The unicorn of a baseball player signed a unicorn of a contract.
When Shohei Ohtani reached free agency last month, he asked his agent, Nez Balelo, “What if I defer all my salary so that my team has a better chance to compete?” Balelo says he dove into collective bargaining agreement language and found no limit on how much salary a player could defer. The only provision: a player must be paid at least the minimum salary.
The minimum salary for next season is $740,000. Over the next 10 years, Ohtani, by his choice, will be paid $2 million annually by his new team, the Dodgers. Ohtani asked for and agreed to have 97% of his salary—$680 million of the $700 million in the 10-year contract—deferred without interest payable over 10 years after this playing contract expires.
Why would Ohtani defer so much money? The deferred money gives the Dodgers another $23.94 million to spend annually against luxury tax thresholds that they otherwise would not have had if they paid Ohtani his full salary in present day dollars. They are expected to spend that money immediately—and possibly more—as they target free agent pitchers Yoshinobu Yamamoto and Josh Hader, according to a source familiar with their thinking.
“Nobody should be surprised,” Balelo says. “Everything he does is unique and impeccably well thought out. Who in their right mind gets to this level and decides he wants to help the team and the city compete above all else and basically says, ‘I don’t need it.’ Nobody does that. But there is nobody like him. This is the epitome of thinking about others, of pure intentions.
“This is who he is, who he always has been. He is coming in not as someone above all others, but as a complementary player to help the team win.”
Ohtani’s historic contract will feature massive payment deferrals the likes of which have never been seen in sports.
Jayne Kamin-Oncea/USA TODAY Sports
Balelo succeeded in a huge bottom-line win: gaining Ohtani the richest contract in sports history, eclipsing a $674 million deal given to soccer star Lionel Messi by FC Barcelona. Thanks to Ohtani’s idea of so much deferred money, the Dodgers also succeeded: they added the game’s biggest international star and the greatest two-way star in the game’s history at close to the previous record annual average value set by Max Scherzer, $43.3 million for a 39-year-old pitcher.
Ohtani will cost the Dodgers an annual value of $46.06 million, according to a source familiar with the formula for how the CBA calculates present day value for luxury tax purposes. It would have been $70 million without the deferrals, which were first reported by The Athletic.
Ohtani will be paid less money next year than Los Angeles backup catcher Austin Barnes ($3.5 million). But even with his $2 million salary, Ohtani will be highest-earning player in baseball because of his off-the-field endorsements. Ohtani is expected to earn $50 million off the field next season, up from $40 million this year, according to sources familiar with his deals. His long-term deal with New Balance, for instance, will expand to include a new line of branded shoes and apparel with his name.
“Nobody at the top of their sport has ever done anything like this,” Balelo says about how Ohtani came up with the idea of deferring the bulk of his salary. “No way. When he brought it up, I looked into it. Nothing comes close.”
The previous record deferral in baseball was by Scherzer, who deferred 50% of his $210 million contract signed in 2015 with the Nationals.
“There have been a few at 20%, maybe 30%, but nothing like this,” Balelo says. “I’ve been with him for seven years. At this point I am not surprised by what he does because he is always going to go down a path no one else takes.”
Balelo says Ohtani’s trust in mutual commitment dates to 2013, when Hideki Kuriyama, the manager of the Nippon Ham Fighters, convinced him to “walk his own path” by first establishing himself as an elite pitcher and hitter in Japan rather than leaving out of high school for an MLB team. (The Dodgers scouted him heavily then and thought they would sign him.) Kuriyama promised Ohtani that the Fighters would honor his dream to leave for MLB once he thought he was ready to make the jump. They did so after the 2017 season, when Ohtani at age 23 signed with the Angels for a $2.3 million bonus and a minor league contract. Even then he broke convention. He probably cost himself $200 million or more by not waiting until he was 25, when international free agents are unrestricted.
Now Ohtani is walking his own path again, taking a $2 million annual salary and deferring $68 million a year. At one point in negotiations, according to a Dodgers source, Ohtani even remarked how the money that was in play “was laughable to even think about.”
To assure the Dodgers honor his gesture of unselfishness, Ohtani asked for language in his contract that assures the club will make good on its promise to use the savings he created to build a competitive team around him, according to one source familiar with those negotiations. Balelo would not discuss any such specific language in the contract.
“There is no player like him,” Balelo says, “and so it is fitting there is no contract like this one.”