Ohtani’s Dodgers Contract Comes with A Massive $680 Million Deferral

Two-time American League MVP Shohei Ohtani didn’t land in Toronto to sign with the Blue Jays. What he landed on was the largest contract in sports history — $700 million over 10 years — with the Los Angeles Dodgers. 

Now, of course, online chatter says that the whole thing with the Blue Jays was a clever ruse to push the Dodgers to close in with a better deal. People are speculating that the fake intel may have leaked from Ohtani’s camp. They are, after all, the ones who’ll benefit the most from it. 

But then again, as Mark Powell of FanSided writes, going to those lengths is just unrealistic — “The flight tracking information was merely a Reddit creation, and a fan theory run wild.”

Fans will likely never find out how that happened. What’s becoming clearer though is that the $700 million deal isn’t exactly as presented initially.

Mike Axisa and Dayn Perry did a detailed breakdown of the contract on CBC Sports. The key takeaways are that the deferrals — all $680 million of it, or payouts of just $2 million of the agreed $70 million per year for 10 years — were 1) “supposedly Ohtani’s idea,” and would be 2) very beneficial to both the Dodgers and Ohtani.

“He wanted to lower his CBT number and give the Dodgers more freedom to spend on the team around him,” they wrote. “Now, he’ll make $2 million through 2033, then the deferred money paid out from 2034 to 2043, according to The Athletic.”

The deferred payments significantly affect the Competitive Balance Tax (CBT) calculations for the Dodgers, lowering Ohtani’s average annual value (AAV) to around $46 million, impacting how the team is taxed under the CBT system. 

And then there’s Ohtani’s off-field earnings, including endorsements with companies like New Balance and Fanatics, and many more in Japan. This totaled approximately $40 million in the past season. With the Dodgers, his marketability is expected to grow, making it financially viable for him to defer the majority of his salary.

As for the Dodgers, which is a bigger brand than Ohtani’s previous team, they anticipate significant revenue generation from Ohtani’s presence, considering his impact on ticket sales, merchandise, and attracting sponsors. The team sees the $700 million investment as a strategic move to capitalize on Ohtani’s immense marketability.

Lastly, to dispel more speculation, specifically the one about how Ohtani might seek opt-outs after recovering from elbow surgery, Axisa and Perry also point out via ESPN that the contract does not include any opt-out clauses, signaling Ohtani’s commitment to the Dodgers for the full 10-year duration.

Information for this story was found via FanSided, CBS Sports, The Athletic, ESPN, X, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply