The current labor deal between MLB and the MLB Players Association dictates no limit to the amount of compensation a player can defer. The Los Angeles Dodgers and Shohei Ohtani have taken advantage of that clause to an unprecedented degree in a move that could alter the competitive state of the league for the next decade.

The two-way superstar’s record-setting $700 million contract will contain $680 million in deferrals, according to multiple reports, beginning in 2034 – after the 10-year contract term – and running to 2043. 

Since MLB uses a net-present value of money calculation for competitive-balance tax purposes, the deferrals will be considered an annual $46 million addition to the Dodgers’ payroll instead of $70 million. That difference will help allow the Dodgers to avoid the uppermost penalties of the league CBT and continue to build a competitive team around Ohtani. 

With this calculation, the Dodgers’ current payroll and benefit commitments for 2024 are still well below even the first CBT threshold of $237 million, and the team is on the hunt for other available top talent, such as Japanese pitcher Yoshinobu Yamamoto.

Dodgers Flex

The unique contract structure also reflects how forcefully the Dodgers are able to flex their financial might in a way that many other MLB clubs cannot. The Dodgers are able to commit such large annual payments two decades into the future, as they have the security of a 25-year, $8.35 billion local rights contract with Spectrum that still has 15 years left and a perennial status as MLB’s attendance leader.

The Dodgers have already executed this strategy, at smaller levels, with some of its other stars, including $115 million in deferred money for Mookie Betts and $57 million more for Freddie Freeman.

While the Dodgers get a massive benefit from this structure, so does Ohtani, provided he’s not living in California after his playing career. If he resides in another state at that point, he’ll avoid California’s top tax rate — which will reach 14.4% starting Jan. 1 – and potentially save millions.

While Ohtani will receive just $2 million in yearly salary from the Dodgers during the deal, his current income is buttressed by more than $35 million in annual endorsements, a figure set to rise now that he’s playing for one of MLB’s marquee franchises.

The legal fight playing out as the Pac-12 dissolves is reportedly costing conference members their share of $61 million in withheld revenue.

As Oregon State and Washington State fight for control of a Pac-12 that has seen its other 10 members depart for the Big Ten, Big 12, and ACC, the two remaining schools have blocked traditional midseason payouts for the entire conference, according to the San Jose Mercury News. 

The Pac-12 was set to equally distribute 15% of its annual revenue, which amounts to more than $400 million for the 2023-24 fiscal year for all 12 members. But due to ongoing litigation, any financial decisions require unanimous approval for the 12 conference members, and OSU and WSU aren’t approving those payouts — for them, or anyone else.

In a joint statement, OSU and WSU told The Mercury News: “No member acting in the Pac-12’s best interest would allow departing schools to drain the conference’s assets on their way out the door, while they refuse to pay their fair share of the liabilities.” 

Unsettled Future

The Beavers and Cougars have been making what appears to be contingency plans to operate as a two-school conference next season. The schools are exploring a scheduling partnership with the Mountain West in 2024 that would cost $14 million in fees.

The 10 departing schools allege that OSU and WSU are now abusing their power by withholding conference revenue, despite the outgoing universities’ agreement to let Pac-12 revenues be used for the MWC pact.

An important part of MLB’s experimentation in national-level streaming is now up for renewal.

The league’s two-year rights deal with NBCUniversal’s Peacock streaming service quietly expired with the end of the 2023 season, and the future state of the rights package is uncertain. MLB initially struck the deal shortly before spring training in 2022, making it one of the league’s first finalized pieces of business after reaching a new labor deal with the MLB Players Association.

The Peacock agreement created a new early-Sunday rights package, with games typically starting at 11:30 a.m. ET, forming something of a bookend with ESPN’s long-running “Sunday Night Baseball.” 

The deal, estimated at $30 million annually, was rather small in the scope of MLB’s overall national media rights agreements, which include a $729 million-per-year deal with Fox, $560 million with ESPN, $535 million with Warner Bros. Discovery, and $85 million with Apple. But as a streaming-only deal it represented a core part of MLB’s push to reach new fans on new platforms and manage ongoing media disruption.

For Peacock, the deal added to an enviable sports rights portfolio that also includes the NFL, Premier League, PGA Tour, Olympics, Big Ten, and Notre Dame football – even if those rights haven’t yet translated to profitability for the platform. 

The expiration of the Peacock deal also arrives during a period of broader change within MLB’s media landscape, as the league continues to grapple with the Diamond Sports Group’s bankruptcy and the related revenue impacts on the 12 teams with ties to DSG’s Bally Sports.