Shohei Ohtani contract deferrals with Dodgers: NEW MLB trend?

Chapters:
0:00 ANOTHER Ohtani contract surprise!
1:25 Deferral and MLB Tax amounts
3:10 How much more will the Dodgers spend?
4:48 The post-Ohtani years
6:52 $48K PER INNING!
7:45 Other contract details
9:40 Final conclusion: Can't judge this until 2033
11:22 Can other MLB teams copy this?
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#mlb #baseball #dodgers

[@Dodgers-sw2uk]

This is the most genius contract ever. After it has all been paid out in 20 years the total he will get will be over 1 billion dollars. And he did this in a way that doesn’t hurt the teams ability to spend. It’s incredible. The reason it is going to be over a billion is because he is getting around 4% interest on the deferrals. So at the end of every year the Dodgers will put 68 million dollars into an investment fund for 10 years. At the end of those 10 years the 68 million plus the collection of interest it made at 4% will go to Ohtani. The interest will be slightly over 30 million. So he will get about 100 million every year for 10 years. And the Dodgers will only have to pay 68 million of it, the investment fund pays the rest. And it only counts as 460 million against the salary cap. Ohtani must have a 200 IQ lol. Dodgers win, Ohtani wins, investors win,. Everyone wins in a deal worth 1 billion? Crazy

[@long-time-first-time]

I thought he wasn't charging interest on those deferrals. $68 per year million straight up.

[@Bk6346]

He gets $2 million a year for the next 10 years. And then he gets paid $68 million a year from 2034 to 2043. $68 million twenty years from now is worth less $68 million today. He is willing to do this because he earns more than $50 million a year in endorsements.

[@davidliskey3553]

Plus he makes soooo much money from endorsements in Japan

[@mirikaku5811]

Watch the Dan Patrick’s interview with Tom Verducci, the only MLB journalist to have interviewed the Dodgers executives who met with Ohtani and their discussion and background to the contract, also Nez Balelo. You can also read his article in SI of this. People are so cynical that they will always find some ulterior motive, while Ohtani is uniquely sincere which also blew the Dodgers executives.

[@justsomeobservations44]

The LA Times is now reporting that the deferred money still has to be funded way in advance of Ohtani actually receiving those future payments. It says for each season the deferred money has to be placed in a holding fund no later than 2 years later (so the $68 mil for 2024 has to be funded by 2026 and so on..). Makes a lot more sense now. At first I thought this would severely injure the Dodgers from 2034-2043 but all of the money will actually be funded before then.

[@robbyg8104]

It's now come out that the final proposal the Giants made to Shohei Ohtani was similar to the Dodgers offer. According to president of baseball operations Farhan Zaidi, their proposed deal for Ohtani was "very comparable if not identical" to the record $700 million, 10-year contract. So, it seems for Ohtani, he was a little more comfortable with the Dodgers, because it meant he could stay in Southern California.

[@user-yo6ji2er1u]

I'm not surprised really...This contract can only be agreed upon by such a man with a rare character such as Shohei. While everyone is focused on MONEY, Shohei has a special spiritual reasoning within him that allowed this. I believe the Dodgers will be blessed beyond their wildest expectations due to Shohei's selfless decision. Be prepared for GREAT things from this man.

[@trer24]

I read a bunch of articles on this CBT and luxury tax stuff all over the internet and it was all confusing. Thanks for explaining this to simpletons like me.

[@VoteAdnanShahab]

The fact that Brodie made this video without using the term "net present value" is astounding to me. Along with the contribution/possible hit to the luxury tax, that would be the proper way to assess the true cost of a contract. In addition to giving the team more flexibility to acquire other players over the next decade, the extreme deferred payments significantly reduces the true cost to the Dodgers.

[@jorgejohnson451]

Which you would value as…?

[@kiroolioneaver8532]

Yep inflation will naturally decrease the amount his deferred salary is worth when the Dodgers finally get around to paying it lol

[@user-md4md8uv2g]

Dodgers Est. tax payroll is $218 MM after arbitration estimates according to spotrac... not sure where the $159.9 comes from

[@brodiebrazil]

Good catch. I also used sportrac but was looking at payroll commitments not tax allocations. Looks like 20 left to spend before CBT vs almost 70. my mistake.

