Shohei OhtaniThe landmark deal with the Dodgers has sparked endless discussion, debate and criticism due to the unprecedented scope of deferrals included in it, but that's far from the only intriguing aspect of the 10-year deal.
Sports Illustrated's Tom Verducci reports that the contract contains language “that ensures the club follows through on its promise to use the savings it has created to build a competitive team around it,” Ohtani's agent, Nez Balelo of CAA Sports, tells Verducci said Ohtani asked him early in the free agent process if it was possible to defer most or all of his salary to give his club more payroll flexibility today.
As far as we at MLBTR can tell, this is the first clause of its kind in any player contract. Further details of the clause and the manner in which it will be enforced remain unclear. The Dodgers reported a trade Tyler Glasnow And Manuel Margotplus her recent meeting with Yoshinobu Yamamotohowever, seem to signal that the team is actually taking steps to meet this condition.
The luxury tax burden associated with Ohtani's contract is $46.06 million, according to Verducci, which is roughly in line with expectations at the start of his free agency. But the way the contract was announced has drawn significant criticism. It's fair to wonder whether if the deal had been announced as a 10-year, $460 million deferral plus interest, it would have sparked the same backlash as the original announcement of a $700 million deal …which was later reported to be 97% deferred.
The initial $700 million figure looks good in a recruiting pitch to future CAA clients, but the league's approximate net present value valuation of $460 million is a whole different story. The MLBPA's ratings are still a bit lower; Jon Heyman of the New York Post Tweets that the union values the contract at $437,830,563, but the luxury tax impact will be based on the league's calculations.
There has been a lot of talk about the contract as a way to exploit the luxury tax system, although the $46.06 million CBT hit is consistent with the league's valuation of the deal. If anything, the contract is less about avoiding the luxury tax and more about artificially lowering the team's actual payroll from 2024 to 2033.
The unprecedented contract language doesn’t stop with the non-compete clause. Ken Rosenthal of The Athletic Reports that the contract states: “If there is a specific change in the Dodger personnel, the player may withdraw from the contract at the end of the season in which the change occurs.”
The contract does not identify the person(s) who could cause Ohtani to withdraw from the contract. Given the enormous amount of deferred funds – Ohtani will receive just $2 million per year from 2024 to 2033, with the remaining $680 million paid from 2034 to 2043 – it is hard to imagine Ohtani becoming any time, unless there is wording that allows this. Part of these deferrals should be paid out in connection with the opt-out.
It's technically feasible that if Ohtani can return to the mound in 2025, he could re-establish himself as a viable starter and have even greater earning power than the net present value of his current contract of approximately $460 million. However, if he was only paid about 1-2% of the total guarantee at the time of a theoretical opt-out, it would still be difficult to walk away from the deal.
On the other hand, Ohtani has shown with his original move to MLB (and to a lesser extent with the high-profile nature of his current moves) that money is not necessarily a top priority in any contract. He also reportedly earns up to $50 million annually from endorsement deals and other marketing opportunities, so the idea that he would give up a massive chunk of his record deal to pursue a return to free agency isn't as far-fetched as it is it would be for many other players too.
News of the unprecedented (as we know it) release clause in Ohtani's contract will generate plenty of speculation. Fans on social media have already wondered about ownership changes, front office changes, management changes, or maybe even star teammates like us moving on Mookie Betts And Freddie Freeman. However, because the contract itself does not clearly spell out the nature of the change, there is no way to know the specific type of personnel change that would trigger this right for Ohtani. The clause is further evidence of the lengths the Dodgers — and presumably other teams — were willing to go to secure the generational talents of the two-way star.
Farhan Zaidi, the Giants' president of baseball operations, has previously indicated that the terms of Ohtani's contract with the Dodgers were suggested by Ohtani and his agents and that the Giants felt comfortable fulfilling them effectively. If Ohtani's camp included the current savings investment and conditional release clause provisions in the terms with the Dodgers, those factors were likely also present in discussions with the Giants, Blue Jays and other finalists for his services.