An Overview of Shohei Ohtani's Agreement with the Dodgers

SSP/DH Shohei Ohtani; Photo via Jeffrey Hayes

The sports world was lit on fire in December of 2023, a couple of days after Shohei Ohtani signed a 10-year, $700 million contract with the Los Angeles Dodgers on December 9th. Ohtani was considered to be one of the biggest free agents in sports ever. His signing, and the days leading up to it, gathered the attention of the media from around the world. There were rumors that an agreement with the Toronto Blue Jays had come to fruition and the subsequent retraction of those rumors when it became apparent they were not true. The bombshell agreement with the Dodgers sent sports fans into a frenzy, and for good reason. Shohei’s record-setting contract contains the highest monetary guarantee in North American sports history. 

On December 11, 2023, the Ohtani contract broke the internet for the second time. It was announced that Ohtani is deferring $680 million of his contract to be paid out to him in a 10-year span after his playing career is over with the Dodgers. This means that, for the next 10 years, Ohtani will make $2 million per season. The 10 years after that, he will make $68 million a year. This also lowers the number that this contract would’ve cost the Dodgers in luxury-tax money from $70 million a year to $46 million. Ohtani cares so much about winning that he elected to make $68 million less than his average annual value for the Dodgers to construct a better lineup around him. 

This deferral is the aspect that truly changes sports contracts from here on out. Baseball fans, and perhaps even football fans, can be sure that players signed in free agency or through contract extensions will think about this absurdly constructed contract and the future of their teams during negotiations. In fact, if a superstar player doesn’t defer a large chunk of their contract’s money for their team to win, they will always be compared to Ohtani and what he did with his contract. This is what it means to change sports, and Shohei’s agreement has shown the MLB that there are alternatives to traditional high AAV contracts for star players. 

As far as MLB free agency goes, the immense pool of talent available in the upcoming years will always consider deferring a large part of their contracts to prioritize winning. Especially with Ohtani’s widespread influence, free agents from all parts of the world will certainly change the way that they think about signing mega contracts.

There is something to be said about what the Dodgers will look like once they have to start committing $68 million per year to Ohtani. What kind of impact will this type of deferral have on the Dodgers’ ability to compete in 10 years? This is something that will reveal itself in time. It is a very nice problem to have for the Dodgers, as they can focus on becoming as dominant as possible for the next decade of baseball. 

A counter to the point above is that because of the extra revenue Ohtani will bring to the Dodgers for years to come, they don’t have to worry about the looming payments of $68 million in the future. Their overall value will have risen so much after signing Ohtani that it will offset the financial strain the expensive 10 years will put on the organization. Another point to consider is the constantly rising luxury tax threshold for MLB teams. As this number rises, the payments made to Ohtani starting in 2034 will have much less of an impact on the overall team’s spending, as these payments will account for less of a percentage of the luxury tax. 

Ohtani has become a magnet for free agents, something that the Dodgers are more than happy with after signing him. However, Ohtani has to be the only one on this type of contract in the organization. This fact goes for every franchise from now on: If a team signs a player to a contract with an extreme deferral, they have to be the only player on a deal like that. If too much deferred money stacks up, it can really hinder the ability to construct a competitive team down the road. 

With the way that Japanese talent is filtered into the MLB, it can certainly be noted how much Ohtani’s being on the Dodgers will affect the team’s ability to attract Japanese free agents. As for the 2023 offseason, Yoshinobu Yamamoto has yet to sign with an MLB team. Once he takes into consideration what the Dodgers are building, paired with the fact Yamamoto would be teammates with Ohtani, it presents a very appealing package to the talented pitcher. This type of thought process will only continue for free agents, foreign and domestic alike. 

It appears as if the Los Angeles Dodgers have cracked the code when it comes to bringing MVP-level talent into their organization. Mookie Betts: Dodger. Freddie Freeman: Dodger. Clayton Kershaw: Homegrown, but Dodger nonetheless. Shohei Ohtani becomes the 4th player on their active roster to have won an MVP. Many believe that Ohtani’s MVP run is just getting started, too. 

When healthy, it is hard to name a more talented player in the league than Ohtani. Shohei will not pitch in the 2024 MLB season, so the Dodgers still have some holes to fill in their offseason. It is crazy that, even after signing Ohtani, there are still holes to fill. The Dodgers’ weak pitching reared its head in the 2023 postseason where the team failed to win even one game. This pattern of early playoff exits for the Dodgers frustrated the team to the point where they signed the most talented player in baseball in a way that allowed them to continue to construct their super team with a (real) World Series win in their sights. 

This contract comes with its risks., but the positives far outweigh the potential negatives. If Ohtani’s ability to produce as a two-way player were to drop off, this money would have been used inefficiently. Also, because of Ohtani’s injury history, another significant injury would shed a negative light on his contract. However, the positives far outweigh the potential negatives. The Dodgers will commit the most money to Ohtani once he is off the field. With the Dodgers being so dominant in the regular season, seeing Ohtani in a playoff setting is almost a guarantee in 2024. However, if the Dodgers do not win a single world title in the 10 years they have Ohtani, they will have been no better than the Angels, who wasted Ohtani’s talents by not making the playoffs one time.

"Shohei Ohtani" via Jeffrey Hayes licensed under CC BY 2.0