Not only is the number figure of Shohei Ohtani’s new contract record-breaking, but the amount of deferred money in the structure of the contract is as well.
When Shohei Ohtani signed his historic 10-year, $700 million contract with the Los Angeles Dodgers, it came with unprecedented deferrals. Ohtani has chosen to defer all but $2 million per year of his $70 million average annual salary until the contract concludes in 2034. This means that he won’t receive $680 million of the salary for over a decade. The deferred portion will be paid without interest from 2034 to 2043, a decision reportedly initiated by Ohtani himself.
Shohei Ohtani’s $700 million deal is one of the most unique contracts in sports history.
He’ll earn $2 million annually over the next ten years and then $680 million in payments starting at age 40.
But the details indicate it goes much deeper than Ohtani just being a good… pic.twitter.com/WQbRKYKot5
— Joe Pompliano (@JoePompliano) December 12, 2023
An Almost Entirely Deferred Contract
The Dodgers officially announced the signing without disclosing the terms, but these deferrals allow the team flexibility in spending around Ohtani to build a perennial championship contender. For competitive balance tax (CBT) purposes, the contract with deferrals will count for approximately $46 million annually. The CBT imposes a financial penalty on teams exceeding a predetermined spending ceiling.
Shohei Ohtani’s $700 million contract calls for him to be paid only $2 million a year for the next 10 seasons, with $680 million deferred until the end of the deal, sources confirm to ESPN.
The CBT hit on the contract is going to be around $46 million, a huge discount for L.A.
— Jeff Passan (@JeffPassan) December 11, 2023
Ohtani’s considerable income from endorsements and non-baseball sources, estimated at $50 million annually, coupled with his previous earnings with the Los Angeles Angels, makes it feasible for him to delay receiving $680 million in salary. The Dodgers have reportedly employed similar deferral strategies with other stars. Freddie Freeman’s six-year, $162 million deal defers $57 million from 2028 to 2040, and Mookie Betts’ 12-year, $365 million contract includes $115 million in deferred salary to be paid from 2033 to 2044. With these three contracts alone, the Dodgers will owe Freeman, Betts, and Ohtani approximately $835 million after 2034, and probably long after they are gone from the Dodgers active roster.
More MLB Clubs Will Mimic This
Ohtani’s deal was the biggest in North American team sports and will certainly set a precedent for how teams will try to pay cornerstone pieces with the flexibility to build around them. Will the Yankees extend Juan Soto with a similar deferred structure so they can build around him and Aaron Judge? And will MLB do anything to limit this? It’s not a new trend obviously, but we’ve never seen anything done on this scale. We all know about Bobby Bonilla Day when the Mets famously pay former OF Bobby Bonilla $1.2 million on July first of every year. Bonilla had 25 years of a deferred contract. It’s going to be interesting to see the impact this has on massive MLB deals moving forward.
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