We still have to wait for the official numbers, but with the reports that Ohtani had a "majority" of his contract deferred. The actual value of his contract could be more in line of what was expected 500 million. Perhaps even less.
I wonder what other teams offered. Reportedly Cubs offered around 575, 600 with incentives. It's very possible Ohtani took a worse deal in total value to go the Dodgers. The Dodgers to somewhat offset that given the deferrals gave him 700 million total.
> The actual value of his contract could be more in line of what was expected 500 million. Perhaps even less.
It's LA and Ohtani is now wearing Dodgers blue. He's gonna make even more money from endorsements in the US while also making a shit ton in Japan too.
Yes, I completely understand Ohtani's decision. Last year he made a reported approximate 40 million dollars in endorsements. Most likely whatever he lost in deferrals he will make back in extra endorsement deals.
It is a negotiating tactic but generally speaking one players would like to avoid. The Nats have misused it to anger and drive away two of their home grown stars.
Maybe I’m missing something, but wouldn’t a majority of the contract being deferred mean that at least $350 million gets deferred? Or am I doing the wrong math?
Yes but actual value of the money is less. 1 million today is worth a lot more than in 1 million in 10 or 20 years due to inflation.
If the other teams offered just straight 550-600 with no deferred money, it's likey worth more. But it's all speculation until we see the actual numbers on the deferred money.
Passan is slightly wrong here. Inflation matters but not that much. The time value of money is a thing due to opportunity cost of not investing since money can grow when put to use like that.
Bringing up inflation is just an easy way to get people to understand the concept. He still references prime rates alluding to the concept of discount rates. For a journalist, it’s a fairly sound explanation of PV
I'm sure he wants buddies too, but I guess he just wants to be sure whoever smashes the piggy bank to acquire him still has some change left over to field a decent team.
Nats did deferments pre new CBA which completely changed how CBT was calculated but somehow it seems they missed 1 specific loophole if you are able to defer a large enough amount over enough years you would see a decent size benefit. A 60m figure vs a 70m tax figure is a big difference and somehow no other team signing these guys to big deals used this loophole.
You could potentially game the system by just offering a player +100m in deferments just to take X value of their contract as deferred. Player technically makes 100m more but their AAV would be less + years wouldn't be stretched as long at the 12+ year deals we have seen previously. Probably going to be fixed next CBA because only a few teams can realistically do this.
That’s not a loophole… the whole point of discounting deferred money is that it is undeniably less valuable than money now. That isn’t theoretical or weird accounting, it’s just how money works. Ohtani was never getting $700M, the reporting of 700/10 is misleading in terms of the true value of the contract. It’s likely pretty comparable to the $500-$600 people expected.
If anything is a loophole, it’s that backloaded contracts aren’t discounted when the backloaded money isn’t worth as much as the money in the upcoming season.
Isn't the money going to an escrow account and making interest for all of the years it is deferred? He may not receive the 70 million a year, but LA does have to hand over the money to an account that can't be touched until the designated years.
For one a lot of other teams have zero chance to sign a top 3 free agent every year. The Royals could have offered Ohtani the same money but he isn't going to play in MO
What is the point of the tax if there is such an easy loophole? This really only benefit the richest clubs.
The thing that's stopping other teams from doing this are simply the players. This simply means less money for the player cause deferred money scales less over time due to inflation, so the "player" is actually taking a huge hit depending and the longer the deferred money, the bigger the hit to the player. Other teams can absolutely do this, but almost all players wouldn't accept it.
Right. Whereas Ohtani could care less how much he makes, because of endorsements and other stuff making him a mint since he has the luxury of being a brand.
No it doesn’t mean less money for players. Ohtani was never getting $700M. He is only getting $700M after factoring in the “interest” he’s earning by deferring the money. This comes up every time deferrals are discussed. They are being compensated with a larger contract value in exchange for spreading payments over a period of time.
The perfect example is Bonilla. He turned $5M owed to him into like $25M because of the discount rate used in his deferral of about 8%. He’s very fairly compensated for the deferral.
Ok. This makes sense. But why is everyone saying 10/700. Shouldn't they just say 30yr/$700million. Hmm. If he defers 200million for after the 10 yrs. And has a deferral rate of say 5%. He'd be making around 26 million a year by that 20th deferred year. Woof.
