As many of you probably have guessed by now, I am a huge sports fan. While I've never played organized baseball, it's probably one of my favorite sports to watch. And like many baseball fans, I was excited about the possibility that my favorite team, the Chicago Cubs, would sign free agent phenom Shohei Ohtani (there were rumors, but unfortunately I don't think the Cubs were ever in serious competition to sign Ohtani). Ohtani is a once in a lifetime talent - not only is he a dominant starting pitcher, he's also a dominant hitter. Despite the fact that he is not likely to pitch for at least one season due to Tommy John surgery, the Los Angeles Dodgers signed him over the weekend on a record contract of $700 million over 10 years. What's even more incredible about this contract is that Ohtani himself requested that most of the money would be paid long after he was done playing baseball!
Ohtani will make $2 million per year over the next 10 years ($20 million in total), while the remaining $680 million will be paid starting in 2034, when he will be paid $68 million per year until 2043! The deferred money will be paid without interest. What' surprising to me about this deal is that it was Ohtani's choice! I don't know his motivation for sure, but I suspect he's figured out that by being paid less now, the Dodgers will have the opportunity to pay other superstars on their roster so that the team can win championships now. In other words, it's a "win today, pay for it tomorrow" strategy!
This is not like the infamous Bobby Bonilla Day, when former New York Mets slugger Bobby Bonilla gets paid just over $1.19 million on every July 1st from 2011 to 2035. Bonilla signed what was at the time a record-setting contract ($29 million spread out over 5 years) in 1991. He played for three and a half seasons with the Mets before being traded to the Florida Marlins, who traded him back to the Mets in 1997. Rather than paying the remaining $5.9 million owed to Bonilla, the Mets chose to defer the remaining money with interest in order to release Bonilla in 2000. At the time, the Mets owners were expecting a huge pay-out from an investment with Bernie Madoff, an American financier and criminal mastermind of the largest Ponzi scheme in history. Unfortunately, that investment didn't work out for the Mets, so now they are paying for it over time.
It's not that unusual for teams to defer large contracts over several years. What's unusual is for an athlete to request it. Only time will tell whether Ohtani's gamble (if a deferred payment scheme can be called that) on winning now will actually pay-off. For now, I will continue to watch to see if there are more contracts like this one in the future.
No comments:
Post a Comment