Folks, I go on vacation, and the Astros’ baseball world goes crazy with the signing of backup catcher Victor Caratini for 2 years / $12 million.
OK, let’s ignore the fact that Hank Aaron topped out at $240,000 back in 1975 and 1976, while backup catchers are making $6 million a year these days. Yes, sure there is inflation, but not like that. While I’m being facetious talking about Caratini, you know where this is going.
The L.A. Dodgers just doled out a 10 year / $700 million contract to one of the most talented two-way players ever, Shohei Ohtani. He’s also 29 years old and currently recovering from UCL / elbow surgery that will likely limit him to DH duties in 2024, before he can resume two-way playing in 2025. Oh, and his former team, the Anaheim Angels of LA (or the other way around), never won half their games during his 6 seasons with them, and he has played in as many playoff games as you and I have. Not all of that is his fault, but let’s put this in perspective a bit….
- The biggest contracts per season, before Ohtani’s was the $43+MM/season owed both Max Scherzer and Justin Verlander on short-term contracts. For the longer contracts, Aaron Judge’s $40 MM/ season for 9 years was the AAV record. The $70 MM/season is a 75% increase over that. Even in Joe Biden’s America that is quite a leap above inflation.
- As a total commitment, the $700 MM leaps over the 12-year / $426 MM contract that Mike Trout is struggling to stay on the field long enough to earn. That’s a 64% increase right there.
- One way to look at how inflation increases over time is to fall back to 1979 when Nolan Ryan’s signing by the Astros made him the first $1 million per season player. Using a little thing called the CPI inflation calculator, that $1 million in 1979 has the equivalent purchasing power of about $4.24 million today. But the price for the highest-paid player in baseball has gone up 70 times, not 4.24 times since then.
- For your amusement or chagrin, in 2023, Martin Maldonado was paid $4 million, a little less than that theoretical $4.24 million.
- The Astros were bought by Jim Crane and his consortium of co-owners for $680 million in 2011, just for another comparison.
Yes, I know that there are a lot of things going on here. Reportedly Ohtani’s contract is mostly deferred beyond those first 10 years, though exact details are not published. We know that Ohtani brings in a lot of extra revenue from his fellow countrymen and from baseball fans around the world. We know that the value of teams continues to soar and that large amounts of money have been committed to the teams from the various media outlets that vie to televise the games, especially the playoff games.
But one thing this writer has been taught during his long time on the planet, nothing goes up forever. Whether it is the stock market or the real estate market or the price of gold in the early 80’s, things that look like sure things can become an unsustainable bubble. Can that happen with the MLB?
There was a little taste of this when Diamond Sports Groups, which runs the regional networks for 14 of the major league teams, announced it was skipping a $140 million payment as a precursor to a possible bankruptcy. It has been quiet since this was announced and perhaps this is just a hiccough in the sports economy.
But imagine if, at some point, the deficit hole that the US government has dug along with higher interest rates on short-term credit for the government finally pops that bubble, and the economy is thrown into a deeper recession than it faces now or even a depression. How high on the list of necessities is monthly cable payments or baseball streaming payments when there is less or no money being direct deposited on paydays? When I was laid off in the 1980s and I had to move and take a job at a 25% lower pay, suddenly, the focus was on the basics of everyday life and not the fluff.
Yes, there are many billionaires involved in MLB ownership. But back in the day there were many ex-millionaires jumping out their office windows or selling pencils after the 1929 stock crash.
Is it likely that any or some of this happens? Who knows? But it says here the MLB can’t continue to outpace the rate of inflation infinitely. That bubble has to pop or at least deflate a bit somewhere along the way.
Note – after completing this writeup – they published the details of Ohtani’s contract, which includes only $2 million per year for the first 10 years and then $68 million per year deferred to the 10 years after he stops playing for the Dodgers. Ridiculous and wild. So, the Dodgers will only take a $46 million hit on the luxury tax bottom line every year and they will have more funny money to toss around during the first 10 seasons of the deal. Crazy.
