When the Boston Red Sox made the signing of Alex Bregman official for $120 million over three years, they managed to execute a financial maneuver that very few teams would think to make. The astute $20 million-a-year extension allows them to maintain financial flexibility for future transfers. This can be considered an evolution of baseball economics.
Could this be the new model to follow to secure the talent of the great sports stars? It is likely that the Boston Red Sox could have rewritten an unwritten rule in MLB.
Deferred contracts have become a tool to keep expenses low and avoid exceeding the salary cap set by Major League Baseball executives. On this occasion, the Boston Red Sox have adapted a path that teams such as the Los Angeles Dodgers and New York Mets have adopted to some extent.
How beneficial are these economic movements in the long term?
In the case of Alex Bregman, Boston’s management will be able to manipulate the payroll more effectively by spreading the payments over a period of time, in this case three years. With the salary cap per year below the stipulated amount, the Boston team will be able to look for another star under the same approach that it has started. Undoubtedly, a new task for the Commissioner in case it is necessary to modify the financial rules.
What other teams have generated deferred salary?
Washington Nationals: Max Scherzer has a $210 million contract through 2028, but $105 million is deferred.
New York Mets: They deferred $50 million of Francisco Lindor’s $341 million contract to manage salary flexibility.
Boston Red Sox: They can ignore the high luxury tax penalties and free up resources for mid-season signings. This will help the team manage space for future big-name signings.
Deferred contracts are becoming more commonplace in MLB. In the case of the Los Angeles Dodgers, they have aggressively embraced this approach, with nearly $1 billion in deferred salary commitments over the past five years.
If Alex Bregman’s contract works with the Boston Red Sox, it could be replicated by other MLB teams, even this year. However, every battle strategy has an element of risk once the player’s salary can be postponed a few more years in the event of retirement and payments limit a financial adjustment for future campaigns.
Just as the Baltimore Orioles do with Chris Davis, who deferred a vital part of his $161 million contract and years after his retirement still receives annual payments, limiting their payroll flexibility.
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