[@bobsyoruncle4583]

Nobody in MLB is going follow Ohtani's example of deferring 97% of his salary. Estimates are that over the life of his contract he's losing 240mil in investment capital without even taking into account currency devaluation - 70mil 20 years from now is likely to be worth half or less what it is now. The payout structure guarantees that the actual cost of his contract will be far less than 700mil in today's dollars. Even if he wasn't making 40mil/yr off the field he probably would have made a similar arrangement because more than money he wants to win.

[@markwakefield6440]

For Ohtani’s sake, I hope US inflation rates stay low, so his deferred earnings really are worth $700 million.

[@Bk6346]

I am no financial expert but I think the deferred payments favor the Dodgers and not Ohtani. If he takes $70 million in year 1 and invests the money at 3% return that’s $94 million by year 11. Instead he gets $68 million in year 11. If he is a shrewd investor then the loss is even greater.

[@HectorHustles]

Brodie I was listening to your final thoughts and I heard a error you said 2023 instead of 2033 this is going to start having teams thinking in having players take less now and more later I’m surprised the players association didn’t balk at this after all Bobby Bonilla getting paid 1.1 million from the Mets until 2035.

[@brodiebrazil]

my bad if i slipped!

[@Dodgers-sw2uk]

It won’t be an issue because most players won’t be willing to do what Ohtani did, they don’t bring in 50 million a year in endorsements like he does, Harper only makes 7 million and Judge 5 million.. A big reason why the Dodgers have had issues signing players over the last 10 years is because they always request those players to defer around 25%. Mookie did it because the COVID economy scared him into thinking he had to take the deal. And Freeman didn’t want to play for the Rays so he took the deferrals. Most players refuse. Ohtani is just a rare breed

[@seanmoore9713]

What I don't understand is if the deferred money is part of their salary cap when it comes time to pay it.

[@MountainFisher]

$46 million goes toward the tax, he showed it.

[@m1ke896]

MLB needs a salary cap so freaking bad.

[@zellazoom6238]

Good luck getting Soto on a team friendly deal lol

[@jmr2436]

Not sure it will start a trend. You’ll need a willing partner with the player to agree to do so. I venture to say most players will not. No one is making the kind of coin Shohei is off the field to offset it.

[@Joejoe88468]

Hey Brodie, what happen with “schools over stadiums”? Haven’t heard or seen anything regarding this topic.

[@brodiebrazil]

appealing their lawsuit, (will be expedited) and also moving forward with new effort to collect signatures

[@Joejoe88468]

@@brodiebrazil ah okay, thanks Brodie 🙏🏽

[@cryptointuition5052]

Unlike many players, Ohtani has an advantage. He makes 40 million a year on just endorsements alone, possibly more in some of those years. 40× 10 is still 400 million. It was Shohei's idea. He makes enough on endorsements alone. And, that 700 million is just going to his savings. The Dodgers will get sponsorships from Japanese companies, which would more than pay for that 700 million he would get after the contract is due.

[@markeschen]

I wouldn't be completely surprised if the state legislature were to amend the jock tax to include deferred income in the current year taxable amount.

[@pringlized]

This is a Bobby Bonilla contract of steroids

[@davidcollison8973]

Nice retirement plan!

[@tatsuyaarai6029]

Everyone talks about CBT. What about the actual tax implication? I know rich people have the privilege to lower/defer/avoid paying tax using various different schemes. The amount of tax Ohtani is paying is way more than what I would ever be able to pay. But kinda hand wavy that I hope I can contribute more 401K instead of paying tax through W-2...

[@JL-rd5gn]

at least 8 players (Scherzer, Strasburg, Lindor, deGrom, Yelich, Freeman, Sale, Cobb) currently have deferred contracts. the $700 million over 20 years is equivalent to getting $469 million over 10 years so the dodgers will pay $46 million/ year in CBT for ohtani.

[@joshuawheelock8874]

What discount rate and inflation rate did you use to get that #?

[@kenmmcnatt]

$8,001.83 per OUT...assuming full 9 inning games with both teams getting their full 27 outs. ($8,230.45 assuming an average of 52.5 outs per regular game)

[@GizmoBeach]

Yankees new payroll: Less than zero, players will pay NY to play there. Then in 5 to 10 years, the Yanks will pay out roughly 5 billion in deferred salaries. Chump change for 87 wins though, am I right?

