With the news of the gigantic new TV-rights deal making waves last night and this morning a number of issues now take center stage. Perhaps the biggest one gripping the owners — in between ordering larger yachts and personal jets after Adam Silver announced the deal — is the salary structure currently in place. It seems the league’s premier talent, LeBron James could team with the head of the Player’s Union, Chris Paul, in an attempt to eliminate any maximums on player contracts.
We mentioned this possibility at the end of the report earlier today. Basically, all the new TV money was expected, though almost $3 billion a year in BRI (basktball-related income) was higher than the original estimates. The TV-rights deal was the primary reason LeBron signed a two-year deal, which makes him a free agent in the summer of 2016 — coincidentally, the same summer Kevin Durant is a free agent. It might also be why max free agents next summer, like Kevin Love and LaMarcus Aldridge, might only sign short, one- or two-year deals.
Here’s the theorizing per ESPN writer and LeBron svengali, Brian Windhorst:
Based on new TV deal projections, max contract for 10-yr vets to increase by more than $6M per year starting in ’16. 7-yr vets increase $4M+
— Brian Windhorst (@WindhorstESPN) October 6, 2014
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This is why LeBron only signed for 2 years and why max free agents to be like Love, Aldridge, Gasol etc. may sign short next summer.
— Brian Windhorst (@WindhorstESPN) October 6, 2014
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With LeBron pushing for it & Chris Paul as head of union, players could also move for increase or even removal of max contract in 2017 CBA.
— Brian Windhorst (@WindhorstESPN) October 6, 2014
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And that possibility could affect how LeBron & Durant view their joint free agencies that come at same time in 2016.
— Brian Windhorst (@WindhorstESPN) October 6, 2014
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With the influx of money from the TV-rights deal, the salary cap in the NBA would explode, which would mean much higher max contracts regardless of whether LeBron succeeds in eliminating maximums altogether.
Tom Ziller of SB Nation looked at the numbers this morning adjusting for the $2.67 billion coming in each year that will part of the BRI:
Under the current collective bargaining agreement, just about half of all of the NBA’s basketball-related income is earmarked for player salary. The league’s annual TV revenue is going from $930 million to $2.67 billion, an increase of $1.74 billion per season. (This assumes a flat contract, which may not be the case, but work with me here.) Half of that is $870 million. That’s what players stand to gain per year from the TV contract bump.
Players are forecast to receive a combined $2.33 billion in salary this season. Now add an additional $870 million to that. That’s an incredible increase … without any increase in the pool of players receiving salary. (Even if there is two-team expansion in the near-future, you’re only adding 30 players to the 450 current roster spots.) Total player salary will increase by 167 percent just because of the TV deal, excluding any other growth.
The salary cap will explode, too. Based on current NBA projections and the new TV deal, basketball-related income in 2016-17 could reach $6.7 billion. If that were the case and benefit costs remained relatively stable, the team salary cap would be about $94 million. For comparison’s sake, this season the salary cap is at $63 million.
Ziller goes on to explain that max contracts stem from the salary cap as a whole. Players coming off their rookie deals (think Kyrie Irving‘s max extension this summer) can make 25 percent of the cap figure, or $15.75 million in the first year like Irving signed. But after the new TV deal it would be 23.5 million!
The increase in max deals gets even more extravegent when you talk about players with 7-9 years of experience (think Kevin Love). Love’s starting max salary would be 30 percent of the cap, or about $18.5 million right now, but with the TV money, it shoots to $28.5 million. Kevin Durant, under the new TV deal — with no restrictions put in place to limit the jump in the salary cap* — could foreseeably sign a five-year, $162 million deal with the Thunder in the summer of 2016, or for four years and $120 million with another team.
LeBron could stand to earn a five-year, $190 million contract in 2016.
Except, removing max contracts would completely change the landscape of the NBA a lot more than just this huge jump in the cap and the max salary. We wouldn’t see any more Big Three teams, that’s for sure.
Think about how much LeBron or KD would command if there were absolutely no salary restrictions in place at all? $100 million or more a year isn’t totally outside of the realm of possibility.
Plus, the majority of NBA players would suffer if maximums were terminated. Much like the income disparity in the free market United States, no more restrictions would penalize those mid-tier players who make up the majority in the players, and who Chris Paul is supposed to be representing as the head of the NBPA (National Basketball Players Association).
It’s not even clear the NBA is going to just allow the salary cap to jump as markedly as it will for the 2016-17 season when the TV money kicks in. Grantland’s Zach Lowe calls it “cap-smoothing,” or basically a system to force more marginal increases in the cap and salary maximums following the influx of cash during the 2016-17 campaign.
As Adam Silver just said, union and league have barely started any discussion of possible cap-smoothing.
— Zach Lowe (@ZachLowe_NBA) October 6, 2014
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We doubt this happens, though Adam Smith acoloytes and champions of the free market might want to see this happen, a laissz-faire attitude towards player salaries could topple the mighty run the NBA has been on with salaries losing all proportion and mid-market teams — not named San Antonio — going bankrupt trying to compete.
(H/T Eye on Basketball)
What do LeBron and KD earn with no max on salary?
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