Shohei Ohtani reshapes baseball economics: Agrees to $680 million deferred deal with Dodgers

Posted : 13 December 2023

In a groundbreaking move reshaping the landscape of baseball contracts, Shohei Ohtani has reached an agreement with the Los Angeles Dodgers to defer a substantial portion of his historic $700 million deal. This 10-year contract, considered the largest in the sport's history, was secured by Ohtani after his previous contract with the Los Angeles Angels concluded.


The deferment arrangement entails Ohtani receiving $2 million annually until 2034, after which he will be entitled to a significant increase, earning $68 million per year until 2043. This strategic financial maneuver provides the Dodgers with increased flexibility to enhance their roster composition.


Beyond the playing field, Ohtani's financial portfolio is augmented by approximately $50 million in annual earnings from endorsements and various off-the-field ventures. Renowned as a two-time MVP and the 2023 trophy-lifting season with the Angels, Ohtani has been instrumental in revolutionizing the way baseball is played in the modern era.


His unparalleled proficiency in both batting and pitching sets him apart from most players who specialize in one discipline. With this groundbreaking deal, Ohtani emerges as one of the highest-earning athletes globally, potentially rivaling or surpassing iconic figures like Lionel Messi or LeBron James.


Dodgers owner Mark Walter expressed his enthusiasm for Ohtani's arrival, hailing the historic contract and welcoming the player to a franchise synonymous with legendary figures such as Jackie Robinson, Sandy Koufax, and Hideo Nomo. The deal's structuring aligns with the MLB's Collective Bargaining Agreement, allowing for substantial deferred compensation without limitations.


This financial strategy not only positions Ohtani as a centerpiece for the Dodgers but also grants the team greater financial maneuverability in the short term. The flexibility is particularly crucial in navigating the league's Competitive Balance Tax (CBT), with a 2024 limit set at $237 million. By deferring a significant portion of Ohtani's contract, the Dodgers can manage their average annual value (AAV) effectively and stay within the CBT threshold, ensuring continued competitiveness in the league.


Ohtani's decision to defer compensation follows in the footsteps of other notable players like Max Scherzer, who opted for a similar approach in 2015 by deferring half of his $210 million contract with the Washington Nationals. This financial strategy reflects a calculated approach to balancing immediate financial considerations with the long-term sustainability of the team's competitiveness.


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