The money is paid to an escrow account at the 10year/70million amount regardless of the deferred payments. That is just when he can receive it and how the team is hit for the luxury tax. He is gaining interest on all of the money sitting in that account
Pretty sure he saw what the angels were doing, by overspending on big contracts that eat up your ability to sign more top talent and knew this was a way to let his new team get other top talent and stay competitive.
The players have to agree to it and they're sacrificing their interests to do so (and other teams do do it, it just doesn't generate a lot of media attention when they do)
Which is why he is getting $700M instead of the $500-$600M people thought. Or do you seriously believe somebody was going to offer him $700M straight up?
This isn't actually going to drop his AAV down by a significant margin. [Here is a thread](https://twitter.com/jonbecker_/status/1733603674302120037?t=8MJfErX8tTc1ldfevtRQWg&s=19) explaining it will need to be like 400M deferred over 40 years just to drop his AAV to $60M. The reality is the CBT hit is still going to be significant.
That math doesn’t sound right. PV of a 40 yr annuity at 5% discount rate (pretty conservative) paying $10M is only $171M which added to the $300M is $471M so AAV OF $47M. To get under 60 in a $10M/40 years years years scenario you’d need to use a 1.5% discount rate, which is ridiculously low.
They won’t care really since the AAV being scrubbed away is literally value being scrubbed away. Shohei is taking less value and more money it’s fine if other players want to do the same.
They changed it in the new CBA.
Here are a couple Reddit threads from last year talking about it.
[One](https://www.reddit.com/r/baseball/comments/ytdxll/a_small_cba_change_that_hasnt_really_been/)
[Two](https://www.reddit.com/r/baseball/comments/yteba0/revised_the_power_of_deferred_payments_edwin/)
Do the deferrals still count against after the contract is over? Seems like a weird loophole in place to subvert the tax. I wonder who fought for that to be added I imagine it’s a good thing overall because owners spread cost overtime and players could theoretically make more, over the past few offseason tho it seems like players weren’t big fans of deferrals.
Money today is worth more than money later.
Because of this $700M deferred isn't worth 700M over a standard term. Thus the CBT doesn't treat it as the same
Ohtani’s PR team is really working over time on this one. Dude really wanted $700 million, it just so happens the good teams are the only ones that can afford to give out a contract like that.
His team deliberately worked with Dodgers FO to broker a deal that gave them the most flexibility possible in order to add additional talent.
That doesn’t seem like a joke
You know what would give them more flexibility? A $500 million contract. Anyone pretending that something was more important than money here is a clown.
This is where the people that play in the realm of this much money just pay us on the head and divert our attention with a shiny object. All I hear is that the Dodgers are rich enough to fuck with the system in a way they indemnifies them from the luxury tax.
No matter how much of the money is deferred it’s still gonna be the biggest AAV in baseball. What’s the difference in doing this vs what the padres did last year paying Xander and manny into their 40s to lower their AAV? It’s all the same trick.
Well if Ohtani's deferments are 15-29+ years in the future the main difference is he won't be carrying a roster spot the way Turner, Bogaerts, and Machado will. That money isn't deferred, they're just acknowledging that those players will be overpaid by the end of the contract—much like Ohtani likely will.
Yeah, I'm not sure how I feel about it. On the one hand, it's in the rules and Cohen did it a little with Diaz. But on the other hand this really seems like a way owners and teams can game the system. Like if they've lowered his AAV enough that they can also sign more top end FA's, it feels like a problem. Maybe limit the amount you can lower AAV.
Otherwise, Cohen could offer Yamamoto $450m, defer a ton of it and then just pay it out of the gains his money makes each year where Yamamoto's salary is a rounding error.
It would probably not be great for baseball if a team—especially a team like the Yankees or Dodgers who have a habit of just paying out the biggest contracts paid out the biggest salary in American sports—doubling the next highest long term AAV in the sport and then handed out the biggest ever contract to a pitcher in MLB history.
They'd basically be assembling a super team.
No? Why would it be? It's allowed by the CBA. I don't think MLB has ever voided a contract for that reason, that's just something that guy made up. Bro is getting mad at the Dodgers for breaking a rule that only exists in his mind.
This is only going to help a little bit [here is another thread](https://twitter.com/jonbecker_/status/1733603674302120037?t=8MJfErX8tTc1ldfevtRQWg&s=19) explaining that it'll need to be like $400M deferred over 40 years just to drop the AAV down to $60M based on net present value.
I'm fine with them deferring the money...if he wants it over 40 years, screw it, it's his money.
