Shohei Ohtani’s 10-year, record-setting $700 million contract includes unprecedented deferrals, a person briefed on the terms said. Athletic on Monday.
In an effort to continue the spending spree around Los Angeles Dodgers stars Ohtani, Mookie Betts and Freddie Freeman, Ohtani agreed to defer all but $2 million of his annual salary — $68 million of his $70 million a year — until it’s over. Agreement. Deferred payments are due from 2034 to 2043 without interest.
The previously unannounced deferrals were reportedly suggested by Ohtani as negotiations raised the figure to $700 million, the person said, explaining the terms. Athletic. The deal is expected to close soon.
The unusual structure is intended to provide the Dodgers with additional cash flow and payroll flexibility. Meanwhile, Ohtani continues to bring in big dollars from endorsements and off-field endeavors. Ohtani is believed to earn $50 million a year from the diamond, the person said, describing the terms. Athletic.
Deferrers give the Dodgers more freedom, known as the competitive balance tax or luxury tax. For CBT purposes, the expected average annual value of the deal is said to be about $46 million per year, the people explained, citing the terms. The $46 million average annual value is still the highest in MLB history, topping the $43.3 million average annual value Max Scherzer earned when he accepted a three-year contract with the New York Mets through 2021.
Baseball’s collective bargaining agreement makes clear that there is no limit to how much salary a player and team can agree to defer. The CBA also includes a net-present-value calculation for luxury-tax purposes — a calculation that estimates the value of a player’s contract on a season-by-season basis. This is how 46 million dollars is determined.
For the 10 years he will play for the Dodgers, Ohtani’s contract could be worth an average of $46 million each year. But over the full 20-year life of the deal — including the following 10 years when the deferrals are paid, while Ohtani is not under contract with the team — he should earn a total of $700 million.
Ohtani will be paid $2 million each year from 2024 to 2033, then $68 million each year from 2034 to 2043 over two 10-year periods.
The Dodgers are at the top of the market, especially for pitching, with free-agent Japanese right-hander Yoshinobu Yamamoto and Tampa Bay Rays right-hander Tyler Glasnow among their targets.
Ohtani’s deal surpasses the $426.5 million his former Angels teammate Mike Trout received in the previous record contract. Ohtani’s agent at Creative Artists Agency, Ness Paleo, mentioned the deferment arrangement when Ohtani’s decision to join the Dodgers was announced.
“He is excited to begin this partnership and has structured his agreement to reflect a true commitment from both parties to long-term success,” Paleo said in a statement at the time.
Ivan Trellich Athletic contributed to this report.
(Shohei Ohtani Photo: Tim Nwachukwu/Getty Images)