Japanese-born baseball star Shohei Ohtani’s story of how he became one of the biggest names in Major League Baseball is a real inspiration. He is one of a kind. His ability to pitch and hit well has drawn people’s attention and made teams shift their approaches, especially regarding salary.
Importance of Ohtani’s Signing
In December 2023, Ohtani made sports history by signing a groundbreaking contract worth $700 million with the Los Angeles Dodgers, which was hailed as the biggest deal ever seen in the world of professional sports up to that point. It wasn’t the size of the deal that made the headlines; it was how the contract was structured. Ohtani agreed to $68 million per year in deferred payment, which would be paid after the contract’s end, from 2034 to 2043. This, in turn, gives the Dodgers a lot of financial leeway in the short term and a significant economic burden in the future.
Ohtani’s effect on the deal was evident right after it happened, on the field and off the strip. According to James Briscoe from Card Player, various sportsbooks offer different odds and betting types for the MLB and a wide range of sports betting markets. In addition to expanding their betting experience with great odds and exciting bonuses, the Ohtani effect made bets much more attractive. The Dodgers’ consistent success and big-name lineup made them a popular choice for bettors, with Ohtani’s signing taking it to another level.
The impact on betting odds was immediate. After the signing, the Dodgers’ World Series odds jumped to +550, putting them ahead of the Atlanta Braves (+700) and the New York Yankees (+900). This shift reflects the betting market’s recognition of Ohtani’s dual-threat capabilities as both a pitcher and hitter and the substantial impact his presence brings to the team’s championship aspirations.
How the Sporting World Reacted to Ohtani’s Signing
The reactions to Ohtani’s signing were quick and intense. Hours after the announcement, social media was flooded with responses from fans, analysts, and fellow players. Mookie Betts and Freddie Freeman were seen publicly welcoming Ohtani, while rival teams and players conceded that the Dodgers had just become even more threatening.
Business analysts also discussed the financial details of the deal. Forbes called the contract a ‘financial masterstroke’ praising the Dodgers for signing the biggest name in baseball while keeping the short-term payroll flexibility. Internationally, the response was massive.
Japanese media treated Ohtani’s Dodgers jersey like a national event, and NHK provided wall-to-wall coverage. The betting markets responded as well, with one sportsbook reporting that Ohtani’s MVP odds jumped to +350, reflecting the growing confidence in his ability to thrive in the Dodgers’ lineup and the week after the deal, betting props on Ohtani’s performance, like home run totals and MVP odds, spiked by over 40%.
Details of the Dodgers Contract
On December 11, 2023, Shohei Ohtani signed a 10-year, $700 million contract with the Dodgers. Although the size of the deal was significant, the structure of the contract was what made it most notable. Ohtani agreed to $68 million annually from 2024 through 2033, with payments to begin in 2034 and run through 2043. This means that Ohtani will receive effectively $2 million per year during the actual contract period, providing the Dodgers with financial relief.
This type of deferral strategy is unusual for such an enormous deal. Almost all MLB contracts are set up so that most funds are paid during the contract period. This could lead to payroll issues and throw teams onto the competitive balance tax (CBT) threshold. In return for deferring the majority of Ohtani’s salary, the Dodgers reduced their annual CBT payroll hit to approximately $46 million per year. This manageable number allows the team to stay under a particular tax threshold, avoiding heavy penalties.
Just a few days after Ohtani signed with the team, the Dodgers followed that up by signing Japanese pitcher Yoshinobu Yamamoto. He signed a 12-year, $325 million contract, including a $50.625 million posting fee to his former club, the Orix Buffaloes. In January 2024, they followed that up by signing outfielder Teoscar Hernández to a one-year, $23.5 million deal. Those moves might have been impossible without the payroll flexibility that Ohtani’s deferrals provided.
However, the contract also has its risks over the long term. After the contract is up, the Dodgers will owe Ohtani nearly $680 million, which could hinder the team’s ability to spend on free agents or extend core players in the 2030s and beyond. For now, though, it allows the team to load up its roster with star talent while keeping the payroll tax impact relatively low.
The Impact on Dodgers’ Payroll Strategy
Ohtani’s contract is a strategic move for the Dodgers. The team has previously worked with one of the highest payrolls in baseball, but this level of financial gymnastics is uncommon. Since the Dodgers accomplished this by deferring the majority of Ohtani’s salary, the team kept a lower payroll and stayed under key tax thresholds. This is important because the MLB luxury tax system is intended to discourage spending over the top through escalating penalties.
For example, if the Dodgers’ payroll had exceeded the first CBT threshold of $237 million, they would have faced a 50% tax on the first $20 million over the threshold and a 62% tax on the next $20 million. Ohtani’s deferrals give the Dodgers room to stay below these markers.
This strategy isn’t without risks. The deferred payments will create a massive financial burden starting in 2034. By then, Ohtani will be 39 years old, and his performance could decline. Additionally, if the Dodgers remain aggressive in signing other high-profile free agents, their future payroll could become crowded with deferred liabilities, making it harder to stay competitive long-term.
The Dodgers’ approach reflects a calculated gamble. They leverage short-term flexibility to maximize their championship window while accepting the long-term risk of significant financial commitments. As of early 2025, the Dodgers’ total deferred salary commitments have climbed to nearly $1 billion, a staggering figure that underscores the high-stakes nature of this strategy.
How This Impacts the MLB
Ohtani’s contract is more than just a record-breaking deal; it’s a blueprint that could reshape how teams negotiate with superstar players. The creative use of deferred payments allows teams to offer massive total contract values without compromising short-term flexibility.
Other players and teams are already taking notice. In early 2024, rumors surfaced that top free agents and their agents explored similar deferral structures to maximize contract value while helping teams manage payroll tax obligations. Teams with deep financial resources, like the Yankees and Mets, are expected to pursue similar deals.
At the same time, this strategy raises concerns about competitive balance. Small-market teams already struggle to compete financially with franchises like the Dodgers. If deferral-heavy deals become the new norm, wealthy teams with strong cash flow could widen the talent gap even further, making it harder for smaller teams to retain top talent.
MLB may need to revisit its luxury tax system or introduce new regulations to prevent wealthier teams from using creative financial engineering to dominate the market. For now, though, the Dodgers have set a new standard, and other teams are watching closely.
