When Shohei Ohtani signed his record-setting contract on Saturday, the phrase “unprecedented deferrals” was at the forefront of the conversation. Not knowing how much “unprecedented” came out to in dollars and cents, we ran with a projection from Jon Becker based on the assumption that Ohtani would receive $400 million of his $700 million contract in deferred money.

At the time, that seemed like such a huge figure I struggled to believe it, even in the face of credible reports that at least half of Ohtani’s salary would be deferred. Surely it wasn’t possible to defer $400 million. But no, apparently the truth is even more incredible: Ohtani is taking a base salary of just $2 million a year, leaving $68 million to paid out, without interest, in each of the first 10 years after the contract ends.

Having that much deferred money reduces the value of the contract to Ohtani — he’s basically giving the Dodgers an interest-free loan for more than 97% of his salary over the next decade. The contract is literally worth $700 million, but after taking inflation and depreciation into account, it’s practically worth only $460.1 million:

FINAL, COMPLETELY CORRECT MATH:

•The discount rate is 4.43%
•The present value of the $68M is $44,081,476.50
•This makes the AAV of each year $46,081,476.50 (the above + $2M, which isn't discounted)
•The present value of the contract in total is $460,814,764.97

— Jon Becker (@jonbecker_) December 11, 2023

So what does this mean?

Most important, it reduces Ohtani’s CBT hit from $70 million a season to just over $46 million, which isn’t some accounting loophole the Dodgers figured out. Paying Ohtani that money later genuinely reduces what this contract is worth to the player. And this isn’t a unique situation; Mookie Betts is deferring about a third of his salary as well, and as a result, his tax number is $25.6 million on a contract with a stated AAV of $30.4 million. Ohtani’s deal plays by the same rules, just in a more extreme fashion. (Jon wrote an explainer on the mechanics of the deferrals that can be found here.)

Spreading out the payments like this theoretically allows the Dodgers to free up cash up front to sign other free agents, with Yoshinobu Yamamoto being the obvious candidate to eat up the money Ohtani is leaving on the table.

On one hand, it’s very, very easy to understand why Ohtani would want to make it painless for the Dodgers to build the strongest supporting cast they can. Ohtani spent the first six years of his career on an Angels team that made the young LeBron’s Cleveland Cavaliers look like the 1970 Brazilian World Cup squad, in what must be a record for the most sports invoked in a single simile. It’s well known that the Angels didn’t make the playoffs in six years with Ohtani and Mike Trout; we don’t talk enough about the fact that they didn’t even finish over .500 in that span, and haven’t won 80 games since Ohtani’s rookie year.

Ohtani can also afford to let his money sit for a while. He makes tens of millions of dollars a year in marketing and endorsement money; it’s likely that a greater percentage of his income is derived from pitching commercial products than pitching baseballs.

But whenever a star takes less money for the good of the team, it’s good to ask why it’s the player’s job to subsidize the rest of the roster and not the owner’s. Particularly on a team like the Dodgers in a league without a salary cap. If I were loaning my employer $680 million interest-free, I’d want concrete assurances that the savings would go toward materially improving the company. In Ohtani’s case, that means player salaries. Because with this much money deferred, the Dodgers are apparently still below the first tax apron, even with Betts and Freddie Freeman also on the roster.

No billionaire is altruistic enough to trust with a handshake deal; if they were, they wouldn’t have become billionaires in the first place. I hope that Ohtani, who apparently came up with this whole scheme himself, understands that. If not, surely his representatives at CAA do. It’s just something to keep in mind if the Dodgers decide to flirt with the Wild Card so they can reset their tax penalties again at some point during Ohtani’s tenure, while $680 million of Ohtani’s money is sitting in Guggenheim’s checking account.

The other intriguing aspect of Ohtani’s contract structure, apart from the luxury tax implications, is that the Dodgers now have what is essentially a debt obligation to Ohtani for two thirds of a billion dollars. Even for a team as rich as the Dodgers, $680 million is a huge chunk of the franchise’s value, which raises the possibility that once Ohtani retires, he could settle the difference in exchange for an ownership stake in the team.

This is how Mario Lemieux ended up owning the Pittsburgh Penguins. The franchise icon signed a seven-year, $42 million contract with the Penguins in 1992, just as the NHL’s fortunes were booming. Over the next five years, the NHL missed half a season with the first of its now-traditional lockouts, and the Penguins were on the brink of insolvency. Lemieux, not wanting to push the team over the edge, kept letting the Penguins defer his salary, but eventually the team defaulted on his contract with more than $26 million left to be paid out.

