Why the CBA is bad for almost everyone

Why the CBA is bad for almost everyone


Why the CBA is bad for almost everyone

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Like a lot of people, I use Twitter. I have found Twitter to be a useful and enjoyable tool that I use “professionally”. While watching countless basketball games on my own, I use Twitter to connect with other people and also to pull the news I want to read, and need to know, in real time to stay on top of my industry.

Anyone who knows me will tell you from time to time I can be an excitable person. I will always be passionate about my issues that surround my clients and all NBA players, so it will be of no surprise to some people when I say I recently came across some news via Twitter that gave me the urge to crush my phone in my hands!

The tweets I was reading were regarding a story line of marquee players being put in the position to take less than maximum contracts to give their teams greater salary cap flexibility. It has become (to me) a strange narrative that I believe originated with a player being asked the question off-the-cuff by a member of the media. I don’t think the player truly understood the implicated and the real world applications, so I’d like to explain how this process would really work, in practice.

The most recent example of this story line was this past weekend at the All-Star Weekend in New Orleans.

USA TODAY Sports ImagesCarmelo Anthony was quoted as saying he would consider taking a pay cut to help the ownership of his team have the flexibility to build the team on the whole. In theory it’s a great sentiment displaying a selfless aspect of a great player, but here is reality behind the sentiment of Melo’s trying to lend his hand in to assist…

If every player opts in, the Knicks will have approximately $68 million committed to 10 guys and Carmelo’s cap hold will be $22,454,402.00 – making the New York's total salary approximately $90 million. This number eliminates New York from having any exceptions to complete their team other than the tax payer mid-level and veteran minimum contracts. 

This means that for Carmelo to give the Knicks added flexibility, he would either have to take a contract that is no more than $4 million per year or opt in to his current contract and take a pay cut next summer when the contracts of Tyson Chandler and Amare Stoudemire expire. Taking this option would result in Carmelo sacrificing $80 million or so available to him this summer.

On the off chance that he does opt out and decides to take a contract that would have to be below the league average, he would have to decide to do this on the very first day of free agency to eliminate his cap hold and thus allow the Knicks to be a player in this market with exceptions. This would give the team a high degree of flexibility in comparison to what they are currently slated to have (To re-sign Toure Murry i.e he should totally do it..)

But this would mean Carmelo is then choosing to give up approximately $18 million per year or more.

I know there are a lot of people who are going to say, "He’s made a lot of money and at some point his legacy should mean more than the money."

To someone making this argument, I would probably decline to respond.

The truth is we are looking at this from two perspectives… I’m looking at this from inside the vacuum of professional sports where the reality is that money matters (and, to be honest, it should). In the thought process of the great Jay Z, there is a difference between a 4.0 and a 4.6 – there just is.

Also we are talking about one of 450 people that are the best in the world at something and in Carmelo’s case arguably one of the Top 10. The reality when speaking about sports and entertainers is that when you’re the best at something, you will and should be highly compensated.

Getty ImagesThe flip side of this argument is that the team owners and the NBA as a whole are compiling record in profits and sale prices of their franchises. Mark Cuban was recently quoted as saying he believes each NBA team will have a value of over one billion dollars within the next five years. When examining the numbers, it’s hard to argue with him.

Looking back 14 years ago, Cuban bought the Dallas Mavericks for a reported $285 million. Last summer the Sacramento Kings, in one of the leagues smallest markets and severely mismanaged for year, sold for a reported $548 million dollars – almost double.

It’s easy to see that a new breed and generation of owners, like Cuban, have made a big difference in just 15 years. But at the same time, you could also argue that in the Mavericks' case a certain international superstar that also came to Dallas at the beginning of Mark Cuban’s tenure as owner also had something to do with the turn in that franchises fortunes…

The new CBA is bad not only the players, but also for the league and the fans. 

In my opinion, the biggest failing of this CBA is the fact that it increases the value of assets that are counterproductive to the on-court product or the understood fundamental goal of sports: winning.

In this CBA, regardless of the market your team is based in, things like draft picks and salary cap space are at a premium above and beyond the actual on-court product. And even if you are a team with a large budget with a win-now mindset, like the New York Knicks, Brooklyn Nets or Los Angeles Lakers, your efforts to execute your plan not only are financially highly punitive but, in some cases, are not permitted in this CBA through the removal of salary exceptions based on the tax level a team puts itself in.

The by-product of this CBA is resulting in growing a number of things that are not positives for the league.

1. The league is going to get younger and more North American

As more and more teams become apprehensive about being in the tax, a loop hole that has been discovered to a point but will be exposed even more: the cheapest available contract in the NBA is a second-round pick signed to a rookie minimum contract.

A rookie minimum contract is $490,180.00, but the difference between a drafted second-round pick minimum deal and a undrafted rookie minimum deal is an undrafted rookie signed to a rookie deal of $490,180.00 is counted as $884,293.00 for tax purposes whereas a second-round pick rookie deal signed to the same deal actually counts as $490 180.00. That a difference of $394,113.00 in terms of the salary cap.

While this may not seem to be a huge amount, there are currently six out of 30 teams in the NBA within approximately a million dollars of the luxury tax line give or take. To those teams, these contracts of a true $490,180 are at a premium and will be even more so moving forward.

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Another added issue of the increased value on second-round picks as the cheapest form of labor and a stop-gap for close-to-the-cap teams is new commissioner Adam Silver stating his intention to raise the draft age to 20 for North American-born players.

I personally agree with the sentiment that from a product standpoint the age limit makes sense, but this is going to come at a time where there is increased need for draft picks to sign contracts to play in the NBA but will lessen the talent pool, drastically.

The difference will not be made up by foreign prospects as the suitable players in that market usually have buyouts that count against the cap or won’t agree to play for minimum contracts.

