A big factor in the NBA lockout is that small-market teams are fighting for a hard salary cap. But in getting one, they could end up losing the ability to surround their young stars with talent.
Aug 22, 2011 - In the center of the thrust of the NBA lockout, franchise owners seek a hard team salary cap. Among owners, there is no loose group that more desires a hard salary cap than those from the small-market (or better stated as low-revenue) teams.
Michael Jordan, owner of the Charlotte Bobcats, showed his hand last week in a talk with an Australian newspaper, in which he lobbied for a hard salary cap to help low-revenue teams remain competitive. This sentiment can likely be extended to Sacramento, New Orleans, Memphis, Minnesota, Milwaukee, San Antonio and Utah. Further, franchise owners in more lucrative markets like D.C, Boston, Phoenix, the San Francisco Bay Area, Philadelphia and Detroit -- several of which have recently bought into the league -- are said to be toeing the hard line on this subject.
But for those small-market, low-revenue teams -- ones that have trouble drawing a decent without a top-flight team or superlative star, ones that have built-in recruiting disadvantages for free agents or quasi-FAs -- the hard salary cap threatens the impact of that which saves them: the NBA draft.
If you look at the greatest successes of the smallest-market teams in the NBA, nearly all can be traced to a draft. The Timberwolves' heyday came thanks to Kevin Garnett, picked No. 5 in 1995. The Hornets are competitive because the team picked Chris Paul No. 4 in 2005. The Grizzlies' recent success is a bit less direct, but the team picked up Pau Gasol back in 2001, eventually trading him for Marc Gasol and the cap space that became Zach Randolph; the team also drafted Rudy Gay and Mike Conley. The Bucks picked up Andrew Bogut and Brandon Jennings to fuel their 2010 playoff run. The Spurs famously nabbed three superstars via the draft. The Kings can trace the trade for Chris Webber back to the drafting of Billy Owens in 1991 (and a quick trade for Mitch Richmond, who was eventually swapped for C-Webb).
Just about every other team can say the same thing; the draft is that important. Picking good players is vital. Keeping them on a second and third contract is vital. Ask Cleveland, which lost LeBron James once his second contract expired.
But is the hard salary cap the enemy of keeping productive draft picks or stars when you're a low-revenue team?
Again, remember Cleveland. Dan Gilbert and Danny Ferry made every financial effort to surround James with talent in his seven seasons with the Cavaliers. Cleveland went well above the salary cap consistently, signing players like Larry Hughes (whoops) and trading for Mo Williams (eh) and Ben Wallace (whoops) and Shaquille O'Neal (eh). You can criticize the moves, but you can't deny that the franchise went to the hilt to spend to surround LeBron with talent and convince him to stay and compete for a title every season.
It didn't work. Now imagine a hard cap situation, where sure, the Cavs have LeBron, but they can't re-sign an Anderson Varejao, they can't trade for Mo Williams. In a hard cap environment, there's no allowance for five years ofcontention. Dan Gilbert can't afford, based on the Cleveland market, to spend the luxury tax for all of eternity; in the now-expired economic system, low-revenue teams must "pick their spots" and reach the top levels of payroll only occasionally, not every season by birthright. The old system allows this.
The new system, with a hard cap? There'd be no or little variability. The Cavs wouldn't be able to splurge to make a run and then sink back to lower levels once the championship window has closed. It'd be a (relatively) flat payroll upwards of $60 million, no matter if the team is winning 16 games or 60.
The idea that teams could offer more money to keep their own players just makes the situation more difficult. If there's a hard cap of $60 million, and the Orlando Magic can keep Dwight Howard for an average of $20 million per year -- as opposed to $15 million elsewhere -- that just cuts into the team's ability to surround him with quality players and contend for a title. So it may in the star's best interest to leave anyway. Situations like this are only compounded when you have a team like the Oklahoma City Thunder, with multiple young stars nearing big paydays.
To get a hard cap that works, you need to give teams the freedom to cut players off of their cap sheets, like the NFL and NHL do. But the NBA has already abandoned the move to end guaranteed contracts. That means that with a mechanism to clear cap space that protects guaranteed salary, teams will essentially be able to spend above the cap to reconfigure talent base and the like. High-revenue teams and franchises with billionaire, spendthrift owners will be advantaged. Just as they are now.