As such, when the Penguins filed for bankruptcy, Lemieux was one of their largest creditors. He had the debt converted into a piece of the team, and put together a group of investors to buy the team and settle its debts. Twenty-two years and three Stanley Cups later, he sold his majority stake for $350 million. (As a Philadelphia Flyers fan, I wake up every morning and curse Lemieux for not allowing the Penguins to go out of business. Perhaps, 30 years from now, as-yet-unborn Giants fans will feel the same about Ohtani.)

Will the Dodgers go bankrupt before Ohtani’s deal is up? No, surely not. That’d be preposterous. Unthinkable. The Dodgers would never, ever go bankrupt. But it’s a fun hypothetical to entertain.

Deferring this much money, knocking a $700 million contract to a $46 million tax number, laying the groundwork for Ohtani to hold an ownership stake, all of this feels shady somehow. It isn’t, really, but this is a good opportunity for us to re-evaluate how we look at contracts.

Because none of this would feel icky if the details of the deferrals had come out along with the headline number. This isn’t really a $700 million contract, it’s a $460 million contract, and should be considered as such. With Betts, or any number of big Washington Nationals contracts with lots of deferred money, we talk about the sticker price of the deal. But if deferrals cause these contracts to depreciate so badly it has a significant effect on the luxury tax, perhaps we’d be better off using the adjusted figure.

Looking at this deal as a 10-year, $460 million contract, it seems like even more of a bargain for the Dodgers, who would be lucky to have Ohtani at any price. It’s the biggest contract in the sport, even adjusted for all the accounting voodoo, but not by as much as originally thought.

That leaves me somewhat concerned about the future of the top end of the free agent market. The best players set an informal ceiling on what teams are willing to offer free agents and, by extension, pre-free agency extension candidates. When Trout and Betts re-signed before hitting free agency, it damaged the free agent market at least a little; if the two best players in baseball make X and Y, why should a team offer another player more? For that reason, some players — Max Scherzer and J.T. Realmuto are two recent examples — make a point to hit free agency and max out in order to reset the market.

Does 10 years and $460 million for Ohtani really reset the market that much? I don’t know.

There are two reasons not to panic. First, Juan Soto is going to be a free agent in 11 months. Ohtani is a unique player with unique and frequently inscrutable desires, who led a unique free agent process that resulted in a unique contract. Soto is an MVP-caliber outfielder with Scott Boras as his agent. There will be nothing mysterious and unprecedented about his contract, except perhaps the dollar amount involved.

Second, Ohtani didn’t actually sign a $460 million contract, he signed a $700 million contract. Deferrals be damned, Boras and every other player agent is going to argue that $700 million is the new top of market. And as a result, they’ll probably have more success in getting their clients paid than if Ohtani got less money on a more normal time frame. This is why, when the issue of limiting deferrals came up in the last CBA negotiation, it was the players who objected, not the owners.

It’s possible that Ohtani’s contract will be used as a model to defer huge chunks of salary for other players, but I think that’s unlikely. First, putting that much money into a future debt obligation makes sense for a rich team with comparatively stable ownership, but not every ownership group is going to want to have that liability on the books, particularly if a sale is possible in the next decade.

Second, most ballplayers don’t make as much as Ohtani does in endorsements. They wouldn’t defer this much money because they, like the song says, need cash now.

Moreover, who would you give that money to? After Soto, the top of the free agent market is probably going to calm down. Taking position players who played last season at age 25 or younger, only two of the top 15 are under team control for less than four more years: Soto and Bo Bichette. Of the other 13, seven have already signed long-term contracts with their current clubs. And that’s far enough down the pecking order that we’re waiting for the likes of Bryson Stott and William Contreras to hit free agency in November 2027.

We already have a good idea of where guys like Bichette, Stott, and Contreras fit in the free agent hierarchy, because players like them hit the market every year. Not Soto, and certainly not Ohtani, which is why I’d be hesitant to use Ohtani’s situation as a precedent worth fear-mongering over.

And ultimately, if deferring that much money is what Ohtani wants, and it’s allowed because the MLBPA asked not to have it regulated, that undermines the case that this is a pressing labor issue.

After so much excitement over the stated value of the deal, it’s definitely a little disappointing to find out that the truth is more mundane. But it turns out nothing about Ohtani can be normal, not even his contract structure.

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