Shohei Ohtani is deferring $68 million of his $70 million annual salary from the Los Angeles Dodgers, per the Athletic, which says that the deferred salary will be paid out beginning in 2034 at no interest.
We talked earlier today about how deferring money at no or low interest reduces the overall value of the contract for Competitive Balance Tax purposes (and, of course, in terms of the net present value of the deal). With $68 million per year being deferred for 10 years at no interest, I am calculating the present value of the deferrals each year, as explained in the link above, to be a little over $43 million per year. Adding in the $2 million per year in salary that is not deferred, and this is effectively a $45 million per year deal.
10 years, $450 million is a whole lot of money...but it isn’t $700 million. Splashy headlines aside, this is a tremendous deal for the Dodgers, particularly factoring in the additional revenue that Ohtani generates for the franchise. And likely less, in present day dollars, than some other teams were offering.
Ohtani, as I mentioned in the above link, reportedly makes about $40 million per year in endorsements, a figure that would seem to potentially rise now that he’s with a perennial winner, rather than a perennial sub-.500 team. Thus, he can afford to take just $2 million per year in actual salary from the Dodgers.
UPDATE — It is being reported that the Annual Average Value for Competitive Balance Tax purposes will be $46 million, rather than the $45 million I estimated above.