How the Shohei Ohtani signing could hamstring the Los Angeles Dodgers

The Los Angeles Dodgers are the winners, if that’s not too strong a term, of the Shohei Ohtani sweepstakes. The Dodgers will pay Ohtani $70 million per season for the next decade to have Ohtani hit and (to the extent his arm permits) pitch for them.

The signing of Ohtani is being widely heralded as further solidifying the Dodgers status among the front rank of contenders, both in 2024 and beyond. But in the widespread rush to salute the team’s genius in wrapping up the game’s most unique player, there may be a tendency to overlook some of the potential pitfalls this signing creates.

And no, we’re not talking here about the fact that Ohtani will not be able to pitch in 2024. We’re not even speculating about how much he’ll be able to pitch going forward, or noting (although it would be accurate to do so) that he has only averaged about 80 innings per season since coming to the U.S. in 2018.

The big and potentially problematic question for the Los Angeles Dodgers looking forward is what impact the Shohei Ohtani signing has on the team’s ability to make other moves, both in the short and long terms.

In baseball, even in Los Angeles, there are financial limitations, which means spending a lot of it on one player impinges on the team’s flexibility. MLB-TV’s Brian Kenny refers to these as "opportunity costs." Granted, the game has no salary cap and granted further that the Dodgers have a lot of cash. But they do have to confront the game’s luxury tax, a factor that is already projected to add close to $5 million to their cost of doing business in 2024 ... and that’s if they do nothing else this winter.

And doing nothing is not part of the projected Dodger program. The team has been rumored to be heavily involved in the Yamamoto chase, and Clayton Kershaw has not yet announced whether he will play another season.

Only Dodger execs know what the upper spending point of the team’s wallet is. But history and math demonstrate that in giving Ohtani $70 million per season, the Dodger front office is charting a course that has proved perilous for many teams before.

According to Cot’s Contracts, that $70 million represents about one-third of the team’s projected $212 million overall 2024 payroll. In a chapter of my 2004 book, The Book on The Book, I discussed the decline in team success that occurs when one player receives a disproportionate amount of payroll, which at the time I defined as more than 17.3 percent.

History demonstrates that when a team commits a disproportionate percentage of its overall payroll to one player, it is unable to respond when presented with other opportunities to improve its roster. In short, the burden on that one player becomes too great and the team fails.

I noted in the 2004 book that over the previous six seasons (1999-2004), 19 major league teams had devoted in excess of 17.3 percent of their payrolls to their best-paid player. Only one of those 19 teams (it happened to be the 2000 Chicago White Sox) qualified for postseason play, only four finished above .500 and the average winning percentage of the 19 was .457.

The Dodgers are not likely to be a .457 team any time soon; not with Ohtani joining a cast that already features Mookie Betts and Freddie Freeman. And both of them are locked up, Betts through 2032 and Freeman through 2027.

But in some ways that only complicates the problem. It means that the Dodgers will devote more than 50 percent of their 2024 payroll to just three players, and likely corresponding percentages for several seasons moving forward. What happens when blossoming stars such as Walker Buehler, Bobby Miller, James Outman, Will Smith, Gavin Lux and others approach free agency? Remember, the Dodgers are already well over the luxury tax threshold, with little prospect of resetting their cap.

In the two decades since The Book On The Book was published, all team payrolls have risen dramatically, a fact that has in turn made it more feasible for teams to pay their mega-stars a higher percentage of the whole while leaving enough for everybody else.

But if the upper level of what a team can reasonably pay one player has moved from 17.3 percent, it hasn’t doubled. In 2023, only the Nationals, Royals, Tigers and Reds paid their highest-salaried player more than 21 percent of total payroll, none of those four teams made the playoffs and only the Reds (82-80) beat .500.  

Among the dozen teams that did play postseason ball in 2023, the average portion of payroll dedicated to their best-paid player was 16 percent. That percentage has not appreciably changed in the past six full seasons. The Dodgers, a perennial playoff contender, have been fully onboard with that approach; their best-paid player has taken down between 11 and 19 percent of overall payroll during that period. So 33 percent to Ohtani is a mammoth jump for them.

The Atlanta Braves, looked upon by many as the benchmark for front office organization, dedicated just 10 percent of their overall payroll to their highest-paid star, Matt Olson. Their three best-paid players — Olson, Charlie Morton and Marcell Ozuna — collectively received just 28 percent of the overall $203 million payroll.

That left the Braves sufficient flexibility to accommodate the increasing salary demands of such young stars as Ronald Acuna Jr., Austin Riley, Ozzie Albies and Max Fried, three of whom (Acuna, Albies and Riley) have been signed to long-term deals.

Going forward, the Dodgers have no such commitments in place for any of their young regulars, and the Ohtani signing may only make it harder to finalize such commitments in the years ahead.

That doesn’t make the signing of the Japanese star an inherently bad move. But given that L.A. is committing a full third of its payroll to one player, it does illustrate how far out of the practical and historical mainstream a team has to move to "win" the Ohtani sweepstakes.