ALL THINGS ASTROS 
28 responses to “Baseball’s funny money bubble gets bigger”
The deferred payments were apparently Ohtani’s idea. The Dodgers actually “win” a little — emphasis on “little” — as they will be paying 2023 $$$ through 2043. Wonder what contracts will look like in 2043? Will they pale by today’s comparisons? Of course, the Dodgers will recoup some of their expenses with bobble heads, jersies and other apparel items, not to mention the added hype of a player who will play every day and pitch every fifth day (eventually).
In this type of player, there are other considerations than just on-the-field matters.
Curious…
• What impact on the Japanese connection will $$$-wise to LA?
• How much will the contract actually impact other contracts? Is this an anamoly?
Here’s one take: “It’ll pay for itself within six or seven years,” said one MLB evaluator. “He’s literally just a money factory. Even just on advertising alone. All the eyeballs from Japan. He’s like Michael Jordan to them. He’s like Taylor Swift.”
Either way, the $$$ are ludicrous and, obviously, not every team can play equally.
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Yeah, Chip we went through this in Houston with Yao Ming when he was with the Rockets. He brought in tons of money in merchandise as the focus of all the Chinese people in China and around the world. He had Chinese press that were assigned to him and him alone following him around.
So, this will not have a present value the same as $700 MM over the next 10 seasons, it will be less depending on how much inflation occurs over the next decade, but it probably is the equivalent of like $550-600 MM in today’s dollars. Still a quantum leap over the present highest contracts.
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But I’m still curious. How will it affect other contracts. Remember when Mahomes got that crazy $500 million. Has anyone topped that — or come close to that — yet? You may check me on this, but has any other player topped $300 million?
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On Spotrac – Mahomes contract is shown as $450 MM and you are right no one else has exceeded $300 MM – Joe Burrow is #2 at $275 MM.
So, this may well be a one off – maybe no one comes close to this for a long time. But still…how long can they give out these 10 year $400 MM contracts to guys who will be near 40 when they are over?
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With the deferrals the contract feels like a farce. Sure, the luxury tax number sounds about right for him, but most clubs can’t afford to pay that type of deferred money down after the player has moved on. At the same time, wouldn’t it be funny if the Dodgers made this deal simply to rub it in that the Padres were having to hold a fire sale?
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My concern regarding these huge contracts is that the overall quality of the game will decline. The Yankees, Dodgers and Mets seem to be willing to try to buy a championship and from my vantage point the Rangers just did. I think that’s setting a bad precedent. There are too few teams like the Astros and Braves who have essentially built their rosters with home grown talent. I fear we’re headed toward a time when the big $$$$ teams prosper and get all the TV attention while pathetic franchises like the A’s, Pirates, Angels, Royals, Marlins, Nationals, Rockies etc. remain perpetual bottom feeders with practically no chance to even approach consistent mediocrity. Instead of expansion we might see contraction of MLB which might actually be an improvement by concentrating talent.
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drbill, that’s my biggest concern, that there will always be a half dozen or more teams that won’t ever be competitive, unless they are visiting Houston! The NBA is the same way. How do these clubs keep home town interest up? Eventually they don’t.
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Look, baseball has always been this way. There are teams like the Yankees who are worth sometimes 2x more than say a team like the Rays. Yet where were they last year? There are more ways to compete. And it gives one great satisfaction when the Astros beat the Yankees, Dodgers or any other top spenders, even though we are in the too 10.
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Let us start with how this signing affects the Dodgers’ division.
-Second place Arizona finished 15 games behind LA and had a negative run differential. They made the wild card because the rest of their division was terrible, the NL Central was terrible and the NL East had the highest spending team fall on their face and bail out at the deadline, while Washington didn’t try to win. How is Arizona going to compete with LA in the coming years.
– Third place San Diego has lost their TV deal and is trading off their players to try and keep afloat. They still have some good players, but will they play well?
– Fourth place San Francisco can’t seem to attract any big names. How are they going to compete? They will have some good attendance figures because they will attract Dodger fans in droves when LA is in town. SF seems like they are in trouble.
– Colorado. My goodness, Colorado seems like they should move to Vegas. Every other team is.
I think the NL West will be a done deal by the end of May after the Dodgers are finished loading up.
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Hello Dan, I hope you’re not out in a frosty garage somewhere on your holiday, typing your comments while ducking the wrath of your loved ones as they string popcorn and cranberries to drape over a freshly cut douglas fir. Does anyone still do that?
