Shohei Ohtani’s decision to defer a majority of his record-breaking $700 million contract with the Los Angeles Dodgers is set to have significant implications for the team’s financial flexibility in the future. Ohtani, the two-time American League MVP, has agreed to defer $68 million of his $70 million average salary, with the deferrals totaling a staggering $680 million. This decision comes as a surprise to many, as it goes above and beyond past instances of deferrals in baseball contracts.
The move will see Ohtani earning just $2 million per year from the Dodgers over the life of the 10-year contract, which runs from 2034 through 2043. This willingness to defer such a substantial portion of his salary is a testimony to Ohtani’s understanding of the financial constraints faced by the team and his commitment to helping the Dodgers maintain a competitive roster.
The deferrals will not only provide the Dodgers with more financial flexibility in the short term but also ease their burden relative to the Competitive Balance Tax (CBT). With the structure of the contract, the Dodgers would currently be under the CBT threshold, although it is expected that more significant moves are on the horizon.
Ohtani’s decision, made within the parameters of the Collective Bargaining Agreement, showcases his understanding and willingness to prioritize the team’s success over individual financial gain. His status as the game’s highest earner off the field made the decision “an easy one for him,” according to a source.
The deferred value of Ohtani’s contract will have implications for the Dodgers’ Competitive Balance Tax figure, as the present-day value of the contract is expected to be around $460 million. As a result, the Dodgers will have a CBT payroll hit of roughly $46 million per year for the next 10 years from Ohtani’s contract, providing the team with the much-needed payroll flexibility to continue building a winning team.
This unprecedented move by Ohtani sets a new standard for deferrals in baseball contracts, dwarfing past instances such as Max Scherzer’s deferred $105 million in his seven-year, $210 million deal with the Nationals. Ohtani’s commitment to the Dodgers’ long-term success and financial flexibility sets a new precedent for star players in Major League Baseball.