Shohei Ohtani Signs Historic $700 Million Deal with Los Angeles Dodgers
LOS ANGELES – In a groundbreaking move that has sent shockwaves through the baseball world, Shohei Ohtani has agreed to a record-breaking 10-year, $700 million contract with the Los Angeles Dodgers. The deal, which includes unprecedented deferrals, marks a new chapter in the financial landscape of the sport.
Ohtani, the highly-touted Japanese pitcher and outfielder, will defer all but $2 million of his annual salary until after the completion of the contract. This unique arrangement, suggested by Ohtani himself during negotiations, allows the Dodgers to have additional cash flow and payroll flexibility.
The deferred money, without interest, will be paid out between 2034 and 2043. This prolonged payment plan not only benefits the team financially, but also gives them extra freedom in navigating the competitive balance tax (CBT) or luxury tax.
For luxury tax purposes, the expected average annual value of the contract is approximately $46 million per year, making it the highest in Major League Baseball (MLB) history. The collective bargaining agreement permits salary deferrals without any limits, and a net-present-value calculation is used to determine the contract’s value.
Over the course of the 20-year lifespan, which includes the deferred payments, Ohtani is set to make a total of $700 million. The payments will be evenly distributed, with $2 million per year from 2024 to 2033, and a staggering $68 million per year from 2034 to 2043.
While Ohtani secures his financial future on the field, he is also anticipated to rake in additional income from endorsements and off-the-field ventures, estimated at $50 million per year. This further cements his status as one of the sport’s top earners.
The signing of Ohtani not only makes waves in terms of financial magnitude, but also raises the bar for future contracts in baseball. His deal surpasses the previous record of $426.5 million, set by his former teammate on the Los Angeles Angels, Mike Trout.
Ohtani’s agent hinted that the deferral arrangement reflects a commitment to long-term success. With Ohtani’s extraordinary talent and the financial flexibility the contract provides, the Dodgers remain active in the free-agent market, particularly in the search for pitching.
As the baseball landscape continues to evolve, the signing of Shohei Ohtani will undoubtedly be remembered as a turning point in the financial dynamics of the sport. Only time will tell if this groundbreaking contract sets a new precedent for future player deals.
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