Heck, the Ohtani post even got a poor old Joe Biden mention! If MLB bursts and craters at any point soon, it might help create a domino effect on the American populace, assisting a tanking the economy and impacting elections too! Can Ohtani do all that?
MLB contracts have become a bit of a folly at this point. But, we were saying the same thing 20 years ago and 30 years ago. The folly today though is that Manfred wanted Ohtani in LA or NY. And Yamamoto is likely the next guy signing in LA. One translator for two guys would be another money saver. But seriously, It seems that MLB is helping drive these wild contracts at this point. Next up Juan Soto, 550 or 600? I suggested 500 last week.
From a reality standpoint though, the Dodgers might just win 119 games next year and according to recent tradition still fold up and go home early in the post season. Gosh, everyone is going to want to send them home. And as for Ohtani, he might well be a fine DH and pretty fine closer in five years. I’m not sure that’s what the Dodgers expect though.
Regardless, it’s a whole big mass of non stop media mania for MLB, spreading to distant shores. Market expansion, with or without more teams!
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Hey Dave –
No, we finished our vacation (holiday) on Sunday, so it is just my normal grabbing a few minutes here and there to write up something for you folks to chew on.
If MLB is helping steer players to specific cities that is just the worst – but nothing can be proven.
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Well you got to be concerned where this takes any Tucker negotiations. Every agent can now start every big money contract with “and for deferred payments……”
ESPN Houston was already running with a narrative that the Astros could use deferred payments to negotiate all 3 of Tucker, Altuve and Bregman.
Starting any negotiation with Bregman is gonna be “OK here is Devers contract, 31.5 a year, 10 years, this is our starting point.” The Astros will try and knock that down to 5-6 based on age, lower the annual stating that Bregman hasn’t been as high on the MVP voting over the years, the games will begin. The Yankees will look at their hole at 3B, and solve it by overpaying. The Astros could counter with the idea of deferred payments, but in my mind deferred is a word that works for some franchises where money is almost limitless, and I don’t know that Crane plays in that neighborhood.
While the Ohtani deal is a clear win for players and the union, and will help the Dodgers while he is in his prime, it is bad for mid-market teams with stars to settle. They are setting unobtainable bars for the Braves, Astros, Phillies, etc., teams in good markets but not NY, Chicago or LA. And the Chicago teams don’t act like they are in a big market most of the time. They are spelling doom for KC, Pittsburgh, etc. Soto will probably stay in NY for 550 million. Tucker will literally be the next guy the baseball world is focused on, and his agent will want it that way. At his age would it be surprising to see 12/420? It won’t be from the Astros. Correa couldn’t get them off 5. Now, I think the everyone in the baseball world knew there were physical issues with Correa, but the Twins said they would chance it. Watching him limp through that playoff series was sad, knowing what he could be, and watching what he is.
Maybe, just maybe, Dana can convince Crane this is the guy they break the rules for. But, given the number of 10+ year deals that don’t work out, maybe they shouldn’t.
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On the plus side, certain teams have been spending like drunken sailors, but in the last 10 seasons there have been 9 different champions (only the Astros won twice in those seasons).
But maybe the way you sustain success is not to hand out those boat anchor contracts and build your teams the right way.
Of course, if the Dodgers rip off three championships in a row that statement may look foolish.
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You won’t find many accountants that tell you deferred payments are the way to go. The value of a single dollar will never be higher for Bregman than it is today. Ohtani can defer $68M per year because he has endorsement deals in multiple countries that are paying him over $50M annually. Bregman is going to have to sell a lot of hot sauce and horses to beat that. Additionally, that money will come due at some point down the line. If Crane wants to sell the team in a few years he’ll make a return on the investment, but I’d assume dollar for dollar it would cost him more than just the remainder of the deferred amount as investors would recognize that the payments to a player not on the roster will be an empty cost which also negatively impacts their ability to spend on the players on the roster.
Having said that, if Bregman wants $20M per year you can be sure his agent is going to ask for $25M where $5M is deferred…because why not?
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I don’t think a Crane run team becomes one that embraces deferring money on a regular basis, or even at all. How many contracts can even the monied terms defer without it piling up on them down the road?