Thus these needed 30 draft positions in the second round will more and more go to North American-born NCAA players based on decisions other than merit. One of the huge value explosions in the NBA has been the extent to which the game has become globalized with a many of the international players coming as second-rounders.

Manu Ginobili, Goran Dragic and Marc Gasol were all second-round picks, and it is not to say that this won’t happen moving forward but the incentive for it to happen will be greatly decreased. The identification of the value of second-round picks will cause the league to get younger, with veteran players who contribute in ways that aren’t always readily seen replaced by cheaper, less experienced players. 

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2. The effect on on-court product

With draft picks and financial flexibility at a premium, the NBA has incentivized losing. Watching the Philadelphia 76ers lose back-to-back games by 40 before the All-Star while at the same time being $5.1 million below the minimum salary line is a positive for no one.

Another example: The Lakers are the league’s most profitable team and two weeks ago they found themselves in a situation where they literally ran out of players to finish a game because they felt it was financially prudent (and they were right) to enter a game with less than the full amount of players under contract possible to them.

Although I guess we shouldn’t complain because then we would never have seen Chris Kaman laying down on the bench and the numerous memes that it provided. My personal favourite (Canadian) was the Viking funeral shot.

So what’s the fix?

As an agent, it is not often my job to identify the fix, my job is simply to tell you what the problem is and clap my hands and walk off as my music plays (my choice would be Desperado). But on this topic I actually do have a suggested fix.

Currently the market is extremely slowed down, frozen in a sense, and teams that make a mistake are being kept down longer as each team trying to compose a trade is hoping for the same things: Either to obtain draft picks or unload unwanted money.

This slowdown in the market takes away from one of the most entertaining non-basketball aspects of the NBA, which is movement and trades.

In my opinion, one way to open up the market would be to give each team the opportunity to sign one player to what would be termed a “franchise player” contract.

While the player is with this team, this contract would not count towards its total salary in reference to the cap. The thought would be that this contract is given to one of each team’s marquee players.

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In this NBA season, one team, the Brooklyn Nets, is more than $20 million over the tax line which basically represents the average max contract in the NBA.

Giving each team the opportunity to keep one player at a value contract while at the same time not clogging up the rest of their salary situation would be hugely beneficial across the board and would help in numerous ways to open up the market, which I believe would be of a benefit to everyone.

I am of the belief that there should be a salary slot deemed a "super max" for the truly extraordinary players. It is my opinion, shared by many that today’s bonafide NBA super-duper stars are the lowest paid stars in all of sports and entertainment.

Now I will say for this idea the complication is the NBA and NBPA agreed to a 50/50 split of the BRI and a clause like this is why the NBPA didn’t initially want to agree to a 50/50 split.

Ultimately the NBA doesn’t care how the 50 percent they’ve said is the players share is divided so the Union being a Union of all the members did an extremely admirable job of trying to find an even ground for all the players to profit.

A clause like the one I am about to suggest would require a change in the BRI split as paying the super star players their value would effect equality of pay to all NBA players.

Teams with one of these stars would have them and then 14 minimum contracts and the BRI calculation for the entire league would be thrown out of wack, which I would argue is close to happening now, but that’s another 3,000 words for another day.

I digress…

In the NBA, the average salary in is $5.56 million this season, which is the highest average salary in any of the four major North American professional leagues.

This comes at the sacrifice of the star players. The NBA caps maximum salaries. Using the Top 5 highest paid players in each of the four major leagues as a representation, the NBA is of the third of the four leagues in average salary.

The NFL’s 5 highest paid players make $33.4 million a year on average. MLB: $25.14 million. NBA: $23.48 million. NHL: $8.6 million.

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My argument in reference to Carmelo Anthony, Kobe Bryant and Dirk Nowitzki being asked to take lower than the max contracts to assist their teams to fill out their rosters would be that these players at this level have already sacrificed a tremendous amount by even accepting a CBA with maximum amounts on their contracts. They can't now be asked to sacrifice even more on top of the original sacrifice.

The NBA has always thrived when the relationship between the league and its players was viewed as an equal partnership. Each side profited and each side was viewed as equally responsible for the success of the league and protected by the greater entity.

If the franchise values are growing to be worth one billion then the flexibility and money used to create and construct teams and the market itself should also grow.

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My criteria for a super max would be for a player who has achieved a certain number of deemed items. Items such as All-League 1st team, MVP or All-Star teams that you take a while to accomplish. Most players would have to wait till their third contracts to hit these goals, thus making these the deals signed by bonafide stars at about the age of 28 or 29, which is basically an NBA player's prime.

When achieved, that player would qualify for a super max contract that would have a dollar range that is between one dollar above the max contract of the league to ¾ for the total salary cap number of the entire league, which is $58 million this year. The super max number for this year would be $43.95 million.

The length of this contract would be for four years max, although you could add in a clause that limits this contract length to two years for players over 35 so it doesn’t become the golden hand shake seen in the corporate world. And it could only be offered by the team the last contract was completed by, i.e. it would also be an extension of the Bird rights and would assist teams in the retention of superstar players and more strongly increase the partnerships and bonds that develop between a superstar player in one market for his entire career.

This contract would not count towards the salary cap.

Overall, when coming into the lockout of 2011, the narrative driven by the league was one of a broken business model and a harsh line was established to give the perception that a drastic fix was needed.

This narrative filtered down to both the fans and the players to the extent that when a CBA was offered that didn’t contain draconian things like existing salary roll-backs, a hard cap and lost season costing a billion dollars in total salaries, the players jumped on it. At the time it felt like a win to me. I will be the first to say I was absolutely wrong, but truly we all were. If there ever was a time that the NBA’s business model was truly broken… It is now.

Bernie Lee is an NBA agent.

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