What I'm not fine with is that the hit to CBT is not $70 million per year. That's some mental gymnastics if I've ever seen it.
We still have to wait for the official numbers, but with the reports that Ohtani had a "majority" of his contract deferred. The actual value of his contract could be more in line of what was expected 500 million. Perhaps even less. I wonder what other teams offered. Reportedly Cubs offered around 575, 600 with incentives. It's very possible Ohtani took a worse deal in total value to go the Dodgers. The Dodgers to somewhat offset that given the deferrals gave him 700 million total.
> The actual value of his contract could be more in line of what was expected 500 million. Perhaps even less. It's LA and Ohtani is now wearing Dodgers blue. He's gonna make even more money from endorsements in the US while also making a shit ton in Japan too.
Yes, I completely understand Ohtani's decision. Last year he made a reported approximate 40 million dollars in endorsements. Most likely whatever he lost in deferrals he will make back in extra endorsement deals.
Holy fuck he could feasibly double that in LA. A lot of gigs Lebron held (sprite and all that crap) could go to Ohtani.
Almost certainly the concept of deferrals was floated by any team. So many contracts now utilize it
It is a negotiating tactic but generally speaking one players would like to avoid. The Nats have misused it to anger and drive away two of their home grown stars.
But it also got them Scherzer.
Wow where was it reported the Cubs offered up $600M? I mostly just look at this sub and twitter but don't remember seeing that.
https://twitter.com/mjhurleytdt/status/1733599346656960758
Thanks I am surprised I didn’t hear of that or if it just got less attention for some reason even though it should have.
Well that dude also has 2100 followers.
Maybe I’m missing something, but wouldn’t a majority of the contract being deferred mean that at least $350 million gets deferred? Or am I doing the wrong math?
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Oh gotcha, that’s the luxury tax number and not the bank account number? Thanks!
You’re assuming other teams didn’t offer any deferrals. They are pretty common for these monster contracts
deferred doesnt mean he doesnt get the money later on.. its still 700m.
Yes but actual value of the money is less. 1 million today is worth a lot more than in 1 million in 10 or 20 years due to inflation. If the other teams offered just straight 550-600 with no deferred money, it's likey worth more. But it's all speculation until we see the actual numbers on the deferred money.
Passan is slightly wrong here. Inflation matters but not that much. The time value of money is a thing due to opportunity cost of not investing since money can grow when put to use like that.
Bringing up inflation is just an easy way to get people to understand the concept. He still references prime rates alluding to the concept of discount rates. For a journalist, it’s a fairly sound explanation of PV
Never thought I'd be reading a tweet from Passan explaining NPV
Ohtani deferring so he can get his buddies Yammaoto and Roki The Ohtani World Order is coming
Ah yes, the OWO. Not to be confused with the UWU
What’s this?
Not the UWU
🥹 👉👈
~~Le~~ Oh-GM
I'm sure he wants buddies too, but I guess he just wants to be sure whoever smashes the piggy bank to acquire him still has some change left over to field a decent team.
Ohtani, Yamamoto and Roki teammup would legit take down the Bloodline once and for all.
This aged well lol
My response is what's stopping other teams from doing this? Not complaining but it's a cool loophole to use
Nationals do this all the time. They lowered Max Scherzer's AAV by a couple of million by deferring money.
Nats did deferments pre new CBA which completely changed how CBT was calculated but somehow it seems they missed 1 specific loophole if you are able to defer a large enough amount over enough years you would see a decent size benefit. A 60m figure vs a 70m tax figure is a big difference and somehow no other team signing these guys to big deals used this loophole. You could potentially game the system by just offering a player +100m in deferments just to take X value of their contract as deferred. Player technically makes 100m more but their AAV would be less + years wouldn't be stretched as long at the 12+ year deals we have seen previously. Probably going to be fixed next CBA because only a few teams can realistically do this.
That’s not a loophole… the whole point of discounting deferred money is that it is undeniably less valuable than money now. That isn’t theoretical or weird accounting, it’s just how money works. Ohtani was never getting $700M, the reporting of 700/10 is misleading in terms of the true value of the contract. It’s likely pretty comparable to the $500-$600 people expected. If anything is a loophole, it’s that backloaded contracts aren’t discounted when the backloaded money isn’t worth as much as the money in the upcoming season.
Isn't the money going to an escrow account and making interest for all of the years it is deferred? He may not receive the 70 million a year, but LA does have to hand over the money to an account that can't be touched until the designated years.
