this offseason and into the future that reaches beyond that of the Underpants Gnomes (Ohtani + ??? = Profit!). This isn't a situation where some sort of creative contract is in play. It's horsefeathers Shohei Ohtani, you only win this if you are serious, and if you're not serious, you don't play the game to begin with.

I can't tell you if the Cubs will get Ohtani. I am at least confident that the Cubs are being earnest here. 

[thawv]

10 hours ago, Maddux31 said:

It’s the long-term ramifications that make signing Ohtani risky. Because Ricketts isn’t going to say, “Jed, Ohtani could bring another $75 million per year into out coffers, so stay over the luxury tax threshold as long as you need to. We’ll just make up the difference with the extra revenue we are getting from Shohei.”

If they were to sign Ohtani, and fill their other needs this offseason to avoid a repeat of the Angels situation, they are going to run up against that third threshold. And then the purse strings  are going to tighten as they scramble to get back down under the first tier.

The other thing nobody is talking about is the fact that the Cubs and Jed don’t have an appetite fo obscenely long contracts that run well past a player’s prime, and I doubt they would make an exception for Ohtani, especially with his uncertain future as a pitcher. I mean, the  Cubs have never even topped $200 million on a contract.

 

They have 75 million falling off payroll after the 2024 season.  Even if they went all the way up to 277 million this season, it's going to fall back to the 200 million range, and be almost 40 million under the 2025 number.  This is the year to go to the 3rd threshold.   It's still only a 12% penalty until they pass 277 million. 

[squally1313]

How do you guys expect the Cubs to make a serious run for Ohtani when they've never signed a guy who can pitch and also hit 45 home runs in the same season

[Stratos]

I'm not sure the Cubs would bump their payroll up much regardless of how much revenue they take in from Ohtani or any other source.