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I think we could all use a good solid in-depth Jim Crane interview about now.
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A lot of these teams will be stuck with really bad contracts in the next decade. The Astros Way is different. We have almost shot our wad but our way will and has proven to be very successful.
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Welcome Memphis Kong – good to hear from you.
It will be fascinating to see if there is any difference to the Astro Way with Dana Brown in charge. He has stated he wanted to extend Altuve, Bregman, Tucker and Valdez, but his backup plan has to be close at hand, because there is likely a disagreement on length of contracts with all four of these players and also on AAV. Not re-signing Springer, Correa, Cole, Morton, etc. has worked because there was some combo of cheaper assets who could step in to the breech. Can that continue? We will see.
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Yeah, I would have to believe Crane and Brown have had tons of discussions just around this philosophy. Where Click wanted to go full on Rays, Brown looks more like the Braves, which I think is more suitable for the size market the Astros are in.
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I would like to hear of Crane employing Luhnow as a part time consultant, not to make decisions but to add a savvy voice to keep the train moving forward.
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I would like to make some further comments on the Memphis Kong ideas.
Luhnow’s original ideas about competing every year for a title included his plan on restocking the team through the draft and international free agency, all the while knowing that “winning” would result in drafting near the end of each round. To make up for that he had a plan that involved signing international free agent prospects and to add to the team with veterans to fill holes at the major league level without sacrificing the future, avoiding long term expensive contracts for player’s declining years.
Please note that the Astros have competed for the title every year since 2017.
During that period of time the Astros added Rasmus, Reddick, Brantley, Abreu, Maldonado, Cole, Velander and Morton. Those additions aided the Astros in accomplishing the goal without any of them dragging down the plan with huge, long-term contracts.
The Astros also added in some relievers on short term deals, a number of whom are still here and will try to get us to the promised land this year.
I don’t think Crane would have hired Brown unless he was convinced Brown would continue this plan. And I think Click didn’t last because he wasn’t all in with it.
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During Correa’s 7 seasons with the Astros he averaged 4.87 WAR and averaged $3.82 million salary per season.
During his 2 seasons with the Twins he has averaged 3.45 WAR and averaged $32.42 million salary per season.
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So, are we saying these guys are not motivated by money? The more we give them the less they give back….
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During George Springers 7 seasons with the Astros he averaged 3.97 WAR and averaged $7.13 million salary per season.
During his 3 seasons with the Blue Jays he has averaged 2.8 WAR and averaged $25.83 million in salary per season.
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1oldpro, that’s why I’m not wringing my hands over losing guys like Bregman and Framber. The formula works.
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I’m not yet accepting of the premise that we are going to become irrelevant in a year or two or three. Certainly a big challenge looms ahead.
At the same time, maybe to a degree, Click could have saved Crane from himself.
While Brown must find value in guys that can be tweaked, we’ve got to continue to get a couple of guys out of our panned minor league system annually. We’ve been told for years now that our system sucks. But we keep bringing players out of that system.
I remain optimistic.
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During Gerrit Cole’s 2 seasons with the Astros he averaged 5.9 WAR and averaged $10 million in salary per season.
During his 4 seasons with the Yankees he has averaged 4.45 WAR and averaged $36 million in salary per season.
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Thank you 1OP for posting those stats on former Astro$. I do not lament the loss of any former Astro the past few seasons except C Morton, whom I thought was not only productive since his departure, but affordable. Cranes $680 mil investment has tripled to what, $2.2 billion I read. Including 7 yrs of playoff earnings, I’d say a P like CM would have been worth the $ given the situation we are in now.
I honestly believe Altuve will retire an Astro (his ask will not break the bank along with his hometown discount). Unless Bregman does the same, I expect to see him walk. I cannot phantom Tuck landing 8-10 yrs over $300m. Not with this org. All these fat, extended contracts we’ve seen the past few seasons (and past seasons) will not end well. Trout was the exception, but it appears Father Time and the inj bug might hasten his decline.
Dan, unless that cheap asset well delivers this tm some semblance of salvation the next two seasons, or if there is decline next season, Brown might have to trade to retool rather than let our superstars walk for free.
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