[@armandoochoa2383]

It’s a deal to help teams, more so then player , only players that want to win will do that, also all of them just want money

[@broman74dude95]

All this - if this leads to 2 championships during those 10 years - it’s well worth it. The Dodgers is valued at $4.8B before Ohtani. I’m sure they went up $1-2B in value once he signed. By 2033, the Dodgers would be worth $8.0B according to ESPN and Forbes. Listened to Mason & Ireland (top radio in LA), they had an economist from Japan says that Ohtani generates over $437M per year economic impact worth to Dodgers.

[@jorgejohnson451]

Unless that economist FROM JAPAN has seen the Dodgers books, that’s likely a bit hyperbolic.

[@wolfstriker3992]

But if the dodgers hold true like they always do and don't make it to a world series and win it in 5 years. This deal is just going to be bad which I predict it will be given the dodgers not making it every season. And they have signed high profile players before not to the extent of 700 million and even with those players dodgers never made it to the world series

[@alexhue752]

I am internet lawyer, and this contract has lots of holes. I would never choose defer payment. Dodgers can come up with millions of reasons not to pay end the contract, his code of conduct, physical condition, bad performance, etc. Not smart.

[@kr6955]

Not likely many athletes will want to defer

[@jacked6]

Didn't he just have a major surgery recently? Why pay for his past. He's heading into 30s soon.

[@laartwork]

Yes about to hit his peak. Also guess the day job of the Doc who did his surgery.

[@tomandrews2887]

70 million a year is really about 40m per year for one the field production. The rest is essentially like paying Taylor Swift 30 million a year to endorse their product. And it’s definitely worth it.

[@davidhalcon5594]

Look for him to be the pipeline to the Japanese players, and at the end of the 10th year when it’s time tot pay up, he’ll be offered part ownership.

[@KittyPurrfect100]

Worst than Bobby Bonilla contract with Mets

[@john.s7559]

Brodie you didn't mentioned every team ohtani had a meeting with got offended same type of deal this wasn't just for the dodgers.

[@Epistaxiss]

I'm done with MLB. 1st Oakland is screwed over by mannford and MLB owners and now this shits happening now with deferred 90% of his contract.

[@Not_a_smart_man]

I can’t believe fisher didn’t bite on this for ohtani for a Las Vegas star. 2 million a year for 10 years, then 1 million a year for 680 years

[@QuintenRogers-nf6fb]

That's assuming Fisher is this smart. 1. Fisher doesn't have the money 2. Ohtani knows he didn't/doesn't have the money. That's where the conversation ended

[@HHSGDFootballJPD]

I think the conversation ended when Ohtani asked where they were playing in 2025 and Fisher just smiled...

[@adamhaak1470]

I totally agree, Brodie!! If the Dodgers continue their trend of 100 win seasons and first round playoff exits for the next 10 years, then this contract will definitely be shed in a very different light in 2033.

[@justinllamas1]

very sure they’re gonna invest in pitching. the last 2 years they haven’t had the frontline starters in the playoffs needed to go far. they faced teams with superior pitching each time.

[@ForTheLongCon]

68m yrs will not be part of the cbt. All is accounted for in the 10 years.

[@ComradeArthur]

One data point is not a trend.

[@hortanokilli7608]

The Dodgers have done so well dealing with pressure in the playoffs the past three decades. This won't add any more pressure to win at all, they should do just fine......

[@brodiebrazil]

well stated. pressure just got cranked way up for 10 straight years.

[@hirokohasegawa8503]

Shohei will be one of Dodgers owner 10 yers time.

[@wolfstriker3992]

But won't that violate california tax code

[@jorgejohnson451]

This is a good point. Will Ohtani be living in CA after 10 years when he is actually getting paid?

[@wolfstriker3992]

@jorgejohnson451 I wonder the same thing

[@garymoisan5899]

It will NOT be a trend, only because this player makes about $50 million a year in outside income.

[@mattmarino8727]

Looking at the financing, it is relevant to mortgaging for their future and Insurance Bonding Performance and Payment clauses. I'm also sure Ohtani has some sort on insurances based on possible disability and ultimately death. As for his tax deferred options, a very well funded life insurance and annuities will be a basis for his ultimate financial protection. The once great sports owner, Jerry Colangelo did something similar with mortgaging players contracts and receiving extended salaries long after the player departed. We shall see how the American and International economies will be producing to support this discretionary income segment of the entertainment industry. Buckle up and in.

