As you may have heard, the Los Angeles Dodgers recently broke the bank by signing Shohei Ohtani, the two-way megastar, to a ten-year, $700 million dollar deal, the largest in North American sports history. Even though everyone knew Ohtani was getting a record-breaking second contract from the moment he won his first MVP award, the dollar amount is still mind-boggling. The discourse for a long time regarding Ohtani’s potential deal was, “Is it going to begin with a 4 or a 5?” This has blown all of that completely out of the water. Here, I’ll break down everything you need to know about the deal, plus the implications it has on the league as a whole.
Contract Structure
The primary element of this contract that is most important to understand is the deferral system the MLB uses. Under the current CBA, it is legal to defer any amount of money in a contract for however long is necessary. The Dodgers took full advantage of this, and are paying Ohtani only $2 million a year while under contract from 2024-2033. The other $680 million is being deferred to be paid out between 2034-2043. Yes, he is only going to be receiving around 3% of his contract in the years he is actually playing, and will be getting paid the rest from the ages of 40-50. This works for both Ohtani’s camp and LA’s for a few reasons. One, Ohtani and his agent can say he received the largest contract in sports, besting Lionel Messi’s $674 million with FC Barcelona. Two, the Dodgers now have significantly more room under the luxury tax to sign players to help compete for championships while Shohei is on the roster. Hell, they already spent an additional $461.5 million on former Rays RHP Tyler Glasnow and Japanese star pitcher Yoshinobu Yamamoto. LA is clearly on a mission to build a baseball edition of the Avengers, which is already reflected in their 2024 World Series odds. Those currently sit at 11-2, by far the lowest in baseball. Finally, if Ohtani is able to leave California by the time he is receiving the bulk of his wages, there could be tax implications as well.
However, the pure dollar figure is a little bit disingenuous due to the structure of the contract. There is no doubt that Shohei will be rolling in dough, but his deal will be worth a lot less than the enumerated amount because of a term that is often a political hotspot: Inflation. Washington Post sportswriter Chelsea Janes did the math, and if you take Ohtani’s $700 million in 2034 and convert it to 2024 dollars, it is only going to be worth around $460 million. This makes sense, because money being paid today is worth a lot more than money being paid in 10 years. This also fits closer to what the original projections were for the contract, given the injury risk Ohtani does bring to the table. And let me make one thing very clear: NO TEAM was ever giving Ohtani upwards of $550 million in ‘now money’ as some reports had said. The risk of his arm not ever being healthy enough to pitch again had cleared that type of money off the table.
Has this type of contract been done before?
The short answer to this question is no. We’ve seen some wacky contracts throughout MLB history, but the one that always comes to mind for me (and I’m sure a lot of others) is the Bobby Bonilla contract with the Mets, where he STILL receives $1 million a year until 2035. Ohtani makes slightly more than him for now, but less than the legendary Ken Griffey Jr. still makes from the Reds, which sits at $3.5 million. In terms of deferrals, I don’t think we’ve ever seen a contract structured as drastically as Ohtani’s. In Bonilla’s deal, the deferred money was more of a failed economic gamble by former Mets ownership, and Griffey’s deal only deferred about half the total money. The Dodgers are doing something that is completely unprecedented.
What does this mean going forward?
The Dodgers are going to have to win a lot of games very quickly in order for the Shohei deal to be worth it. Once Shohei finishes out his contract in 2034, the Dodgers will basically be spending $68 million in dead money every year. That’s almost a third of the Competitive Balance Tax (otherwise known as the ‘luxury tax’) threshold. Obviously, that threshold is going to increase in the next ten years, but it will still put a stranglehold on the quality of teams Los Angeles is going to be able to build during those years.
On the flip side, since the Dodgers are only paying $2 million right now for the most talented baseball player of all time, they are in a prime position to win championships. Ohtani, alongside stars Mookie Betts and Freddie Freeman, should combine for one of the most fearsome lineups I’ve ever seen. This move officially puts the Dodgers all-in, with their chip stacks pushed way in towards the center of the table. There’s a good chance Andrew Friedman and Dodgers ownership would be disappointed if they don’t win multiple championships in the Ohtani era.
As for the rest of the league, I’m not sure these types of contracts will be making a big jump in popularity. There’s only one Shohei Ohtani, and not many teams are run as well as the Dodgers. This might go down in history as a once-in-a-lifetime type of deal. It wouldn’t shock me to see more teams implementing some types of salary-deferred contracts into their toolkit, but nothing to the level of Ohtani.
Is he worth the money?
Economically, Shohei Ohtani is worth all that money and more. The Dodgers are going to profit heavily from the publicity from around the baseball world that comes with having the most marketable superstar on their roster. Memorabilia, ticket sales, and other avenues of revenue will be maximized, both in the United States and other broad baseball markets in Asia.
From a pure baseball perspective, the answer gets a little bit more complicated. Ohtani’s value will likely be dependent on if he is able to pitch effectively again after tearing his UCL last season. He underwent a second elbow procedure over the offseason (he had previously undergone Tommy John surgery) and is expected to make a full recovery by 2025. However, if the recovery doesn’t go as planned, his value as a pure hitter is probably not worth that much to a team. Other hitters such as Bryce Harper have gone on the market and not gotten anywhere near Ohtani’s money. I’m not saying those two are equal at the plate, but Ohtani isn’t out of the stratosphere in terms of talent without bringing his elite pitching to the table. The Dodgers must have every reason to believe that he will be back to the mound, healthy, in 2025.