The Opportunity Cost of Winning: Inside MLB’s Rising Wave of Deferred Money

Finance and accounting professionals don’t make SportsCenter, and that’s okay. But if you look at the ways in which teams are getting creative to maintain a competitive advantage, there’s an argument to be made for an addition to baseball’s Golden Glove and Silver Slugger awards: The Platinum Ledger.

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You've seen the headlines, MLB contracts are getting longer and bigger. Shohei Ohtani: $700 million over 10 years, $680 million deferred a decade down the line. Bobby Bonilla: Still collecting checks 20+ years after retirement. Juan Soto's deal will likely shatter records.

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To most fans, these deferrals look like financial gymnastics—confusing at best, shady at worst.

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But here's what the back office nerds realize: The deferrals aren't just about saving money and luxury tax avoidance. They're about meeting the differing needs between players and clubs.

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As FloQast's CFO, I look at these deals and I don't see confusion. I see beautiful, rational financial decision-making. It’s not just about interest rates or inflation; it’s a story about risk, leverage, and the most important concept in economics: opportunity cost.

The Player’s Dilemma: Betting on "Me, Inc."

Imagine your entire net worth, your entire career earnings potential, and your family's financial security are tied to one single volatile asset. That asset is your body.

That is the reality for a Major League Baseball player.

When a player hits free agency in their prime, they have incredibly high leverage. They are the shiny object every General Manager wants. This is the moment they can demand the moon, and why not? Your prime only last so long. However, they also face terrifyingly high long-term risk.

The Risk Curve

From a financial perspective, a player has zero diversification. They can’t spread their risk across an index fund of other shortstops. Their portfolio is 100% "Me, Inc."

If they sign a short-term deal and tear an ACL next week, or their bat speed slows down just a fraction, their value doesn't just dip—it craters. Their market value is far more likely to drop from $40 million to $1 million than it is to jump from $40 million to $60 million. The downside is a cliff; the upside is a plateau.

Because their risk curve is so steep, the smartest financial move is to lock in the maximum guaranteed value for as long as possible. If a team says, "We will guarantee you $300 million, but we need to pay you $50 million of it in 2035," the player usually takes the deal. Why? Because that $50 million is guaranteed. It protects them against injury, salary cap changes, or a sudden inability to hit a curveball.

They trade the opportunity of free agency and the time value of money for the certainty of money.

The Team’s Advantage: The Luxury of Time

On the other side of the negotiating table, the club is in a totally different position.

In the short term, the team has very little leverage. They need to win now to sell tickets. But in the long term? They hold all the cards.

Certainty and Control

Unlike the player, the franchise isn't going to retire at age 38. They aren’t going to injure their wrist dirtbiking (and subsequently telling their team they broke it washing their truck). Teams have high future certainty. They know they aren’t going bankrupt. They have control over their revenue streams and can adjust their strategy as the market changes.

Teams can ramp investment up or down. They can trade assets (players). Over a long enough timeline, they can even lobby the league to change the rules of the Collective Bargaining Agreement (CBA) to favor their finances.

Because they have this long-term stability, they are willing to hand out massive numbers, provided they can control when that cash leaves the building. Deferrals give them leeway. It smooths out their cash flow management, allowing them to keep the lights on and the roster full without hitting a liquidity crisis.

Diversification

Crucially, the team is diversified. They are making bets on 26 active players, a minor league system, scouts, and so much more. They have big contracts, small contracts, rookie deals, and veteran minimums. If one asset underperforms, the whole enterprise doesn't collapse.

This allows them to absorb the liability of a long deferred contract much easier than a player could absorb the risk of a short-term "prove it" deal that went awry.

It’s Not Just Interest Rates: The Opportunity Cost of Winning

When finance types talk about deferred payments, we usually default to the "Time Value of Money" (TVM). It’s the basic principle that a dollar today is worth more than a dollar tomorrow because you can invest it.

While TVM is definitely a factor here—teams love paying with cheaper, inflation-depreciated dollars in the future—the more interesting angle is Opportunity Cost.

Opportunity cost is simply the value of the next best alternative. If a team pays a star player $50 million cash today, that is $50 million they cannot spend on anything else.

By deferring $40 million of that salary, they free up cash flow right now. What can they do with that liquidity?

1. Stack the Deck

They can go sign two solid roster players. Maybe an undervalued pitcher who can shore up the rotation in a pinch, or a utility player who desperately wants to bat in front of the superstar you just signed. Suddenly, you aren't just adding one player; you're building a super-team, and a deep one at that.

This creates a virtuous cycle. Players want to win. If deferring money allows the team to sign more good players, the superstar is often happy to do it because it increases their odds of a championship.

2. Funding the Future with Today's Wins

This is the part that really piques my interest as a CFO.

If a team owes massive payments in 2034, they need revenue in 2034. How do you ensure you have revenue in the future? You build a massive fanbase today.

If the deferred money allows the team to win a World Series now, the financial impact is enormous. They can raise ticket prices. They sell more hot dogs and beer. Advertising rates for the stadium go up. Merchandise sales skyrocket.

They are essentially using the deferred savings to finance a product (a winning team) that generates the revenue needed to pay off the debt later. It’s a brilliant usage of working capital. They are leveraging short-term flexibility to maximize the asset's value, banking on the fact that a championship banner flies forever—and keeps fans buying jerseys for decades.

3. Execute capital investments

You know what teams can do with that $50M? They can invest in revenue generating activities. Maybe it’s three new restaurants outside the stadium to drive year-round revenue. Maybe it’s a new luxury box section to drive increased ticket sales. Or maybe it's identifying and acquiring franchises in other sports, which would enable operational efficiencies in franchise management and downstream effects like cross-marketing and creating fans in new locales.  

The Bottom Line

Now, more than ever, baseball is a game driven by stats. But the most important numbers aren't always on the scoreboard—they’re also on the balance sheet.

Deferred payments might look like "kicking the can down the road" to a casual observer. But when you peel back the layers, you see a sophisticated dance of risk management.

For the player, it’s about locking in generational wealth in a career that is statistically likely to be short and volatile. For the team, it’s about leveraging long-term stability to maximize short-term cash flow, diversify their portfolio, and buy the one thing that generates more revenue than anything else: Wins.

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