[@joec.5009]

most players are greedy and they want money now. this will not be a trend. don't be naive.

[@johngibson8636]

He’s deferring the bulk of the salary as a tax saving, to take it when he is no longer a California resident or subject to performer taxes in other jurisdictions.

[@robertrussell2166]

Unfortunately most of today’s young players want a huge payday and want the cash now. It takes a special person like Ohtani to put team first. And let’s face it, Ohtani will get his money in side deals.

[@mics605]

First of all, he doesn’t even think much about money because he wants to concentrate on his play! Secondly. if the team gets stronger because of the money flexibility, the value of Ohtani in marketing will increase anyways.

[@oiler62]

He has over $40 million a year in endorsements, so this works for him but maybe not for others.

[@ddddirge]

Probably only works with the Tier-1 players that's also probably near the end of their career... (Probably retired after the contract ends) 🤔🤔🤔

[@HeavyC78]

Happy Shohei day! The new Bobby Bo day. 😂😂

[@nomercyinc6783]

people who think being rich makes them important are idiots. ohtani wants to win, he doesnt want to get paid immediately. more players need to be like ohtani, nobody on earth is worth a million dollars let alone hundreds of millions. athletes dont save lives on any field or court

[@revelationdefy3345]

nah - its the best player OF ALL TIME. u pay whatever it takes, especially if youre the dodgers and can afford it.

[@Thurmanatr16]

lol crackhead take, not remotely close to the best player of all time

[@smxwing]

Wiuld he not get such a big tax hit if he left california after the contract?

[@RunForPeace-hk1cu]

Maybe the owners are CHEAP and they just want to pocket all The money 😂😂😂😂

[@__greg__]

I'm not mad about Ohtani getting his bag, he definitely deserves it. But what's the point of the CBT if only mega markets like LA can sign literally the greatest player to a decade and then still have room to sign multiple other all-stars?

[@michaelbaucom4019]

Deferrals---see " Bobby Bonilla "...as Mets fans will tell you...the Mets are still paying Bonilla, a player from the late 1980s/early 1990s

[@vincentfucci5622]

This is a terrible idea I wouldn’t want to wait for my money. I mean it makes sense but, with inflation happening every year your technically getting paid less in the long run.

[@paulduffy8774]

racket racket the owner of the mets should be upset with this he lost his pants and shirt last year

[@paulduffy8774]

i am done with baseball going to pickle ball

[@timmccrory7630]

No to the Dodgers. Go A’s go Astros

[@RunForPeace-hk1cu]

Because who’s gonna defer 98% of their salary 😂😂😂😂

[@jorgejohnson451]

Maybe someone who doesn’t want to pay the state taxes?

[@Mr.Ed_Wayner]

In 10 years Ohtani retires and moves to Nevada and starts collecting deferred money, he skips CA 13%state tax. Will CA sue and say he earned his deferred money while living in CA? Ohtani will pick up the mantle from Bobby Bonilla. Shohei Ohtani Day.

[@mrmoose6619]

Hopefully not in the same way (for his sake) since July 1 is known by many Mets fans as Bobby BOO day.

[@Mr.Ed_Wayner]

It will be “SHO-me-the-money Day

[@paulduffy8774]

this should not be aloud going to ruin baseball what a racket conflict of interest

[@34thncrenshaw]

wish the giants got him, this is BS!

[@brodiebrazil]

i'm not sure, for that price, to be honest

[@34thncrenshaw]

yeah that is a insane amount of money@@brodiebrazil

[@210gremlin]

Giants didn’t stand a chance

[@34thncrenshaw]

they been blowing it@@210gremlin

[@wolfstriker3992]

@brodiebrazil and plus it would look bad on Zadi Giants fan can get brutal if a player doesn't pan out especially a 700 million dollar one. Giants will be fine we have the tendency of creating stars and Zadi has already picked up great players already that flew under the radar for our farm system

[@paulduffy8774]

if he dies they wont have to pay him

[@paulduffy8774]

baseball is ruined for ever poor blue jays