Shohei Ohtani Deserves His Contract—But the MLB Will Suffer Because of it.

The Deferred Payment Structure is a Fantastic Idea, But Shohei Ohtani’s contract risks destroying “parity” and Major League Baseball can only blame themselves.

Let me start off by being clear, I’m not blaming the Los Angeles Dodgers for signing a two-time MVP, international superstar, and generational talent to a 10-year, $700 million contract. I would have done the same thing. In fact, the general feeling from baseball fans all over the world was that they would do the same thing to land the reincarnation of Babe Ruth.

No one could have expected the number to have been as high as it was. Likewise, no one could have expected Shohei Ohtani to ask the team to defer some of his earnings in order for the Dodgers to build a better team around him. Looking at some of the largest free agents since 2018, the biggest names tend to not have deferred payments.

Overall, the idea of a deferred payment is a smart one for both team and player. From the team’s perspective, they could sign someone to a monster contract, and still have money to build a team around them. On the player’s side of the contract, a player can earn a salary well after their playing days end. In the off chance that they blow through the money they made over the course of their career; they receive a boost of cash every year.

This system works better for smaller market teams like the Kansas City Royals, Cleveland Guardians, and Milwaukee Brewers.  In fact, the Brewers are using the “Deferred Payment” system to pay former MVP Christian Yelich’s 9-year, $215 million contract.

According to ESPN, Yelich’s contract includes “between $28-30 million in deferrals, from 2032-2041.” The money saved is about $4 million a year from 2022-28. While the Brewers will still have to pay $20 million a year for the rest of Yelich’s career, an extra $4 million a year can be the difference between extending another player or adding another piece towards a World Series title.

Hence why Ohtani and the Dodgers agreed to a contract that has been described by ESPN’s Jeff Passan to have “significant” deferrals. $70 million yearly to one player is a risky gamble—especially someone with Ohtani’s injury history—and Ohtani will get what he never got with the Angels: a team around him.

My issue with this contract is the precedent it sets for Big Market teams to destroy the smaller markets. That’s not to say that big market teams like the Yankees, Red Sox, and Dodgers shouldn’t be allowed to use them, that would be unfair.  However, this contract sets the precedent that Bigger-market teams can offer more money than smaller market teams can afford, all while only having to pay a percentage during the player’s career.

Contrary to the growingly popular belief, small markets do exist. I understand that some owners are consistently cheap but saying that Los Angeles and Minnesota should spend the same because “they’re all MLB teams” is a little absurd. Commercial Markets extend far beyond the playing field.

I will call out two owners who I think are obscenely cheap. Bob Nutting (PIT) and John Fisher (OAK) are in charge of the two franchises that never dish out any sort of money. They  are consistently at the bottom of the league’s payroll standings and have had minimal success on the field in the past ten years. It is a shame, because Pittsburgh and Oakland are historically huge baseball cities, and deserve to have winning teams on the field.

Baseball is a business, and while I agree with that the business should be winning, teams like Pittsburgh and Oakland simply could not afford to take on a contract of this magnitude.

Comparing Ohtani’s Contract to Forbes’ evaluations for MLB teams in 2023, nine teams would be spending at least 50% of their value just to afford this contract. The teams are Miami (70%), Oakland (59.3%), Cincinnati (58.8%), Kansas City (58.3%), Tampa Bay (56%), Cleveland (53.8%), Pittsburgh (53%), Arizona (50.7%), and Minnesota (50.4%).

Sure, the argument can be made that “Owners should just spend more money.” More owners like Steve Cohen could be exciting for the game of baseball, but let’s be realistic here. Rob Manfred—or any person named commissioner—would be fired on the spot if he tried to tell his owners to spend more money.

The time for a Salary cap in the MLB was 30 years ago—i.e. ten years before I was born. This puts Major League Baseball in an unenviable position. Players make far too much money for one to be implemented and would probably walk out if the owners tried to. In this situation, what do you do?

Do you choose option A: Attempt to impose a salary cap instead of the Tax, and risk your players going on strike? Or option B: Implement a salary floor and force owners to spend more, and risk an MLB Lockout?

As of right now, I have no answer for the MLB. I don’t think the owners would allow the commissioner—who works for them—to force them to spend more money. I think the best option could be to revoke the Luxury Tax threshold entirely in favor of a hard salary cap. Keep the number the same, but don’t allow teams to go over.

The problem is, the players would never play under a salary cap. It would drastically limit how much money they could make, because there are teams that do not want to pay top-dollar for players even with the money they get from the luxury tax penalties.

But, if we eliminate the revenue-sharing from those penalties, would they spend more money when they make less? In theory, they would have to. In practice, nothing is certain.

What is certain though is that while the MLB continues to produce record-setting profits year after year, fans of smaller-market teams will continue to suffer through long periods of losing, and an inability maintain their talents; and the only body that the MLB can blame is themselves.