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When American businessman Todd Boehly took over Chelsea last year, the billionaire investor quickly took what some in English football would consider a risky opportunity. By offering unusual contracts to players – seven years, or sometimes more – Boehly allowed Chelsea to spread its transfer fees beyond the norm, which took advantage of the Premier League’s low wages.
No one knew it at the time, of course, but the method can now be seen as a model for a specific move for one of Boehly’s investments: the delayed $700 million megadeal that was presented by Boehly’s Los Angeles Dodgers to baseball’s two-way superstar, Shohei. Otani.
In Britain, the reaction of Boehly using the watch has been strong, it ended on Tuesday when The GameDavid Ornstein reports that enough of Chelsea’s rival clubs have voted to shut down his solution to transfer fees. The change of policy brought the league and the European sports governing body, UEFA, which in June made a similar change.
Meanwhile, in the US, the baseball industry is still dealing with the fallout from Ohtani’s tragic trade, information first reported on Monday night. The GameFabian Ardaya. All but $2 million a year will be deferred to 2034.
That Ohtani would agree to such an idea is not surprising. Deferrals have been part of baseball deals for years, with the most famous example being the contract signed by Bobby Bonilla with the New York Mets in 1991 – which still inspires July celebrations. 1, when Bonilla owes an annual payment until 2035. .
But the size of Ohtani’s deferment — 97 percent of the guaranteed salary — is unprecedented.
“It’s no surprise that the biggest contract of all time is the most delayed,” one baseball player said Tuesday. “But on a percentage basis … we’ve never seen anything close to that.”
For the Dodgers, where Boehly is a part-person with the chairman Mark Walter, the additional flexibility that the contract buys is certainly not harmful.
Like Chelsea, the Dodgers have seized a better position than their opponents, working within the rules to improve their ability to spend aggressively and surround Ohtani with talent. That situation became apparent later on Tuesday, when the Dodgers did it was scheduled to meet with pitcher Yoshinobu Yamamoto, The GameThe No. 3 ranked free agent is slated to receive a deal north of $200 million.
The combination between Ohtani and the Dodgers seems to be based on philosophy.
The Dodgers and Boehly are no strangers to delays, baking them in trades for two of their most popular players, Mookie Betts and Freddie Freeman. Meanwhile, people familiar with Ohtani’s agreement insisted that the player himself proposed the arrangement of the contract, and that he was willing to accept similar deals with other agents. So, the partnership with the Dodgers made sense.
Ohtani’s contract was originally a 10-year, $700 million deal, but several extensions paid him over 20-years. In Major League Baseball, contracts that span more than a decade are rare, just as seven years in the Premier League was almost unheard of until Boehly came along.
In both leagues, long-term contracts seem to be a solution to keep spending in check. Whether the system is directly connected remains the most important result. The biggest test to date that the Dodgers faced today is Babe Ruth.
In baseball, a sport that sees incompetence as a part of the game within the game, the structure of Ohtani’s contract has attracted attention, even though so far , there is no serious need for a policy change. But in the Premier League, the grumbling about Boehly’s practices was enough to speed up the changes, although Boehly did not see an investment that destroyed the length of the standard contract in the EPL.
The situation was set for the dispute about ten years before Boehly’s arrival, when UEFA introduced the concept of Financial Fair Play, which works well as a soft fee.
The idea is simple: the more the club has, the more the club can spend on talent. What is not easy is enforcement. Measuring the team’s expenses in a consistent and transparent manner is a challenge. And it is in this gray area that Chelsea, under the watchful eye of Boehly, have found an opportunity when it comes to transfer fees.
In the EPL, the fees paid by clubs to sign players are reduced over the length of the players’ contracts. Depreciation is how accountants spread the value of an intangible asset, such as a player’s contract, over its useful life. It’s the same as depreciation but it applies to real assets, like your playground.
If a club buys a player for a £100 million transfer fee, that deposit is spread evenly over the length of the player’s contract. For a five-year contract, a long-term deal in the EPL, £20 million a year for five years. Chelsea, however, is giving that same player an eight-year contract, which reduces the annual transfer fee to £12.5 million. Three years of salary, but the move reduces the salary to a salary of £ 7.5 million annually.
Those savings add up — and Boehly responded by offering long-term deals.
In January, Boehly paid Ukrainian Shakhtar Donetsk £62 million for Mykhailo Mudryk and gave the player an eight-and-a-half-year contract, the longest in the league’s history. In February, Chelsea struck again by adding Argentine midfielder Enzo Fernandez for £107 million over eight years. And in August, Chelsea set a new British transfer record by shelling out £115 million for Ecuadorian midfielder Moises Caicedo, an amount extended over eight years.
So far this season, which started in the summer window, Chelsea has bought 11 players, all of them in contracts between six and eight years.
On Tuesday, the contract award was finalized. The EPL clubs voted to limit the termination of players to five years regardless of the length of the contract. The change effectively closed the gap – but before Chelsea made a huge investment under the rules of the Gambling Game. Chelsea came with another great victory: despite the action of some clubs to re-use the five-year period, there were many obstacles, especially the threat of the law of the London club.
Chelsea and Boehly have long been out of control at the end, and the Dodgers appear poised to reap the benefits of a unique deal with Ohtani. In fact, savings accounts, as such, are not large in the state. The arrangement of the transaction prevents $ 70 million of expensive taxes every year. But even accounting for deferrals and interest, Ohtani’s average annual salary for tax purposes is still a high of $46 million, surpassing the previous record from Max Scherzer.
“It’s still a work in progress,” said one longtime baseball executive. “That’s the most (expense tax) a team has faced, and that was 10 years ago, not two or three like Scherzer’s previous record.”
Instead of worrying about the tax implications, the executive said, he’s focused on how Dodgers management hopes to improve the back end of Ohtani’s massive trade. Management said: “I’m more than happy with the way the Dodgers are handling their $680 million Ohtani trust fund.”
— With reports The Game‘s Evan Drellich
(Top photo of Boehly: Adam Davy/PA Photo via Getty Images)