Shohei Ohtani’s groundbreaking contract with the Los Angeles Dodgers is set to include a substantial deferred payment arrangement, as sources familiar with the deal disclosed on Monday. This structure will see Ohtani deferring a staggering $68 million of his annual $70 million salary, a move that will significantly reduce the immediate financial burden on his new team’s payroll and potential tax obligations.
The official announcement of Ohtani’s signing by the Dodgers came on Monday, following his agreement on Saturday to a monumental 10-year, $700 million contract. This contract is unprecedented in the history of North American professional sports. While it was initially reported that a substantial portion of the deal would be deferred, Ohtani will ultimately be deferring over 97% of his earnings. The deferred sum, amounting to $680 million, will be paid out to Ohtani between the years 2034 and 2043.
Sources indicate that the decision to structure the contract with such significant deferrals was Ohtani’s own idea. He was primarily motivated by the desire to assist the Dodgers in signing other talented players, a move made more feasible by his substantial off-the-field earnings. Ohtani is believed to earn an annual income of over $45 million through endorsements, establishing him as the most marketable player in Major League Baseball. During his tenure with the Los Angeles Angels, it is estimated that the team generated more than $20 million annually from his marketability.
In response to the signing, Ohtani expressed his gratitude to Dodger fans and shared his commitment to the team’s goal of bringing World Series championships to Los Angeles. He stated, “Dodger fans, thank you for welcoming me to your team. I can say 100 percent that you, the Dodger organization and I share the same goal—to bring World Series parades to the streets of Los Angeles.”
The financial implications of Ohtani’s contract on the Dodgers’ competitive balance tax (CBT) payroll will be substantial. The CBT payroll calculation typically considers the average annual value of contracts, which in this case is $70 million, but discounts deferred money. Consequently, Ohtani’s cost towards the CBT payroll will be approximately $46 million annually. When factoring in the contracts of Freddie Freeman and Mookie Betts, the total expense towards the luxury tax threshold is estimated to be around $100 million annually, with the threshold set at $237 million for 2024.
While there is no specific limit on the amount of money that can be deferred according to the collective bargaining agreement, teams must allocate the present-day value of the deferred funds—approximately $44 million in cash each year—in an escrow account.
In addition to Ohtani’s signing, the Dodgers made room on their 40-man roster by trading reliever Victor Gonzalez and infielder Jorbit Vivas to the New York Yankees in exchange for shortstop prospect Trey Sweeney.
Mark Walter, chairman of the Dodgers and Guggenheim Baseball Management, welcomed Ohtani to the team and acknowledged his extraordinary talent and global appeal. He expressed the organization’s commitment to working alongside Ohtani to enhance the excitement of Major League Baseball worldwide.
Meanwhile, the Los Angeles Angels, Ohtani’s former team where he spent six seasons, bid him farewell on social media, acknowledging his generational impact on the sport and wishing him success in the next chapter of his career.
The details of Ohtani’s deferred payments were initially reported by The Athletic.