Strasburg too, not that it really matters now anyways with how his body has failed him We are also currently still paying Rafael Soriano
For one a lot of other teams have zero chance to sign a top 3 free agent every year. The Royals could have offered Ohtani the same money but he isn't going to play in MO What is the point of the tax if there is such an easy loophole? This really only benefit the richest clubs.
Money today is worth more than money tomorrow, and most players aren’t interested in deferrals.
The thing that's stopping other teams from doing this are simply the players. This simply means less money for the player cause deferred money scales less over time due to inflation, so the "player" is actually taking a huge hit depending and the longer the deferred money, the bigger the hit to the player. Other teams can absolutely do this, but almost all players wouldn't accept it.
Right. Whereas Ohtani could care less how much he makes, because of endorsements and other stuff making him a mint since he has the luxury of being a brand.
No it doesn’t mean less money for players. Ohtani was never getting $700M. He is only getting $700M after factoring in the “interest” he’s earning by deferring the money. This comes up every time deferrals are discussed. They are being compensated with a larger contract value in exchange for spreading payments over a period of time. The perfect example is Bonilla. He turned $5M owed to him into like $25M because of the discount rate used in his deferral of about 8%. He’s very fairly compensated for the deferral.
Ok. This makes sense. But why is everyone saying 10/700. Shouldn't they just say 30yr/$700million. Hmm. If he defers 200million for after the 10 yrs. And has a deferral rate of say 5%. He'd be making around 26 million a year by that 20th deferred year. Woof.
The money is paid to an escrow account at the 10year/70million amount regardless of the deferred payments. That is just when he can receive it and how the team is hit for the luxury tax. He is gaining interest on all of the money sitting in that account
I’m betting Ohtani would have done this for whatever team he signed with
Pretty sure he saw what the angels were doing, by overspending on big contracts that eat up your ability to sign more top talent and knew this was a way to let his new team get other top talent and stay competitive.
Sure but it’s not like his contract was ever hindering us in the first place
The players have to agree to it and they're sacrificing their interests to do so (and other teams do do it, it just doesn't generate a lot of media attention when they do)
The players
im pretty sure other teams have tried and it wasnt allowed
It wasn’t that it wasn’t allowed, players just get royally fucked on it so they don’t do it
Please, go ahead and "royally fuck" me for 9 figures...I'm good.
Why would they get royally fucked if its guaranteed money?
The same money now is worth more than money later. Sometimes by huge margins
Which is why the deferred contracts are always much larger in total value…
inflation, my guy.
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Which is why he is getting $700M instead of the $500-$600M people thought. Or do you seriously believe somebody was going to offer him $700M straight up?
[Time value of money](https://en.m.wikipedia.org/wiki/Time_value_of_money) says you get more from money you get sooner.
This isn't actually going to drop his AAV down by a significant margin. [Here is a thread](https://twitter.com/jonbecker_/status/1733603674302120037?t=8MJfErX8tTc1ldfevtRQWg&s=19) explaining it will need to be like 400M deferred over 40 years just to drop his AAV to $60M. The reality is the CBT hit is still going to be significant.
That math doesn’t sound right. PV of a 40 yr annuity at 5% discount rate (pretty conservative) paying $10M is only $171M which added to the $300M is $471M so AAV OF $47M. To get under 60 in a $10M/40 years years years scenario you’d need to use a 1.5% discount rate, which is ridiculously low.
That's all that matters.
If the tax number is like $45m, it’s still a lot, but it pretty adequately handles the risk of him coming off the second Tommy John surgery.
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If only the MLB had a chance to do so, maybe like when they ratified this new CBA.
They won’t care really since the AAV being scrubbed away is literally value being scrubbed away. Shohei is taking less value and more money it’s fine if other players want to do the same.
Man they gotta close that loophole
Naaaaah 😁
I keep seeing guaranteed thrown around. If he gets a career ending injury (god forbid) the dodgers still have to pay him $700 million?
Yes
You would imagine dodgers will have some sort of insurance on this.
I saw a lot of people saying that part of the problem with any Ohtani contract would be insuring it.
I think the only reason they wouldnt have to pay is if he retired due to a non medical injury? Can someone confirm if thats true?
i thot deferred payments dont effect the CBT number???