The hard cap is not the salve Michael Jordan and the low-revenue owners are looking for. The now-expired cap structure can certainly be tweaked to prevent some of the most egregious payroll loopholes -- the sign-and-trade ought to die a horrible death, and I wouldn't be sad to see the mid-level follow it to the gallows. That will help even the playing field for low-revenue teams, as will -- broken record alert -- robust revenue sharing among the teams.
A hard salary cap might boost the financial sustainability of teams like the Bobcats, Kings and Hornets. But it could kill the talent sustainability all these teams have when it comes to the most important players in the NBA: its young stars. By pushing for a hard cap in the face of logic, the low-revenue teams are playing with fire.
The Hook is an NBA column that runs Monday through Friday. See the archives.
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Comments
I still see a solution
I have commented on your blog previously saying the NBA needs two divisions, one for money teams and one for non money teams. But, while I realize the nba will retain its geographic divisions, I think it needs 2 playoffs. 2 playoffs will allow all clubs to play a full season and participate in an end regular season playoff which can profit all clubs. I take as a model, the UEFA champions league and UEFA Europa league
I commented on your twitter post, I wonder your thoughts to my article.
by central harlemite on Aug 22, 2011 9:37 AM EDT reply actions
With a hard cap at 60 some million
there would also be explicit player maximum caps. Right now, there are grandfathering rules that would allow players to get a salary at close to 50% of the soft cap like Kobe. If those kind of salaries are cut to a hard player cap of let’s say 35% for example, then this hard cap wouldn’t look as bad. You would think that there would be rollbacks of salary, etc. after this thing is resolved.
by thewiz06 on Aug 22, 2011 12:12 PM EDT reply actions
Any time Michael Jordan has an idea about how best to run or manage a team, it should be avoided like the bubonic plague.
Switching MLS allegiances faster than the eye can see.
by Tim C. on Aug 22, 2011 3:30 PM EDT reply actions
but the bubonic plague is cureable
huh? wha?
by effin steve on Aug 22, 2011 3:40 PM EDT up reply actions
Depends on where the cap is
If you get it up to $70 million with a $60 million threshold for the MLE and a soft cap of $50 million then you have a situation where teams will not have a problem surrounding their star with good players.
Keep in mind that there will be more cap flexibility when considering that the length of contracts will be shortened. So instead of being stuck with Gilbert Arenas’ deal for 3 more years, the Magic would only be looking at 2 or less.
New collective bargaining agreement is simple. Give small markets a larger share of the national tv revenue sharing pie, limit MLE's to teams under the lux tax threshold, allow owners to terminate one deal every other year provided players have played at least 3 years on it and limit raises to 5 and 10%
by Trueblood on Aug 22, 2011 10:23 PM EDT reply actions
Revenue sharing
I agree, this is the key to the long term sustainability of the NBA. Find a way for to share more revenues. For example, all teams get to keep 50% of their local broadcast revenue and the other 50% goes into a common pool to be share equally by all teams.
As far as the owner-player negotiations, I am fine with the owners pushing for a 50-50 share of BRI, but I think a hard cap is unnecessary.
by DW19 on Aug 24, 2011 2:50 PM EDT reply actions
I doubt you can get to a 50-50 on TV revenues
Even a 70-30 (though I hope for more) would help tremendously along with the 50-50 BRI split. I also think that the players sharing in more of the expenses makes sense.
What I’d like to see along with an ownership revenue sharing agreement are ticket price standards that benefit the fan, that is reduce some prices. Now, do that and the fans are really on your side and it’s all over.
Now, freezing the salaries and therefore decreasing year by year the 50-50 split doesn’t seem fair and almost punitive.
I also think that with a few tweaks the salary cap should remain soft for reasons TZ has discussed.
"Victory goes to the player who makes the next-to-last mistake."
- Chessmaster Savielly Grigorievitch Tartakower
by lietothegirls on Aug 25, 2011 6:36 PM EDT up reply actions
Good points
Yeah, 50-50 is probably too fair to ever happen. Maybe 60-40 on the local TV revenues and 55-45 on the BRI.
by DW19 on Aug 26, 2011 3:30 PM EDT up reply actions
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