Shohei Ohtani’s huge contract has notable structure

Jun 15, 2023; Arlington, Texas, USA; Los Angeles Angels starting pitcher Shohei Ohtani (17) walks to the dugout before the game against the Texas Rangers at Globe Life Field. Credit: Tim Heitman-USA TODAY Sports

Shohei Ohtani’s $700 million contract with the Los Angeles Dodgers is the highest in the history of North American sports, but it is structured in a way that actually manages to make it somewhat team-friendly.

According to Ohtani’s agents, the contract contains unprecedented salary deferrals that cover the majority of the $700 million that will be owed to the two-way star. Those deferrals were included at Ohtani’s request for payroll flexibility purposes.

The deal includes: “unprecedented” deferrals – the majority of Ohtani's salary_which was his idea;. He insisted on mitigating the CBT and cash-flow burdens to enable the team to have flexibility in order to be competitive as possible.''

— Bob Nightengale (@BNightengale) December 9, 2023

While we do not have exact figures, these are going to be massive deferrals if they cover over $350 million in salary. It essentially means that the Dodgers will be paying Ohtani well beyond the life of the 10-year deal, which will allow them to pay him less now. Without this wrinkle, the Dodgers would be paying Ohtani a full $70 million annually, which would make it difficult for even them to add talent around him without racking up a massive luxury tax bill. Instead, the Dodgers will be able to pay Ohtani a more manageable figure that enables them to bring in more talent to move Ohtani closer to his stated goal of winning.

The most famous example of contract deferrals in baseball is the New York Mets’ infamous Bobby Bonilla deal, which sees the team pay the long-retired Bonilla $1.2 million annually until 2035. The Dodgers may wind up in a similar arrangement with Ohtani, but if he is anywhere near as good as he has been so far in his MLB career, it is a price they will presumably be happy to pay.