When the Los Angeles Dodgers signed Shohei Ohtani to the largest deal in the history of North American sports, it was widely reported that the deal was going to contain a lot of deferred money. The idea there being that Shohei would get his money regardless, but kicking the cost further down the line and spreading the cost out would allow the Dodgers to continue to spend while Ohtani was under contract. Again, this was all already known.
However, no one thought there was going to be THIS much deferred money involved and the long-term repercussions for Shohei and the Dodgers' payroll for the next decade require some explanation.
Ohtani's contract deferrals are wild, but they aren't as crazy as it seems
First things first: it is crazy that this is a contract that exists in baseball. Shohei was willing to defer all but $2 million a year of the $70 million a year for the next decade until after his contract is up so that the Dodgers can continue to have some financial flexibility...with no interest whatsoever in those extra payments from 2034-2043. Shohei isn't going to be sleeping on anyone's couches or anything as he will still rake in plenty of off the field income, but contracts like this just aren't agreed to in sports and may never be agreed to again.
However, this doesn't mean that the Dodgers can just run amok. While Shohei will be deferring $68 million a year of the $70 million he is owed, LA still has to contend with the luxury tax somewhat. Based on the best guesses now given the information available, Shohei's contract will count $46 million a year against the luxury tax threshold over the course of the deal. Still, structuring the deal the way they did essentially saves the Dodgers $24 million a year against the luxury tax. That isn't quite saving a full Freddie Freeman worth of payroll space, but it is pretty close.
The extra payroll freedom should allow the Dodgers to remain top suitors in free agency the rest of the offseason which is good news considering they don't have a functioning starting rotation for 2024 yet. Yoshinobu Yamamoto remains a realistic possibility as are the rest of the top free agent starters like Blake Snell and Jordan Montgomery.
So is the deal as crazy as it looks on paper? No, it isn't. LA does still have to pay Shohei $700 million and they do still have to keep an eye on their luxury tax penalties even with the deferrals. However, it is still a big improvement over committing $70 million a year to one guy no matter how remarkable that one guy is and this deal certainly isn't going to turn into a Bobby Bonilla contract situation from the looks of things.