By Sevanah Sandoval
On Saturday, December 9th, Major League Baseball player Shohei Ohtani signed the most expensive contract in MLB history: a ten-year contract for $700 million with the Los Angeles Dodgers. However, he is deferring $680 million, meaning he will only receive $2 million per year while he is under the contract, and he will receive the rest after the ten years is over.
Why would he do this? Well, deferring his contract allows the Dodgers to sign more players, which helps the team “align their talent to strike now when the iron is hot,” according to Temple University School of Sport, Tourism and Hospitality Management faculty member George Diemer. This is not the first time an MLB player has deferred money from their contract. In 1991, Bobby Bonilla signed a five-year contract with the New York Mets for $29 million, which was the largest MLB deal at that time. Even though Bonilla has retired, he is still being paid about $1.19 million per year because of the deferred salary arrangement and the interest the Mets are paying. According to CBS, the Mets will continue making payments to Bonilla until 2035, when he will be seventy-two years old.
Ohtani’s situation is a little bit different. Unlinke Bonilla, Ohtani is not asking for interest to be paid on the $680 million that he has deferred. This will cause him to lose a lot of the money in his contract due to inflation over the next ten years. However, Diemer has pointed out a few reasons that this may not be an issue for Ohtani. One is that “[b]ecause he is deferring it for 10 years, he might be able to move out of California or even out of the United States and go back to Japan where he would not have to pay income tax on [the deferred salary].” Furthermore, Ohtani is still making a lot of money on endorsements. According to CNBC, Ohtani “is one of the highest-paid athletes in sports off of endorsements alone, raking in a reported $50 million annually.”
Despite the fact that Ohtani wasn’t the first to defer money from his contract, the magnitude of it can not be denied. This deal is still unique in that Ohtani is not asking for interest to be paid, and in that it is the most expensive MLB deal to date.
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