Don't buy sticker price: Orioles' use of deferred money in contracts helped land Cobb

Orioles executive vice president, Dan Duquette, discusses the team’s four-year, $57 million contract with right-hander Alex Cobb—a club-record layout for a pitcher—and why he believes Cobb will be a good fit for 2018 and beyond. (Jon Meoli, Baltimore Sun video)

Almost every long-term free-agent deal the Orioles have given out in recent years has included deferred money, which adds to the overall value of the player's contract while lessening its impact on the present-day payroll.

It's been a feature in Orioles contracts as far back as those signed by Ubaldo Jiménez and J.J. Hardy in 2014, and has been part of deals with Chris Davis, Darren O'Day and Yovani Gallardo (2016), plus Mark Trumbo (2017) and Andrew Cashner (2018).


While introducing new right-hander Alex Cobb, who has a four-year, $57 million deal that is reportedly heavily structured toward deferred money, executive vice president Dan Duquette said it's a structure that benefits both sides.

That's especially true in the case of Cobb. The Orioles are able to fit him onto this year's roster in part because of other players’ deferred money.

"It's good for everybody, for the organization and the player," Duquette said. "The player has long-term security and it's good for the organization as it allows you to maximize your team each and every year."

Cobb's signing certainly fits into the idea of using deferred money to strengthen this year's team.

The Orioles have five players with known deferred money on their contracts — Cobb, Cashner, Davis, O'Day, and Trumbo. Right-hander Chris Tillman has some deferred bonuses for this year, too. (All contract details via Cot's Baseball Contracts unless otherwise noted.)

Davis has the biggest deferred commitment, with $42 million of his $161 million to be paid out after the contract is over, beginning in 2023 with $3.5 million per year through 2032, then $1.4 million annually from 2033 through 2037. That brings Davis' salary down from $23 million to $17 million on this year's books.

O'Day also signed after the 2015 season, inking a four-year, $31 million deal with $1 million deferred and paid beginning in 2020, knocking his $9 million 2018 salary down to $8 million in present value.

The deferred commitment is also moderate for Trumbo, who will receive $1.5 million of his $12.5 million salary this year as deferred money as part of his three-year, $37.5 million contract signed last offseason. There's a total of $4.5 million deferred on that deal, payable beginning in 2020 in three installments.


This offseason, Cashner received a two-year, $16 million base deal including a $3 million signing bonus deferred and to be paid in $1.5 million installments in 2020 and 2021. That lowers his 2018 base salary to $5 million, with incentives to bring it higher.

Cobb's deal has $20 million of the $57 million deferred, according to MASNsports.com. The Orioles will start paying Cobb that money after his current four-year deal expires following the 2021 season. Cobb will make $14 million this season with $6.5 million deferred, making the present value $7.5 million, according to Press Box. He will have $4.5 million of his salaries from 2019-21 ($14 million in 2019-20 and $15 million 2021) deferred with $2 million being paid in 2022 and $1.8 million paid annually from 2023 to 2032.

If the math seems tidy, that's because it is.

Miguel Castro allowed five runs in three innings in the Orioles' 9-4 loss to the New York Yankees on Wednesday night.

The Orioles are essentially fitting Cobb on this year's payroll into space made by deferred money to Davis, Trumbo, O'Day and Cashner totaling $10 million. And using this method, they were able to sign a quality free agent to a four-year deal onto this year's payroll, and have three veteran starters in Cashner, Cobb and Tillman making a base of $15.5 million.

The other half of this equation comes in the money owed once players are gone, which the Orioles are now getting into on some of their earlier contracts.

Gallardo's deal included $2.5 million deferred in 2016 with $1 million deferred in 2017, though the Seattle Mariners are on the hook for part of it. The Orioles must pay their portion beginning in 2019.


Jiménez had $2.25 million per year deferred, a total of $9 million, which they'll begin to pay off this year. Hardy's deferred money on his three-year contract signed ahead of the 2014 playoff run totaled $6.5 million, but since the Orioles paid him a $2 million buyout in lieu of picking up his $14 million option for 2018, that could kick in in 2019 as well.

What's unclear is how such money is accounted on the team's ledgers. The payments, like all major league contracts, are guaranteed. Duquette's assertion that deferring money allows a team to maximize current resources indicates that the money isn't considered a part of the present-day payroll.

With rising revenues across the game, even a cost-conscious team could look at a commitment of $5 million or $10 million five years down the line and consider it the cost of doing business, and a team that likely has one last shot at winning with a generational talent such as Manny Machado and All-Stars Adam Jones, Zach Britton and Brad Brach can talk itself into using this method to put the best team on the field now.

Clearly, it's worked for the players, too. Each of them received a contract considered fair-market value at the time, and perhaps slanted toward the player in retrospect considering the total value.

The Orioles were about to hand a prime-time assignment to top pitching prospect Hunter Harvey Wednesday against the New York Yankees, but Tuesday's rainout and the addition of Alex Cobb to the rotation conspired to see him sent out of major league camp.

Present-day value might bring that down on the club's side, but the player and his representatives benefit from the total money paid, and having deferred payments can keep a player at ease about a possible next contract as it lessens burdens about investments and financial security knowing the money is coming later in life.

But it's not for everyone. According to Cot's team pages, the Boston Red Sox have an undisclosed amount of money owed to second baseman Dustin Pedroia. No other team in the American League features even one player with a contract structured that way, according to Cot's info.

There are many more in the National League, with deferred money listed on Cot's from 15 active deals, including former Orioles Matt Wieters with the Washington Nationals and Wei-Yin Chen with the Miami Marlins.

Some of the biggest deals signed in recent years occurred in the NL, including star pitchers Stephen Strasburg of the Washington Nationals ($70 million of his $175 million deal deferred) and Arizona Diamondbacks right-hander Zack Grienke ($62.5 million of his $206.5 million deal).

Of the roughly 20 contracts with deferred money listed across the league, there seem to be two archetypes — top-of-the-market players who needed the overall value of a deal to be in line with expectations, and January-or-later signings for teams trying to fit stars into budget constraints while allowing the player to save face financially.

The Orioles have dabbled in both. And if this works out, they could be as known for deferrals on a smaller scale as they are for their spring training free-agent signings and proclivity for home runs.

Deferred money is the new Oriole Way.