Crazy Deferrals But Could This Be The Future?

The jaw dropping news that hit this weekend of Shohei receiving $700M over 10 years just got a bit more interesting. As being reported, Shohei will receive 2M a year for 2024-2033 and 68M a year for 2034-2043. This unprecedented move will help ease the Dodgers' luxury tax as his salary will only hit about 46M a year rather than average annual value of 70M.

A couple quick hitters here:

1. Brilliant move for the Dodgers. Regardless of Shohei's baseball talent, this was an incredible business deal. The Dodgers will likely become the team to root for in all of Japan. As the Yankee cap is iconic globally, the Dodger hat is expected to be the same and will influence many young ball players all over the world. Almost every youth Japanese ball player will be a Dodgers fan and will dream of putting on the Dodger blue.

2. Brilliant move for Shohei. Although it looks like Shohei is leaving tons of money on the table (using NPV computations), Shohei will have as much access to cash as he would ever want in the current deal. Shohei will access tons of cash through endorsements (easily 40M a year) and if he really needed to access the future cash, he will have banks lining up to loan him cash against his future deferred payments.

3. Could be the move of the future. Handing out huge contracts has not necessarily correlated to team's long term success and has seemed to handcuff teams. Pujols, Trout, Cano, Stanton, and Rendon are a few that come to mind that hampered team's abilities to go out and improve themselves in the open market either due to lack of cash or the team's lack of desire to pay the luxury tax. Long-term deferrals can allow teams to go after these big ticket free agents while not killing their ability to add important pieces later on.

A lot of early chatter on this is that it is "bad for baseball". I completely disagree. I think this could allow smaller market teams to compete with the larger market teams on some on big free agents. Will the larger market teams still have more buying power, absolutely. Can a team like that Pirates, Royals, Reds, Marlins, etc pay someone 300M over 10 years while having payroll flexibility to compete, no. But they can certainly spread that out over say 20 years if it can help guarantee their team to remain relevant for longer windows of time. Deals like this may lay the groundwork for future contracts for Bobby Witt Jr or some of the studs coming up through the Pirates system.