Originally published by DodgerBlue.com
The Los Angeles Dodgers signed their top priority on Saturday as Shohei Ohtani announced he is joining the organization with a reported contract worth $700 million over 10 seasons.
The deal is the largest in professional sports history, and it blows away the next largest MLB contract of $426.5 million, which was signed by Mike Trout with the Los Angeles Angels.
Although it’s a significant number that represents the Dodgers’ commitment to landing baseball’s unicorn, the total value of the deal is going to be worth less than the number shows.
According to Ken Rosenthal of The Athletic, the deal includes a historic amount of money deferred, which was Ohtani’s idea as it will lessen the value of the money being paid by the Dodgers to give them more money to continue making other moves:
Ohtani deal with Dodgers, per source, includes “unprecedented” deferrals – the majority of his salary. The deferrals were Ohtani’s idea to ease the Dodgers’ luxury-tax and cash flow burdens to give the team the flexibility needs to be as competitive as possible, the source said.
— Ken Rosenthal (@Ken_Rosenthal) December 9, 2023
The reason the value will be lower is due to inflation as $70 million this year will be worth more than $70 million in future years with the value of the dollar decreasing as time goes on.
It’s unclear how long the Dodgers are spreading the deal out, but according to Jeff Passan of ESPN, most of the contract is deferred, which also decreases the luxury tax number Ohtani will count for against the competitive balance tax (CBT) threshold:
I’m going to explain why Shohei Ohtani’s $700 million contract with the Los Angeles Dodgers will not equal $700 million in terms of MLB accounting or the present-day value of the deal.
When money in a contract is deferred, the competitive-balance tax number — the luxury tax — is…
— Jeff Passan (@JeffPassan) December 9, 2023
A player’s CBT number is generally calculated by using the average annual value of their contract, which would have been $70 million for Ohtani.
However, when a deal includes deferred money, that CBT number is discounted, so the expectation is Ohtani will only be worth roughly $40-$50 million against their payroll.
“Shohei is thrilled to be a part of the Dodgers organization. He is excited to begin this partnership, and he structured his contract to reflect a true commitment from both sides to long-term success,” his agent Nez Balelo said.
When Ohtani is officially added to the roster, the Dodgers will still have plenty of room to continue adding talent as they now turn their attention to their starting rotation.
When will Shohei Ohtani’s deal be official?
Despite Ohtani’s announcement, the Dodgers and Ohtani still need to officially complete the contract. That requires the two-way superstar to pass a physical, which shouldn’t be a problem as his surgery was performed by the Dodgers’ team doctor, Neal ElAttrache.
They will also need to clear up space on their 40-man roster to make the deal official, which could be done with a trade or by designating someone for assignment.
Because of those reasons, the deal could take a week or so to get done, but there is no set timeline on how long it needs to take. After agreeing to a deal with Jason Heyward, the Dodgers finalized it roughly a week later.
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