The Los Angeles Dodgers already made plenty of waves when reports came out that they managed to secure the services of the biggest MLB free agent of all time, Shohei Ohtani, by signing him to a 10-year, $700 million deal — the biggest contract in professional sports history. More seismic reactions came out when details of the contract structure and its hefty, interest-free deferrals became public.
As one would recall, Ohtani would be earning a “mere” $20 million from 2024 to 2033, with the remaining $680 million on his deal lining up his bank account from 2034 to 2043. This helps the Dodgers considerably. Not only do they have more room in the budget to make more blockbuster moves at present, it also lowers the competitive balance tax hit of Ohtani's contract from $70 million a year to just $46 million.
In the end, it was Shohei Ohtani and his camp, according to Alden Gonzalez and Jeff Passan of ESPN, that proposed this contract structure to the Dodgers front office. This shows how hell-bent Ohtani is on winning, and winning now. And the Dodgers, of course, gladly obliged. It's just that if it were left to president of baseball operations Andrew Friedman's hands, he never would have mustered the courage to put such an offer on the table.
“I wouldn't have had the guts to propose it,” Friedman said.
Given how the economy works, present money is always worth more than future money. This is what economists call the time value of money. This is where the practicality of interest sets in; the interest basically covers all the value lost for deferring the money. But in the Dodgers' case, Shohei Ohtani and his camp didn't even ask for interest.
So the Dodgers may be on the hook for quite a lump sum, but the deferrals make it as though the $680 million Ohtani will be receiving won't be worth the same if he received it for the duration of his contract instead.
It's understandable why Andrew Friedman wouldn't have wanted to float out that offer, as it may have been seen as a sign of disrespect and the Dodgers may not have secured Shohei Ohtani's services. But everything tends to work out quite well for the Dodgers these days.