Not a Post About LeBron…Sorta

By Daniel Adler

It is annoying to see the Heat rewarded for wasting one of Dwyane Wade’s prime seasons by making little attempt to get better and instead clearing cap space.  Equally frustrating is the fact that the Cavaliers were punished for continually appeasing LeBron in a series of short-term, expensive moves.  They constantly mortgaged their future and now that payment comes due.  However, today I would like to talk about a greater systemic annoyance: the NBA maximum salary.

While the “maximum” salary varies depending on contract length and other factors, the important thing to know is there is a maximum amount any team can offer a single player.  For all teams beside the Cavaliers, that number was something like $96 million for five years.  The system promotes players staying with their current teams and the Cavaliers were allowed to offer about $30 million more for a six year contract.  Is the concept of a maximum salary good for basketball?

It is important to define what we mean by good for basketball.  For the moment, let’s just consider whether it is good for competitive balance.  There are some compelling reasons why perfect competitive balance is not good for basketball (people like to see dominant teams, big cities should win more frequently, etc).

A look at the top earners in the NBA shows a wide range of talents contained within a small range of salaries.  Many of the players on the top 30 list earned the max (which is dependent on experience and when they signed the deal).  Essentially, a max player like LeBron offers huge excess value (worth over actual earnings) to a team while the players who barely merit the maximum (Michael Redd and Rashard Lewis) offer little (if any) excess.  The maximum salary system basically allows those teams that have the top players extra salary cap space.

To put some actual numbers to this example, first we need to decide the value of a win.  Using a very simple methodology (dividing total league payroll by total wins in the league), David Berri determines that the value of a win in 2010 was about $1.71 million.  Using Berri’s Wins Produced stat averaged over the past three seasons, Arturo Galleti shows that LeBron is worth $41 million, Bosh is worth $17 million, and Wade is worth $25 million (low due to missing most of the 2008 season)…yet they will all make nearly the same salary ($16 million or so) with Wade possibly getting more due to the fact that he is re-signing with the Heat.  Even those who disagree with Berri’s method or the exact dollar figures know that LeBron is much more valuable than many players receiving maximum money.  Take a look at Joe Johnson’s huge payday in Atlanta.

Let’s try a thought experiment.  Imagine that we still have a salary cap, but no maximum salary (similar to the NFL).  Would LeBron, Bosh, and Wade be so willing to take A LOT less money to play together?  True, they may sacrifice a couple million per season the way things stand now, but let’s say teams could offer as much of the cap as they wanted.  Would LeBron pass up $45 million per year just to play with his buddies?  How much does he really value winning/friendship/living in Tony Montana‘s old house?

The next NBA collective bargaining agreement promises to bring a far different salary structure.  In the past six months, I have spoken with and heard from people representing both the NBPA and NBA and neither side has mentioned eliminating the maximum salary.  In fact, most people seem to feel that it will actually decrease.  Getting rid of a maximum salary is something the NBA should really consider if they value competitive balance.

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6 Responses to Not a Post About LeBron…Sorta

  1. cliveklg says:

    “There are some compelling reasons why perfect competitive balance is not good for basketball (people like to see dominant teams, big cities should win more frequently, etc).”

    What people want to see, and what is good for basketball are two different things.

  2. Mike Robataille says:

    no individual cap & fixed team cap – is the obvious free-market solution to distributing talent and is in general a very good idea.

    combined with guaranteed contracts, though, one bad injury to a star and your franchise is done.

  3. QuincyHouse06 says:

    Max salary cap gives the players a chance to dictate what happens in the NBA. Getting rid of the cap would certainly give that control to the teams. Take whatever you believe to be the lesser evil. As for myself, If a player is willing to sacrifice millions to better his chance at winning- I’m all for it. Cant wait until November; I’ll be rooting for Miami all the way up to Eastern Conference Finals against my Celtics.

  4. David says:

    Mr. Adler,
    Some interesting metrics in your post; however, the “blame” rests not just with the players but with the ownership and management that hand out these ridiculous salaries.
    A free market system dictates that what you can negotiate with your employer (as a full-time employee, contractor or otherwise) is what you get. Sports deals are collectively-bargained and there are caps on what a team can pay, but each player’s got his own agent and deals with the team individually for what he think he’s worth and what the team is willing to pay.
    While I feel bad for the people of Cleveland, and I think Lebron’s little made-for-ESPN special was a tad too cute, I think Cavaliers’ owner Dan Gilbert’s outburst was a bit sissified even for a corporate superstar. Cavaliers ownership (from the end of Gund’s time as owner to Dan Gilbert’s regime) hasn’t exactly lit the lamp as far as shrewd moves. You could argue that the team’s best acquisition the last 7 years was the day they won the NBA Draft Lottery and had the rights to negotiate with LeBron James.
    It’s time NBA owners grew up and accepted responsibility for their own bad player-personnel moves. For example, LeBron James was a bonafide star by all accounts coming out of high school. And he more than delivered full houses to Dan Gilbert’s arena and helped power ancillary businesses around that arena on NBA game nights in Cleveland. His economic impact was considerable. But since LeBron James doesn’t set up the salary cap for the Cavs nor does he make draft decisions and other key personnel moves? Who IS to blame for not dumping Wally Szcerbiak’s albatross of a $13M deal when the money should have been used to sign a complimentary player to help buttress LeBron James’ efforts? How about who botched the re-signing of Carlos Boozer? Cleveland drafted him. Couldn’t keep him OR his wife happy in Cleveland. So they took major money in Utah and then Chicago.
    Bottom line: the sports “culture” of today of enraged fans, sports columnists like Bill Simmons claiming everyone except Larry Bird and Kevin McHale are lazy are what make it simple to blame guys like LeBron for what ails the NBA. To most Celtic fans, the NBA isn’t fun when their team doesn’t win a title. There must be something wrong with the league. Or it’s Doc Rivers’ fault. It’s a typical sentiment that isn’t lost on people outside of Boston.
    The day that players like LeBron James take a “LOT” less to play for the Celtics is the day that every CEO in the country swears off of monster salaries and perks and pays every man and woman in their employ a lot more money. These guys go to Harvard Business School not to be that stupid. But even a guy from Akron with a high school diploma isn’t dumb enough to take a fool’s proposition in order to make a fan who could give a damn about him more comfortable. If NBA players acquired themselves, agree to pay themselves a salary on their own AND wrote their own checks? Different story.
    Writing a blog post about how the max deal is bad for the NBA and doing without addressing management’s role in this is like blaming all teen pregnancies on either the teenaged boy or the teenaged girl alone. It takes two to tango, as the old saying goes. You can’t address one party to a problem and absolve the other. And NBA salaries, as in most sports leagues, is a function of league revenue. The players get a certain percentage of league revenue and each team gets an equal slice of that pie to pay salaries.
    Maybe the question should be how can an NBA team that never wins an NBA title continue to make money and operate year in, year out? The Lakers and Celtics have combined for the lion’s share of the NBA’s championships. Cleveland has not one of them in its entire history. That’s not LeBron’s fault. Maybe the question should be why the Lakers and Celtics win titles regardless of era, it seems, and can build teams properly (either via draft or free agency or both) where other teams fail year in year out?

  5. Pingback: The NBA salary cap is a joke « Courtside Analyst

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