Breaking down what goes into athletes’ deals.
$70 million.
That’s the average annual salary Shohei Ohtani is set to make after signing a record 10-year, $700-million deal less than a year ago.
It’s also roughly how much Amazon is paying the NFL to broadcast Thursday Night Football every regular season game week until 2033.
These two numbers have a lot more in common than you might think.
Ohtani, the 30-year-old megastar playing for the Los Angeles Dodgers of Major League Baseball (MLB), was awarded the largest contract in sports history in late 2023, surpassing contracts given to soccer players Lionel Messi and Cristiano Ronaldo. And, while the $700 million headline figure is certainly accurate, the annual salary needs a bit of context.
The contract calls for $68 million per year — or 97 per cent of its value — to be deferred until after 2034. Effectively, Ohtani will receive a $2 million annual salary until that date. It has been speculated that the deferral was structured to help Ohtani avoid California income tax.
Another potential reason for the deferral is that it’s more team-friendly. According to the MLB’s rules, the contract “only” costs $46 million per year towards the luxury tax, a salary comparable to that of other MLB superstars like Max Scherzer and Justin Verlander.
By any measure, however, the contract is historic. And it’s merely the most recent example of increasing player salaries across the biggest North American sports leagues.
Of the 10 largest contracts ever given to athletes by their teams, eight were given in the last five years, and seven were given to pro sports players in North America.
A lot of this has to do with a concept unique to American sports — the salary cap. Caps are a set of stipulations that limit teams’ payrolls for athlete salaries below a given number.
So, what drives salary cap growth? That’s where Amazon comes in.
Well, sports broadcasters like Amazon more generally. Team salary caps and luxury tax thresholds are calculated based on annual league revenues — and no factor affects revenue more than media rights deals.
A Sportico analysis revealed that the NFL is set to receive $12.4 billion in media rights payments from broadcasters this year — and 94 of the top 100 most watched US broadcasts in 2024 were NFL programming.
Media rights are a big deal.
Case in point: the NBA has been, and is, a more popular league than the NHL in the United States, but the two leagues had similar salary caps just a decade ago. Since, the NBA was awarded larger media rights deals and now has a salary cap nearly $60 million higher than the NHL’s.
Why has the value of these media rights deals exploded?
New entrants like Apple, YouTube, and Amazon have shown themselves willing to spend to acquire media rights, effectively introducing a new medium from which to watch sports: streaming platforms. Whereas traditionally, sports were left to legacy broadcasters to be shown on cable TV, these disruptors are willing to out-pay them (or pay them directly) for a piece of the market.
In practice, this pushes upward the amount for which leagues can and do license their media rights.
While these contracts are paid directly to the leagues, North American sports are distinctive in that they share this media rights revenue with all teams equally. This new kind of competition is therefore welcomed by leagues and teams alike. And athletes, too, as they know that for every dollar a company like YouTube spends, they’re likely to get a bump in salary down the line.
Ohtani’s contract was historic — but it seems like the first billion-dollar contract is just around the corner.