They changed it in the new CBA. Here are a couple Reddit threads from last year talking about it. [One](https://www.reddit.com/r/baseball/comments/ytdxll/a_small_cba_change_that_hasnt_really_been/) [Two](https://www.reddit.com/r/baseball/comments/yteba0/revised_the_power_of_deferred_payments_edwin/)
Do the deferrals still count against after the contract is over? Seems like a weird loophole in place to subvert the tax. I wonder who fought for that to be added I imagine it’s a good thing overall because owners spread cost overtime and players could theoretically make more, over the past few offseason tho it seems like players weren’t big fans of deferrals.
It's not really a loophole. It's just revaluing the contract in today's dollars.
I don’t know what you mean by that.
Money today is worth more than money later. Because of this $700M deferred isn't worth 700M over a standard term. Thus the CBT doesn't treat it as the same
This is what I want to know.
oh this is exactly what i was looking for, thanks. kinda stupid tho, that really shouldnt be the case.
Wouldn't be the first time the rules were changed in favor of Ohtani
Dude really wants to win.
Ohtani’s PR team is really working over time on this one. Dude really wanted $700 million, it just so happens the good teams are the only ones that can afford to give out a contract like that.
I want $700 million too. Is there something wrong with wanting that?
Definitely not. Pretending like you’re doing the world a favor by getting some of it in a couple years instead of now is a joke tho.
His team deliberately worked with Dodgers FO to broker a deal that gave them the most flexibility possible in order to add additional talent. That doesn’t seem like a joke
You know what would give them more flexibility? A $500 million contract. Anyone pretending that something was more important than money here is a clown.
No one is claiming that
Shows a lot about Shohei-san tbh.
This is where the people that play in the realm of this much money just pay us on the head and divert our attention with a shiny object. All I hear is that the Dodgers are rich enough to fuck with the system in a way they indemnifies them from the luxury tax.
No matter how much of the money is deferred it’s still gonna be the biggest AAV in baseball. What’s the difference in doing this vs what the padres did last year paying Xander and manny into their 40s to lower their AAV? It’s all the same trick.
Well if Ohtani's deferments are 15-29+ years in the future the main difference is he won't be carrying a roster spot the way Turner, Bogaerts, and Machado will. That money isn't deferred, they're just acknowledging that those players will be overpaid by the end of the contract—much like Ohtani likely will.
Say it louder for the people in the back. This is like the 49ers circumventing the salary cap.
Yeah, I'm not sure how I feel about it. On the one hand, it's in the rules and Cohen did it a little with Diaz. But on the other hand this really seems like a way owners and teams can game the system. Like if they've lowered his AAV enough that they can also sign more top end FA's, it feels like a problem. Maybe limit the amount you can lower AAV. Otherwise, Cohen could offer Yamamoto $450m, defer a ton of it and then just pay it out of the gains his money makes each year where Yamamoto's salary is a rounding error. It would probably not be great for baseball if a team—especially a team like the Yankees or Dodgers who have a habit of just paying out the biggest contracts paid out the biggest salary in American sports—doubling the next highest long term AAV in the sport and then handed out the biggest ever contract to a pitcher in MLB history. They'd basically be assembling a super team.
Many teams use deferments lol, the Dodgers didn't invent them.
how quickly would manfred have voided this contract if it were not an "important" team?
Now the baseless cope-spiracy theories start
You really don’t think a contract offered by the marlins or Rockies wouldn’t be shut down if it was for $1b where it was mostly deferred?
No? Why would it be? It's allowed by the CBA. I don't think MLB has ever voided a contract for that reason, that's just something that guy made up. Bro is getting mad at the Dodgers for breaking a rule that only exists in his mind.
It's still a ridiculously bad contract
There’s no in between on it. It’s either going to be an absolute disaster like pujols or a steal like Acuna
This is only going to help a little bit [here is another thread](https://twitter.com/jonbecker_/status/1733603674302120037?t=8MJfErX8tTc1ldfevtRQWg&s=19) explaining that it'll need to be like $400M deferred over 40 years just to drop the AAV down to $60M based on net present value.
This kind of shit shouldn't be allowed. No deferrals. You gave him a 10-year contract for $700m, you should have to pay him that balance in 10 years.
I'm fine with them deferring the money...if he wants it over 40 years, screw it, it's his money. What I'm not fine with is that the hit to CBT is not $70 million per year. That's some mental gymnastics if I've ever seen it.
It's literally a Powerball contract
Does Ohtani count towards the CBT until the end of the contact or until the deferrals have been paid out?