Cody Snavely
As we get deeper into the Major League Baseball offseason, with December right around the corner, we are just under a year removed from the Los Angeles Dodgers, spending over one billion dollars.
Albeit, a majority of the money was on two players in two-way superstar Shohei Ohtani, who signed a massive 10-year $700 million contract last December, and top Japanese right-handed pitcher Yoshinobu Yamamoto, who signed for a 12-year $325 million deal, the largest contract for a starting pitcher in Major League Baseball history.
However, despite the Los Angeles Dodgers coming off their first full-season World Series championship, the team looks to continue adding via the free-agent market and are preparing to blow past the CBT (Competitive Balance Tax) as it looks to become the next evil empire.
And Andrew Friedman and Co. are off to a hot start this offseason as they’ve signed top left-handed starting pitcher Blake Snell to a massive 5-year $182 million deal this past week before the Thanksgiving Holiday.
However, this signing has sparked a massive uproar among baseball fans. Many have stated that the Dodgers are ruining the game, breaking the parity in the sport, and are even arguing that the league should enforce a salary cap. I am here to offer a counterargument and suggest that the Dodgers aren’t bad for the sport but are what all teams should strive to be.
Looking at the projected payroll from the 2025 Major League Baseball season, the Los Angeles Dodgers are projected to have an active payroll of $211.01 million. Regarding their tax payroll, the Dodgers are yet again projected to exceed the CBT, which is set at $241 million.
Currently, the Dodgers are expected to exceed that total by about $65 million, which will give them a 60% surcharge on any contract signed this offseason. It will also be the Dodgers’ fourth year in a row over the CBT, adding on an additional 50% surcharge.
So, any move that the Dodgers make for the rest of the offseason will be charged 110% of the original agreed-upon contract, and those fees will be dispersed to the other teams around the league that did not exceed the CBT.
Despite what many suggest, there are massive repercussions when a team continues to go over the luxury tax as the Dodgers are doing.
For starters, teams that are $40 million or more over that year’s CBT threshold will have their Rule-4 draft pick moved back ten places, and a team like the Dodgers, who usually would pick in the bottom third of the draft due to their regular season success put them out of the first round altogether.
However, as we know, there is much more to spending. The Dodgers have one of the best drafting and developing systems in Major League Baseball, consistently ranking in the top ten for minor league farm systems despite being a perennial contender.
With the Dodgers on the hook with multiple multi-year contracts over $100 million over the next several years, they’re more than likely to continue exceeding the CBT. And the only way to reset the penalties is to be under the CBT for one season.
The last time the Dodgers reset their luxury tax was the 60-game shortened COVID-19 2020 season, but they have exceeded it yearly since then.
- 2021: $285.5M ($210M)
- 2022: $295.3M ($$230M)
- 2023: $268.1M ($233M)
- 2024: $339.4M ($237M)
Obviously, it is well documented that the Dodgers like to spend, and that is not the problem. The problem is that multiple owners around the league are refusing to spend.
According to Forbes, at the start of the 2024 season, all thirty franchises were worth over one billion dollars, so the idea that teams don’t have money to compete is not the problem.
The difference between the haves and the have-nots is less extreme than many fans or media outlets would like you to believe. Teams like the Pittsburgh Pirates, who had an estimated revenue of $309 million in 2023, only allocated $120 million to their 2024 payroll (38.8%), and when the product on the field is less than stellar, they’ll cry boo-hoo when the team fails to miss the postseason.
And it doesn’t just stop at Pittsburgh as more than half of the league acts this way from Tampa to Oakland; seventeen teams have spent under 50% of their revenue on their on-field product.
Another common theme of teams near the bottom in revenue and spending is their record of winning or, let alone making the postseason.
The formula for making money in the sports business is simple: winning = increased value. While every sport has large market teams on the East and West coasts, this is not the be-all and end-all of financial success.
Take a team like the New England Patriots in the early 2000s, which was valued at $460 million, just over the National Football League average at that time ($430 million). Take a chance on Tom Brady in the NFL Draft, and two decades and six Super Bowls later, the Patriots are now the second most valuable franchise in football at $7.4 billion, just behind the Dallas Cowboys.
Sticking with football, you can look at a mid-western team in the Kansas City Cheifs, which are the most recent success of a dynasty in the making led by star Quarterback Patrick Mahomes, who has led Kansas City to four Super Bowl appearances, winning three of them.
