Three years ago, the men who run the NBA's 30 teams shut down the league because players were making too much money to allow every franchise to profit. The lockout succeeded: players gave up a collective $300 million per year and some contract security by agreeing to tighter limits all around. Before the lockout, only nine teams were pulling a profit, according to the league. Now, only nine teams are losing money.
Back to the present. The NBA just inked deals that will pay teams $24 billion over nine years for the privilege of showing games on national TV. The league's annual TV revenue went from $31 million per team to $89 million per team on average over the life of the new deal.
Grantland ace Zach Lowe reported Monday that nine franchises lost money last season, but only one of them lost more than $13 million. (That'd be the muy loco Nets.) Let's make a couple of assumptions.
1. Non-salary costs don't increase because of the new TV deal.
2. On average, salary costs increase 51 percent of the new income ($29 million per team per year).
3. Franchise leaders don't get worse at selling basketball or managing costs.
Assuming all that means every team that doesn't have a player payroll triple the luxury tax threshold should be making at least $16 million or so.
But not all teams will profit similarly. A team like the Hornets will be on the low end, even with the new income. A team like the Lakers will be making maybe $150 million in profit each year. (Per Lowe, they made $100 million in their worst season in decades in 2013-14.) Everyone acknowledges that the league is healthiest when all teams are solvent, profitable and competitive. Adam Silver actually has the phrase "competitive balance" tattooed across his chest in a nice, cursive typography.
One of the first successful campaigns in the NBA franchises' two-decade war on player power was the introduction of the cap on individual player salary. That came in 1999 when franchises and David Stern effectively divided the players' union between stars and role players. Capping stars' individual salary was really about saving dough in a soft-cap, variable payroll system.
But the league made it about more equitable sharing of payroll among the players. Cutting down Shaq's ability to make an enormous salary made it possible for Devean George to earn a few million per season. Every dollar that didn't go to Allen Iverson could be split up between Eric Snow, Theo Ratliff and Aaron McKie. NBA role players love the idea of a cap on individual salary. It was a brilliant stroke by Stern and company: take an objective that is a huge priority and boon for Management, use it to divide Labor and profit.
Now that the NBA has found a new cache of gold, and some 15 years after the the introduction of the max contract, the superstars are fighting back.
Players are "encouraged" per new CBA to take less to win or risk being called selfish+ungrateful while nbatv deal goes UP by a BILLION #biz
— Kobe Bryant (@kobebryant) October 7, 2014
Kevin Durant's full comment on potentially doing away with max contracts: pic.twitter.com/DcvwZxmQ2v
— Anthony Slater (@anthonyVslater) October 7, 2014
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
Kobe has fought the max contract since it was born -- he was actually one of the very few (like, count them on one hand) players who voted against the deal ending the 1998-99 lockout. LeBron has quietly grown into a player who values agency and implicit power over all else. Durant is maturing along those same lines at a critical point in his career.
But this is the wrong reaction to the TV deal. So long as there are 50-odd stars who would directly benefit from unrestricted salaries and 400 role players who do better with individual caps, ending the max is a non-starter. What the stars need to do, led by LeBron and his friend Chris Paul (the union's president) is pitch this medicine over to the gander of franchisees.
Individual player salary is capped, and the league believes that's worked out well for the league. Fine. Keep it. Now cap individual team profits.
After the lockout ended, the NBA approved a more robust revenue sharing system that results in a whopping $200 million of the league's then $4 billion in revenue (five percent) being moved around from high-profit teams to low-profit teams. How gracious.
Meanwhile, LeBron is making $20 million when he's worth at least $50 million to the Cavaliers specifically and even more to the NBA. They argued that while LeBron is obviously more valuable than Alonzo Gee, you can't have a league with just LeBrons. You need the Gees too. So the money needs to be shared around.
The same applies to NBA teams. The Lakers help the league's bottom line more than the Hornets do, but without the Hornets and Pelicans and Kings and Hawks and a dozen other low-revenue teams, you don't have a league.
Never mind that teams with zero national TV games will get $89 million from ESPN and TNT, just like the teams with 25 national TV games. There are about 400 players who don't sell jerseys, tickets, merch or the game itself. They still profit off of indirect subsidies from LeBron, KD and the like.
The NBA has achieved some semblance of player salary parity through a rather socialistic regulatory scheme in the name of competitive balance. (Some left-wing types would love to get a CEO salary cap on the books.) Meanwhile, the NBA teams themselves have instituted a rather small wealth tax in the interest of competitive balance. That hardly seems fair to the Alonzo Gees of the NBA Board of Governors.
If the league insists on keeping the max contract alive, it's only fair that franchisees take that same medicine. For the good of the NBA.