Shohei Ohtani, baseball’s two-way superstar, has signed a monumental 10-year contract, setting a record in the world of sports. The deal, worth a staggering $700 million, makes Ohtani the recipient of the largest contract in the entire history of major sports, surpassing Lionel Messi’s $673 million contract with FC Barcelona. With this deal, Ohtani joins the Los Angeles Dodgers, where he will be paid approximately $2 million per year with the bulk of his salary being deferred until after the completion of the contract.
This unprecedented deferral, amounting to $68 million of his $70 million annual salary, will be paid out without interest from 2034 to 2043. The agreement, made to enable the Dodgers to continue spending around stars Mookie Betts and Freddie Freeman, has never been seen before in the history of Major League Baseball.
The elaborate payment arrangement is a response to the competitive balance tax (CBT) which is a penalty tax on MLB payrolls. Ohtani’s deferrals will lower the team’s CBT number to approximately $46 million, allowing them to continue spending on star players without incurring higher tax penalties.
This deal, initiated by Ohtani himself, aims to lower the team’s CBT number, giving the Dodgers the freedom to spend elsewhere on their team roster and avoid higher tax tiers. It also showcases Ohtani’s selflessness and his desire to see the team and the city succeed. This is particularly significant as the Dodgers still have pressing needs in their starting pitching rotation. Ohtani, who will not be pitching in the upcoming 2024 MLB season due to an elbow surgery, made these deferrals expecting the Dodgers to add more star power to the team.
Although Ohtani’s contract does not feature traditional opt-outs or option years, there is a potential escape hatch. However, the details of that possibility are yet to be revealed. With this historic contract, Ohtani has set a new standard in baseball salaries and his impact is sure to be felt by the Dodgers for years to come.