Shohei Ohtani’s $700 Million Dodgers Deal: Details On Deferrals, Opt-Outs And More

In a move that didn’t come as a surprise to many, Shohei Ohtani has officially chosen the Los Angeles Dodgers as his new team. On Saturday, Ohtani announced the signing of a monumental 10-year, $700 million contract with the Dodgers, making it the most lucrative deal in the history of sports, surpassing Lionel Messi’s $673 million contract with FC Barcelona.

Here’s a look at the top five largest contracts in baseball history:

1. Shohei Ohtani, Dodgers: $700 million
2. Mike Trout, Angels: $426.5 million
3. Aaron Judge, Yankees: $360 million
4. Manny Machado, Padres: $350 million
5. Francisco Lindor, Mets: $341 million

However, it’s essential to note that Ohtani’s record-breaking contract is quite complex. It won’t involve a straightforward $70 million per year for a decade. The full details of the deal have yet to be disclosed, but here’s what we know so far:

‘Unprecedented deferrals’: Ohtani’s contract includes what’s described as “unprecedented deferrals,” a concept initiated by Ohtani himself. The purpose behind these deferrals is to reduce his competitive balance tax (CBT) number and provide the Dodgers with more financial flexibility to build a competitive team around him. While the exact terms of these deferrals remain undisclosed, they significantly impact the present-day value of the contract and the associated CBT hit. Deferrals help distribute the financial burden over time, making it more manageable for the team.

As an example, Max Scherzer previously signed a seven-year, $210 million deal with the Nationals, averaging $30 million annually. However, he agreed to defer a portion of his salary each year, lowering the contract’s present-day value to approximately $185 million and reducing his annual CBT hit.

No opt-outs: Despite previous speculation that Ohtani might seek opt-out clauses in his contract, especially after completing his elbow surgery rehab and demonstrating his pitching prowess, his deal with the Dodgers contains no opt-outs, per reports from ESPN. It’s a firm 10-year commitment with no escape clauses on either side.

Endorsements: In addition to his substantial salary, Ohtani’s endorsement deals played a crucial role in his earnings. During the past season, he secured approximately $40 million in endorsement agreements, which include partnerships with New Balance, Fanatics, Topps, and numerous Japanese companies. With the move to the Dodgers, Ohtani’s endorsement portfolio is poised for significant growth, likely making him a $100 million-a-year athlete when considering both endorsements and salary.

The Dodgers’ revenue: Shohei Ohtani is a revenue-generating powerhouse for any team. His presence attracts fans, sells tickets, jerseys, and opens doors to new sponsors, particularly from Japan. While Ohtani reportedly generated $10 million to $20 million a year in advertising, marketing, and related revenue for the Angels, the Dodgers, with their global brand and higher attendance figures, are projected to reap even more substantial financial benefits from Ohtani’s association. Their $700 million investment in him is a clear indication of their expectations regarding the revenue he can generate for the team.

With Shohei Ohtani’s arrival, the Los Angeles Dodgers are poised to become even more financially robust, thanks to the revenue streams he’ll bring in through various avenues.