In his capacity as a Columnist for California Sports Lawyer®, Founder and Managing Attorney Jeremy Evans has written a column about the use of deferred money in entertainment, media, and sports contracts and the value of such deals.
You can read the full column below.
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What are the benefits of the deferred money in sports contracts. Is deferred money allowed in other industries, namely in entertainment and with actors? Why is deferred money allowed in sports and other industries? Why do all teams or studios not use deferred money in contracts? These are some of the questions fans and experts may be asking themselves and others when it comes to deferred money in contracts.
The Los Angeles Dodgers front office is led by current and former Guggenheim Management executives and a collective of baseball and business minds that rivals that of any sports team now or ever in existence. The results are clear. Since Guggenheim purchased the franchise for $2.15 billion in 2012, the Dodgers signed a $8.35 billion television deal, upgraded the stadium (eight times), have led the league in attendance, have made the playoffs every year since 2013, went to the World Series four times, and have won two championships (2020, 2024).
A complaint made by many is that the Dodgers have spent money and used deferred contracts to buy wins. That is a fair question that needs addressing. First, deferred money is a common occurrence in sports and entertainment contracts. In entertainment for example, actors often take a non-guaranteed percentage (or points) in a film or series by residuals or syndication. Second, in sports the collective bargaining agreements (“CBA”) allow or forbid the deferment of money in contracts. Every team in Major League Baseball (“MLB”) has access to the ability to defer money in contracts according to the CBA, but whether a team accesses that ability or a player accepts the offer is in their discretion. Third, until MLB requires a minimum spend, teams and their owners can continue to avoid spending money short of a grievance being filed by the MLBPA with threat of losing revenue sharing coming from the teams maintaining collective player salaries above the luxury tax threshold.
From a business perspective, why would a studio or professional baseball team defer money in contracts? In entertainment, it comes down to studios not wanting to front cash until seeing how the film or television series performs with viewers and box office. The financial deferment is subject to performance like an incentive provision in a sports contract. In sports, a team might want to bring in more talent, but not be subject to a high luxury tax rate so the player and team agree to deferred money to help build a stronger team. The equivalent comparison might be a player taking less money to win and build a team.
However, with the amount of deferred money increasing, eventually it will harm the bottom line right? Not necessarily. First, imagine that the luxury tax threshold will continue to increase so teams will not be subject to the same rules in 2048 as compared to 2025. Second, team ownership could simply sell the team and all debts to make a profit before having to pay on the debt. Third, a player taking a payout over a longer period of time to avoid overspending and encourage investment is a positive result (it may also mean a lower tax rate). Fourth, and possibly most important, a team spending money and being successful in winning a championship always increases attendance, merchandise sales, brings in more dollars, and more players are interested in playing with a team as a destination thus leading to more success. After all, the purpose in sports is to win, right? That should be a rhetorical question.
There is also the business principle of overpaying to put more pressure on competitors and to stay competitive. There is also the juxtaposition that a sports team is only as good as its farm system and the development of players, rookies, veterans, and everyone else in between. The Dodgers and other teams with success in making and winning in the postseason all have one thing in common: terrific player development, great players, and good personnel. Remember, the best franchises in sports demonstrate the four tenants, consistently: a great venue, lease, market, and personnel. There is of course the thought that a player could perform poorly and a team would be paying large amounts of money to a player not playing anymore (or not playing well). However, Bobby Bonilla’s $1.19 million paid every July 1 through 2035 is worth a lot less in 2025, then in 2000 or even 2011, because of inflation, team valuation, and the standard for player contracts. For context, the MLB minimum salary was $740,000 per year for 2024, and will increase to $760,000 in 2025 and $780,000 in 2026. The MLB minimum salary in 2000 was $200,000, while in 2011, it was $414,000.
In sports and entertainment, teams and studios take risks. Calculated risks that may feel like gambling dollars and cents. However, the owners and front offices must take risks to win and if it raises the bar of competition, so be it. The fans, players, and leagues are better for it by experience and expectations.
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About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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