What if the key to baseball’s future lies in a strategy that only one team can currently pull off?
As the Winter Meetings approach, the Los Angeles Dodgers bold approach to contracts has helped them set the foundation for a dynasty, potentially redefining how teams approach roster construction in the process.
Meanwhile, the Soto sweepstakes loom large, promising to shape the offseason in dramatic fashion. Let’s dive into why the Dodgers’ new strategy might be good for baseball—and how the Juan Soto saga is playing out so far.
Dodgers Spending Habits
"The Los Angeles Deferrals", "Deferring Dodgers", "Sport Ruiners". These nicknames have been thrown at the Los Angeles Dodgers recently, especially after signing another marquee player to a big contract...with deferred money. While some view this negatively, Andrew Friedman’s strategy is a masterstroke—one that’s not just beneficial for the Dodgers but for baseball as a whole. The best part for Friedman? It might only work for them.
The Dodgers have signed plenty of stars in recent years, persuading them to agree to some form of deferral in the contract. Shohei Ohtani's deal is the most notorious example, deferring 680 million of his $700 million contract to 2034-2043. However, other players such as Mookie Betts, Freddie Freeman, Teoscar Hernandez, Blake Snell, Tommy Edman, and Will Smith have also agreed to Deferrals
Why it Works for Players:
The benefits for players are clear:
- Tax Advantages: Deferring income allows players to reduce exposure to California's high state taxes
- Financial Flexibility: Future earnings from deferred contracts don't reduce players' ability to sign new lucrative deals. For example, if Ohtani signs another contract worth $30 million annually after 2034, he'd earn that $30 million plus the deferred $68 million from the Dodgers, totaling $98 million annually (pre-taxes).
Why it Works for The Dodgers:
From the team's perspective, deferrals provide immediate financial flexibility and extend their championship window. For example, Ohtani only being paid $2 million cash from the Dodgers allowed them to sign Yoshinobu Yamamoto to a historic deal. Additionally:
- Luxury Tax Relief: the luxury tax calculation is based on the adjusted average annual value (AAV) of the contract. Ohtani's $700 million/10-year deal has an AAV of $46 million, not $70 million. This $24 million difference could save the dodgers hundreds of millions in taxes over time.
- Competitive Advantage: By lowering their luxury tax burden, the Dodgers are able to offer more guaranteed money with lesser tax implications since the payments are spread over a longer period of time than the contract.
One thing that helps the Dodgers is that they are currently the premier destination for most players. They've been a model in terms of player development and team-building. Almost every player can improve with the Dodgers player development staff and will be competing for championships. Now, the Dodgers have found a way to mitigate the biggest con (California Taxes) that come with playing for them, while also giving them more financial flexibility to improve the roster.
Soto Sweepstakes
As of now, five teams have reportedly made formal offers to Juan Soto: the Red Sox, Mets, Yankees, Blue Jays and Dodgers. However, it's unlikely these are their final offers. Soto's decision-making process isn't only about getting a record breaking contract, but also about joining a team poised for perennial World Series contention. In his initial meetings with teams, he reported asked about player development, roster-building plans, and long-term competitiveness among other things.
Red Sox
The Red Sox have significant roster holes to fill, including adding multiple starting pitchers and upgrading at least two infield spots. While their farm system is among the best in baseball, their prospects remain unproven at the MLB level. Adding Soto would help, but their issues may require trades—like one for star lefty Garrett Crochet—to truly compete.
Mets
Even with Frankie Montas signed, the Mets still desperately need starting pitching. They also face uncertainties at first and second base, especially with the potential departure of Pete Alonso. Swapping Soto for Alonso might improve their lineup but wouldn’t close their competitive gap with teams like the Dodgers or Padres.
Yankees
The Yankees seem to be set with starting pitching (even though they could use more), but still have three holes they need to fill. Depending on where Jazz plays, two of left field, second base and third base, as well as first base needs to be addressed this offseason. Additionally the Yankees are losing multiple reliable bullpen arms and will need to bolster their pen.
Blue Jays
The Blue Jays face an uphill battle. Burdened by large contracts for George Springer, Kevin Gausman, and José Berríos, they also need to extend Vladimir Guerrero Jr. If signing Soto means losing Vladdy Jr., it’s hard to see Soto committing to Toronto. They'll also need more from Bichette/have a plan to replace him, as he was terrible in 2024 and probably isn't in the teams long term plans anymore.
Dodgers
If Soto wants to win championships, he should sign with the Dodgers. They have multiple stars locked up for years, just beat him in the Yankees in the World Series, and have the best player development in the sport. However, the Dodgers have so much money on the books and Soto has said he does not want to sign a deferred contract, making his salary a tough fit into the Dodgers payroll. They'll keep doing their due dilligence to see if the market breaks their way, but they probably won't be willing to make the financial commitment required to get Soto's services.
Dark Horse: Phillies
While they haven't made a formal offer yet, the Phillies have had reported interest in Soto. They're a very complete team, with a strong pitching staff and strong lineup. The Phillies could reunite the ex-young Nationals stars Trea Turner, Juan Soto, and Bryce Harper, complimenting them with Kyle Schwarber, JT Realmuto, and others. The front office has been aggressive in past years and they might be willing to spend, especially if they're able to move Nick Castellanos to free up some cash and a spot in RF for Soto.
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