MLB
Are the Los Angeles Dodgers trading their future away with contract deferrals?
Deferred salaries aren’t anything new, but the Los Angeles Dodgers have made an art form of it. But are they securing their future or simply mortgaging it?
The Los Angeles Dodgers are no strangers to bold moves, but their recent financial strategy has baseball fans buzzing. Over the past few years, they’ve committed nearly a billion dollars in deferred payments - a tactic designed to secure star talent while managing short-term payroll flexibility. But is this a brilliant strategy or a ticking time bomb for the franchise’s future?
How Do Deferred Payments Work?
In Major League Baseball, deferred salaries allow teams to spread out payments over time rather than shelling out the entire contract value during a player’s active years. It’s a bit like paying with a credit card. This approach helps teams avoid luxury tax penalties and maintain financial maneuverability. For players, it often ensures a comfortable retirement cushion, with millions flowing in long after their playing days are over.
Deferred payments aren’t new in baseball. Bobby Bonilla, for instance, famously collects $1.19 million every July 1 from a deal signed in 2000. But what the Dodgers are doing now makes Bonilla’s arrangement look like pocket change.
The Dodgers’ Deferred Payment Explosion
Since mid-2020, the Dodgers have become the undisputed kings of deferred salaries. Let’s break it down:
- Shohei Ohtani: $680 million deferred out of a $700 million contract, stretching into the 2040s.
- Mookie Betts: $115 million deferred from his $365 million deal.
- Blake Snell: $62 million deferred on a $182 million contract.
- Freddie Freeman: $57 million deferred from a $162 million deal.
- Will Smith: $50 million deferred from a $140 million extension.
These figures are staggering when compared to the league as a whole. The total deferred salaries for all other MLB teams combined amount to just $271.5 million. The Dodgers, by contrast, owe $865.5 million in deferred payments from 2028 to 2040. That’s a financial promise that dwarfs the competition.
Why Are the Dodgers Doubling Down on Deferrals?
The logic behind the Dodgers’ strategy is twofold. First, it helps them skirt the luxury tax - a penalty levied on teams that exceed a certain payroll threshold. By deferring payments, the Dodgers keep their annual payroll figures more manageable on paper. This allows them to sign or retain marquee players like Ohtani without triggering exorbitant penalties.
Second, deferrals provide the team with flexibility to build around their stars. Ohtani, for example, reportedly proposed the structure of his deferred deal to give the Dodgers room to add more talent around him. And they’ve done just that, with the likes of Mookie Betts, Freddie Freeman, and a freshly extended Will Smith anchoring their lineup.
High Stakes and High Rewards
For now, the strategy seems to be paying off. Betts and Freeman have delivered MVP-caliber performances, Ohtani is a generational talent, and Smith has emerged as a cornerstone for the franchise. These players aren’t just producing on the field - they’re elevating the Dodgers’ brand and, by extension, their bottom line.
But this approach comes with risks. The Dodgers are essentially betting that their star players will remain elite throughout their contracts, and that the financial windfalls generated by championships and ticket sales will offset the looming deferred payouts. If these players falter, the team could be saddled with massive obligations to athletes no longer contributing on the field.
Will MLB Step In?
The Dodgers’ heavy reliance on deferrals raises questions about fairness and competitive balance. Smaller market teams may lack the financial muscle to promise future millions while also building a championship-caliber roster in the present. While MLB has resisted a salary cap, some have called for a cap on deferred payments to level the playing field.
So far, the league has not intervened. Other teams, like the Mets, are beginning to follow the Dodgers’ lead, albeit on a smaller scale. JD Martinez, for example, will collect payments from his one-year, $12 million contract through 2038. But no team is as deeply invested in the deferred game as the Dodgers.
The Long View
The success of this strategy hinges on one thing: winning. For all their spending, the Dodgers need multiple World Series titles to justify their approach. The current era, defined by these massive contracts, will likely close by the mid-2030s. By then, the deferred checks will start coming due, whether or not the championships arrive.
If the Dodgers can leverage their financial wizardry into sustained success, they’ll be hailed as visionaries. But if their stars fade, the team’s future could be hamstrung by decades of deferred obligations. It’s a high-stakes gamble, one that will shape the franchise for years to come.
For now, the Dodgers are all-in, betting that their unprecedented spending spree will deliver a dynasty. Only time will tell if they’ve secured their legacy - or mortgaged it.
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