$500 Million Contract Is Inevitable As New Revenues Fuel Major League Baseball

One of the most fascinating aspects of Major League Baseball is the structure and value of contracts for ball players. Even as Competitive Balance Tax thresholds and onerous penalties are designed to curtail egregious spending, certain ball clubs are still pushing the limits with record-breaking contracts. Major League Baseball could see its first $500 million ball player within the next five years given an influx of new revenue streams and the potential free agency of two exceptional ball players. Right fielder Juan Soto of the Washington Nationals and first baseman Vladimir Guerrero, Jr. of the Toronto Blue Jays are two likely candidates who have warmly embraced the challenges of lofty expectations and historic comparisons.

Fans of a certain age will never forget December 1998 when the Los Angeles Dodgers signed right-handed pitcher Kevin Brown to a seven-year, $105 million contract. As the first $100 million ball player in baseball history, concerns regarding risk and competitive imbalance dominated conversations regarding the 34-year-old right-handed pitcher. Some had even gone as far as calling it a crisis for the sport. The hysteria continued as 25-year-old shortstop Alex Rodriguez became the first $200 million ball player with his 10-year, $252 million contract in December 2000 with the Texas Rangers.

As $200 million contracts had become an accepted practice, the San Diego Padres made third baseman Manny Machado Major League Baseball’s first $300 million ball player in February 2019 with a decade long contract prior to his age 26 season. Within a blink of an eye, Machado was surpassed by right fielder Bryce Harper’s 13-year, $330 million contract with the Philadelphia Phillies as he embarked upon his age 26 season. By Opening Day 2019, the Los Angeles Angels had signed 27-year-old center fielder Mike Trout to a 12-year, $426.5 million contract extension and technically became baseball’s first $400 million ball player. According to Cot’s Baseball Contracts, the final two years of Trout’s six-year, $144.5 million contract (2015-2020) which totaled $66.5 million were replaced by the extension which includes a $20 million signing bonus.

The 23-year-old Soto has already turned down a 13-year, $350 million contract extension from the Nationals. Under the guidance of his agent, Scott Boras, Soto will take it one season at a time until he becomes a free agent at the conclusion of the 2024 season. There are multiple examples of young ball players who have committed early to long-term contracts and have likely left significant money on the table during negotiations. Right fielder Ronald Acuna, Jr. and second baseman Ozzie Albies of the Atlanta Braves immediately come to mind. In 2019, the 21-year-old Acuna, Jr. committed to an eight-year, $100 million contract while days later Albies signed a seven-year, $35 million contract at 22-years-old according to Cot’s Baseball Contracts.

Soto is currently signed to a one-year, $17.1 million contract and has two years left of arbitration eligibility due to his Super Two status. He will be shopping his services as a free agent to the open market just as he turns 26-years-old. Like Soto, the 23-year-old Guerrero, Jr. has Super Two status but becomes eligible for free agency at the conclusion of the 2025 season. He will have just completed his age 26 season. Presently signed to a one-year, $7.9 million contract, discussions regarding Guerrero, Jr.’s long term future in Toronto will likely begin in earnest this offseason.

As the 99-day lockout thankfully appears to be a distant memory, intrigue surrounds several new revenue opportunities for Major League Baseball. Streaming deals with Apple
AAPL
and NBCUniversal’s Peacock complement existing national media deals with ESPN, FOX, and TBS. According to Michael Ozanian of Forbes, the annual average of Major League Baseball’s national media deals is $1.96 billion which is divided equally among the 30 ball clubs. Even as traditionalists struggle with a multitude of streaming services, MLB.TV, MLB Extra Innings, regional sports networks, and the dreaded blackouts, it is a necessary move for Major League Baseball when it comes to reaching a larger and younger demographic.

Another exciting revenue opportunity eliciting strong opinions is the usage of uniform sleeves and batting helmets for corporate sponsorship. While the ball clubs will control sponsorship opportunities on uniform sleeves, Major League Baseball will decide who will be the league sponsor for decals on the helmets. The San Diego Padres have already announced a 2023 uniform sponsorship with Motorola and the Los Angeles Dodgers have hired marketing firm SPORTFIVE
TFIV
IVE
to assist in the process of securing a uniform sponsorship and field naming rights. Let’s also not forget the potential windfall of gambling revenues thanks to Major League Baseball’s partnerships with DraftKings and BetMGM.

The thought of a ball player signing a $500 million contract is no longer an absurd idea given Major League Baseball’s willingness to think differently regarding revenue opportunities as average franchise values presently sit at $2.07 billion according to Forbes. Ball clubs such as the Minnesota Twins shocked everyone by winning the Carlos Correa sweepstakes through creativity and a willingness to take a chance in the spirit of competitiveness. Expect to see additional surprises given the influx of new revenues if owners demonstrate a true commitment to winning.