MLB superstar Shohei Ohtani officially announced his decision to sign a 10-year contract worth $700 million with the Los Angeles Dodgers on December 9th, 2023. This deal makes Ohtani the highest-paid player in the history of all major sports, surpassing Lionel Messi’s previous record-breaking $673 million contract with FC Barcelona.
However, Ohtani’s contract is not a straight $70 million per year over 10 years. Instead, there are unprecedented contract deferrals that have never been seen before in Major League Baseball. Ohtani has agreed to defer all but $2 million of his annual salary, with the deferred money to be paid out without interest from 2034 to 2043. This allows the Dodgers to continue spending around stars like Ohtani, Mookie Betts, and Freddie Freeman, while also avoiding harsher tax penalties.
The year’s competitive balance tax number for the Dodgers is anticipated to be around $46 million, with Ohtani’s average annual value calculated at approximately $46 million due to the contract deferrals.
The deferrals were Ohtani’s idea, according to his agent Nez Balelo, who stated that Ohtani wanted to lower his CBT number and give the Dodgers more potential freedom to spend in other areas to surround him with more great talent. Ohtani will earn just $2 million until the 2033 MLB season, with the deferred money paid out from 2034 to 2043.
There are no traditional opt-out clauses in Ohtani’s contract, but there is a possible escape hatch. The Dodgers’ payroll flexibility has allowed them to sign other coveted players like Yoshinobu Yamamoto. Notably, Ohtani’s deferrals will likely impact the team’s future roster decisions, as they are currently around $16 million under the CBT guidelines.