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Shohei Ohtani’s Dodgers contract includes a whopping $680 million in deferred salary, per reports

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MLB: Los Angeles Angels at Oakland Athletics Neville E. Guard-USA TODAY Sports

The 10-year, $700 million contract for Shohei Ohtani was said to have “unprecedented” levels of deferred salary, and I have to say that actually undersold the structure of his deal. Per multiple reports, beginning with Fabian Ardaya at The Athletic who had it first, the Dodgers are deferring $68 million of $70 million in each season of the contract.

From Ardaya:

In an effort to enable the Dodgers to continue spending around stars Ohtani, Mookie Betts and Freddie Freeman, Ohtani agreed to defer all but $2 million of his annual salary — $68 million of his $70 million per year — until after the completion of the contract. The deferred money is to be paid out without interest from 2034 to 2043.

That means the Dodgers will only pay $2 million per year during the years of Ohtani’s contract, then $68 million in each of the next 10 years after the contract.

The Dodgers finalized the 10-year contract on Monday evening.

Baseball has never seen such a deal structure, so “unprecedented” was correct. But it also could be something the league might want to address leading up to when the current collective bargaining agreement expires after the 2026 season. But for now, this is how the CBA reads, in the beginning of Article XVI, which covers deferred compensation:

There shall be no limitations on either the amount of deferred compen- sation or the percentage of total compensation attributable to deferred compensation for which a Uniform Player’s Contract may provide.

In other words, if both sides agree to the terms, for the most part anything goes.

There are benefits to both sides. For the Dodgers, it’s obvious, as their $70-million-per-year contract will actually count for something much less for competitive balance tax purposes. Any deferred compensation is discounted back to the year from which it was deferred, giving the contract an adjusted net present value. From Jeff Passan at ESPN:

So Ohtani’s $700 million contract, given the way it is paid out, is considered roughly the equivalent of a $460 million if it was paid out “normally.”

From Ohtani’s side, even considering the reduced net present value, $46 million is still a new record for average annual value, about six percent more than the shorter contracts Max Scherzer and Justin Verlander signed with the Mets.

And Ohtani’s agency, CAA Sports, can still tout technically that they landed a record-smashing $700 million contract, which they already have done:

The Dodgers structured their other two big superstar contracts similarly, though obviously on a much smaller scale.

Mookie Betts has $115 million of his $365 million contract deferred, and will be paid through 2044. That reduces the average of his 12-year deal from $30.4 million to $25.55 million for competitive balance tax purposes.

Freddie Freeman has $57 million of his $162 million deferred, reducing the average from $27 million to about $24.7 million. He is paid through 2040.

These are all accounting tricks. How long they remain available remains to be seen, but changing such a thing would require collective bargaining.

But if you’re not keeping track at home, here’s what the Dodgers will pay for Ohtani (reportedly), Betts, and Freeman over the next 21 years.

Dodgers payment schedule to Shohei Ohtani, Mookie Betts, and Freddie Freeman

Year Shohei Ohtani Mookie Betts Freddie Freeman Totals
Year Shohei Ohtani Mookie Betts Freddie Freeman Totals
2024 $2,000,000 $22,000,000 $20,000,000 $44,000,000
2025 $2,000,000 $22,000,000 $15,000,000 $39,000,000
2026 $2,000,000 $20,000,000 $15,000,000 $37,000,000
2027 $2,000,000 $20,000,000 $15,000,000 $37,000,000
2028 $2,000,000 $24,000,000 $4,000,000 $30,000,000
2029 $2,000,000 $24,000,000 $4,000,000 $30,000,000
2030 $2,000,000 $24,000,000 $4,000,000 $30,000,000
2031 $2,000,000 $21,500,000 $4,000,000 $27,500,000
2032 $2,000,000 $21,500,000 $4,000,000 $27,500,000
2033 $2,000,000 $10,000,000 $4,000,000 $16,000,000
2034 $68,000,000 $10,000,000 $4,000,000 $82,000,000
2035 $68,000,000 $9,000,000 $4,000,000 $81,000,000
2036 $68,000,000 $8,000,000 $5,000,000 $81,000,000
2037 $68,000,000 $8,000,000 $5,000,000 $81,000,000
2038 $68,000,000 $10,000,000 $5,000,000 $83,000,000
2039 $68,000,000 $10,000,000 $5,000,000 $83,000,000
2040 $68,000,000 $11,000,000 $5,000,000 $84,000,000
2041 $68,000,000 $11,000,000 $79,000,000
2042 $68,000,000 $11,000,000 $79,000,000
2043 $68,000,000 $11,000,000 $79,000,000
2044 $11,000,000 $11,000,000