MLB Salary Deferrals: Risk or Reward?

Major League Baseball Commissioner Rob Manfred has raised concerns about salary deferrals, calling them “problematic” for teams with limited financial resources. He points to the 2004 Arizona Diamondbacks, who collapsed under $254 million in deferred salaries, as an example of the risks. Manfred argues that excessive deferrals could destabilize teams’ long-term finances and harm the league’s competitive balance.

The Los Angeles Dodgers, however, have turned salary deferrals into a strategic tool. By postponing payments on massive contracts, such as Shohei Ohtani’s record-breaking deal, they maintain short-term financial flexibility while building a championship-caliber roster. The Dodgers owe over $1 billion in deferred payments extending into the 2040s, yet their $5.5 billion valuation and strong revenue streams mitigate the risk.

The key lies in leveraging new revenue sources. Ohtani, for example, brings substantial international income through Japanese broadcasting rights, merchandising, and global fan engagement. Modern MLB rules also require teams to set aside the present value of deferred salaries within 18 months, ensuring players get paid while reducing financial risk.

Manfred’s concerns extend to smaller-market teams, which lack the Dodgers’ financial strength. Excessive reliance on deferrals without diverse revenue streams could create long-term instability for these franchises. The challenge is ensuring that deferrals remain a strategic option rather than a risky necessity.

The debate highlights MLB’s changing financial landscape. Wealthier teams like the Dodgers can responsibly use deferrals to enhance competitiveness without jeopardizing stability. Critics view this as an unfair advantage, but it demonstrates that, when managed properly, deferrals can be sustainable.

Looking ahead to the next collective bargaining agreement in 2026, MLB faces a balancing act. Eliminating deferrals entirely would stifle financial flexibility for wealthier teams without solving the struggles of smaller franchises. Instead, strengthening oversight and regulations can ensure deferrals remain a tool for success while preserving fairness across the league.

The Dodgers exemplify how deferrals, paired with financial planning, can work. However, Manfred’s warning serves as a reminder that such strategies have limits. For MLB, the key is balance—maintaining innovation and financial health across all markets.

This article was inspired by reporting from Evan Drellich of The Athletic. You can read the original article here.