Michael Rueda, US head of sports and entertainment, was interviewed by The Sporting News and featured in the recently published article "How Shohei Ohtani's deferral-heavy $700 million contract could impact baseball industry."
Shohei Ohtani's signing of his $700 million contract with the Dodgers has caused quite a stir not only for its value, but also for the fact that Ohtani opted to defer the vast majority of his pay until 2034 with annual payments until 2043. While the value of the contract may be staggering, the fact that Ohtani will not receive the entirety of that value for nearly twenty years may be even more surprising.
"You sort of took home the fact that the player wants to win, wants to help the club build a team around him, is smart enough to identify that between his salary and endorsement earnings, he is able to defer a large portion of this contract," Michael Rueda told The Sporting News. "I'm someone who represents a lot of individuals across the sports and entertainment space, and this was seeing someone who's able to look at the bigger picture, and agree to something that benefits them professionally and then personally in the long term," he added.
The extra time built in by the deferral is likely to be a net positive for both parties, Michael noted.
"Between now and then, hopefully the Dodgers can really reap the benefits of having landed a player like this, with increased ticket sales, marketability, merch. Ohtani is a global superstar, as opposed to just an American one. There's so many other factors that you count on by actually having him in the organization and the increased revenue from having someone like this and from being able to hopefully build a roster and produce a really successful franchise and have some successful years. I think that's sort of the trade off. If we can defer it and reap the benefits in the interim, it will help us address those future costs. And then you factor in the aspect of not having to pay interest, that also helps."
Michael also provided his feedback on the question of whether or not this could be the norm going forward, and noted that unique or creative contracts are cropping up across the world of sports and entertainment.
"I mean, you could, if we want to speculate. Talent is expensive across all sports, right? It's increasingly difficult to own teams and fund operations and inject capital so that you can be competitive, whether it's facility-wise or player-wise," he said. "So, yeah, to the extent that you can get players to agree to terms that allow you to be competitive and still pay them their market rates? Yeah, you could absolutely see it being a trend."
"I think how we pay talent, specifically athletes, has gotten more creative over time," Michael said. "Look what Major League Soccer did just to land Lionel Messi, right? There are so many different elements to that deal that made it attractive to him, from a financial perspective, not just the personal elements that may have been attractive to him and his family."
"The teams that have the resources to do it, are creative enough to pull it off, I think there's no reason why we won't see it. The Messi deal is a really a prime example. With the amount of money he was being offered in other places, the league was forced to get creative."
However, Michael also noted that there are no guarantees - while a deal may look incredible on paper, it takes more than one athlete to build a successful team.
"But it's also the risk, right? If you don't win and you're stuck with this really large bill in the future, if something doesn't go well during his time with the team, then it doesn't look like a great calculation," he said. "If all goes well, maybe you come out looking like it was a brilliant decision. But there are some risks there. Not every team can do it. Not every team may have the resources or the marketability, or whatever the case may be, to ensure they capitalize fully on an opportunity like this, to leverage having a star like that on your roster and being able to build a good club around him. There's a lot that goes into it."
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