If you look at the Chief’s overall value in 2019 before the dynasty run, it was at $2.3 billion; now, the franchise that is not in a large market is worth more than double today ($4.85 billion) and is a must-watch television.
Even in the National Basketball Association, the Golden State Warriors, who were near the bottom of the barrel in terms of value at $750 million in 2014, are now the most valuable NBA franchise in 2024 at $8.8 billion after winning four championships since 2015.
Even our Los Angeles Dodgers, who were worth $800 million entering the 2011 season before being sold in 2012, are now worth $5.4 billion over a decade later, largely due to the success the team has had since 2013, with four World Series appearances, two titles, and making the postseason every year.
When you put a product that is doomed to fail on the field, it is a no-brainer why the team won’t make any money. It’s not the team that chooses to spend money to prove their team’s chances of winning fault.
The next subject of debate is the use of deferrals in the Dodgers’ recent contracts, which was highlighted last offseason after Shohei Ohtani deferred $680 million of his deal.
Newsflash deferrals have been in the rules since 1985 and are widely used by all thirty teams offering nine-figure deals. They are also available for any team to use with the player’s agreement.
As for the Dodgers’ use of them, it has been well documented. Prior to the 2024 regular season, after the 10-year extension to catcher Will Smith, the Dodgers had $915.5 million in deferral payments from 2028 to 2044.
However, after signing two-time Cy Young Award winner Blake Snell (5-year, $182) and extending utilityman Tommy Edman (5-year, $74 million), each with deferrals attached, that number has risen to over one billion dollars.
- Shohei Ohtani: $680M from 2034-2043
- Freddie Freeman: $57M from 2028-2040
- Will Smith: $50M from 2034-2043
- Teoscar Hernández: $8.5M from 2030-2039
- Mookie Betts: $115M from 2033-2044
- Blake Snell: $60M from TBD-TBD
- Tommy Edman: $25M from TBD-TBD
However, throughout baseball, there are many examples of teams handing out deferrals to superstar players.
Such as Rafael Devers, $75 mil until 2043; Chris Sale, $50 mil until 2036; Francisco Lindor, $50 mil until 2041; Nolan Arenado, $50 mil until 2041; Max Scherzer, $105 mil til 2028, is a common practice many teams throughout the league use.
While the Dodgers have taken it to somewhat extreme levels, according to some fanbases, I would argue it says more about the organization that these many players are willing to take less money upfront and pay it at a later date rather than taking it all in one lump sum now.
Over the last several seasons, the Dodgers have built a culture of winning. The players have bought in on the “Dodger Way” and are doing what’s best for the team. The front office led by President of Baseball Operations Andrew Friedman has shown that they are willing to make moves via trade or free agency while also drafting and continuing to develop talent on a nightly basis. Then, the ownership showed that they were willing to spend big and continue to invest not only in the team but also in the stadium and the business side of the Dodgers.
In a conversation with Rob Bradford of Baseball Isn’t Boring, I asked him if the hate is warranted by the Dodgers continuing to spend and defer money. His response is dead on, stating that the Dodgers are taking advantage of the system that is in place and that all teams can do as well.
Another element of the Dodgers’ taking advantage of the market is the situation around the league. Teams’ television deals with multiple teams, such as those who used Bally Sports, now generate little revenue, with Major League Baseball taking over their broadcasting rights.
Before the 2013 season, the Dodgers inked a new 25-year $8 billion deal with Spectrum, the largest RSN contract in baseball. The deal generates over $300 million annually for the Dodgers’ baseball operations.
With more than half the league suffering from the Bally Sports problem and a few big-market teams like the Red Sox and Yankees reluctant to give out massive deals, the Dodgers have stepped up, offering up the cash, years, and the ability to join a winning team—a deal that is hard to pass up.
Overall, the Dodgers will continue to spend this offseason. They’ll continue to make trades to better their roster and compete for multiple World Series Championships—as they should.
And as MLB insider Ken Rosenthal stated on his last appearance on Foul Territory, when the subsequent labor discussion comes up after the 2026 season, there will likely be yet another work stoppage if the owners are hellbent on a salary cap.
While many will argue that the growing issue in baseball is the ever-increasing gap between large and small market teams over the last few years, I’d argue that the larger issue is teams refusing to spend money, which in turn gives the Dodgers an advantage
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