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NBA Lockout Deal Would Result In Stronger Pay-For-Production Paradigm

Competitive balance is almost certainly a fleeting unicorn in NBA lockout talks, but the league can achieve a stronger pay-for-production paradigm. Why isn't David Stern selling fans on that aspect?

The league's steady argument that its NBA lockout stance on the hardening of the salary cap is set so firmly because of owners' desires to see a more competitively balanced association has been blown out of the water every which way. In the kindest reading, it's an elaborate joke attempting to cover up the real motivation, but the fact that the NBA has offered no proof for its claims that a harder salary cap would help balance the league beyond its mantra that "the expensive Lakers were awesome and the cheap Kings were terrible" is almost funny. (Almost.)

A harder cap will probably not improve the league's parity, but it will do something else, something the league could very well trumpet to gain fan support and media sympathy. Something that very obviously hurts just one group of actors in this whole thing, a group of actors no one would be surprised to learn the league was willing to hurt: the players.

A harder cap designed in the fashion that the league has proposed would increase the level of pay-for-production in the NBA. That's something that owners from markets of all shapes and sizes can support. That's something that fans can support, and media can agree is feasible and a good thing. And it's something that, compared to the competitive balance schtick, you almost never hear the NBA mention.

There are a few facets to the league's push for a pay-for-production paradigm.

* Shorter contracts. The players have already conceded pretty strongly on this, accepting contracts that go no longer than five years for Bird rights players staying with their team and four years for free agents. This facet also pervades the discussion of the mid-level exception: the NBA's proposal would limit length of the deals to three and four years in alternate seasons, and for tax-paying teams would drop it to three seasons.

How do shorter contracts boost the pay-for-production paradigm? So many contracts in the NBA, especially those for non-star roleplayers, are given for the immediate term. When the Milwaukee Bucks gave John Salmons almost $40 million at age 30, they were not doing so to ensure they had him locked up for the 2015 season. That was about keeping Salmons in place; the cost was a long contract. Even for stars, it matters: the Atlanta Hawks never wanted to pay Joe Johnson through age 34. But without doing so, the team risked losing him in the immediate future. Those late, expensive seasons are the cost.

By limiting contract length at the league level, the NBA helps its teams avoid running up "production debt," where players who made sense at the time of signing can no longer be expected to pull their weight. Even one season off of a contract like Joe Johnson's will help teams. It's like fast-forwarding to the end of bad contracts.

* Mutual opt-outs. This one is still a bit fuzzy, but in the NBA proposal posted by the New York Times, the league said its offer would prohibit team and player options outside of rookie contracts, but would by default allow non-minimum players to opt out of the final year of their contracts (which contain zero salary protection). That sounds like a mutual opt-out on the final year of almost every contract in the league -- which almost sounds like another reduction on the maximum contract length.

I have actually advocated for this feature in the past, arguing that any flexibility afforded to teams who decide they have made a mistake should also be afforded to players who decide they have made a mistake. Giving teams an option to drop an Eddy Curry a year early is golden for everyone but Eddy Curry and maybe Eddy Curry's tailor. Giving players an option to flee a crummy situation or capitalize on a market opportunity is golden for everyone but teams who lose good deals. 

This is the flip side of the pay-for-production paradigm: teams don't have to pay so much to non-performing players, but they will be asked to pay their productive players more and more frequently. There'll be no milking a dirt-cheap Gary Neal for four years in the new NBA.

* Greater churn. This is a byproduct of both items described above: the free agent market is going to be fuller every single season. It's not going to be 2010 all of the time -- that FA class was notable for its depth on the marquee, with 7 or 8 legitimate centerpieces up for grabs -- but players outside of the All-NBA level will be moving around a lot more frequently. That spurs the trade market as pending free agency remains one of the biggest lubricants to deals. (The NBA proposal also ends base-year compensation rules, which should boost trade action a bit as well.)

With greater churn, even considering the luxury tax reforms that will seek to tamp down spending at the high end, wealthy teams will still end up willing and able to pay the non-performers in order to acquire assets in trades. As teams prioritize escaping the tax -- especially if the multi-year penalty will kick in -- losing the fewer non-performing contracts will have greater priority. Cap space or space under the tax threshold will become more valuable. Teams on both ends -- ones cheap enough to have space and ones spendthrift enough to be willing to overpay -- will benefit.

* The cost of wins will rise. As a result of the league's individual proposals, the number of dead weight contracts and the size of those contracts will shrink. Say that in the old NBA, dead weight contracts made up 10 percent of the payrolls, so about $200 million. If the dead weight percentage shrinks to 5 percent ($100 million), there's an extra $100 million to spread among performing players. Via free agency, that raises those salaries.

This has been a constant refrain from deep readings of the NBA's plan: things will actually get more expensive for some teams. That's what happens when you harden a cap: you drop payrolls at the top, which necessarily raises payrolls at the bottom. When you do that and start to eliminate non-performing contracts, the cost of players will rise. That's not a bad thing: every team in the league would rather pay Gary Neal or Marcus Thornton a little more and pay an Eddy Curry or Matt Carroll nothing. But it's a reality everyone needs to get used to, because it will happen.

* The stretch proviso. Under the stretch rule proposed by the NBA, teams can cut a player and stretch his salary cap hit over a longer term. That, of course, is the exact opposite of a pay-for-production scenario: teams will literally be extending their dead weight obligations to affect more seasons. But lessening the cap hit in the immediate allows teams to go out and pay for production on the market. 

The NBA is not going to get an NFL-style hard cap any time soon. But it can fashion the same sort of pay-for-production model that the NFL employs, just on a softer scale. This should help teams recover from mistakes more quickly, it should help underpaid players get their paychecks, it will certainly decrease the level of dead weight contracts league-wide, it should boost player movement and it will make s--t more complicated on a daily basis, which helps writers like me feel more important than we actually are.

But it's easy to understand why players have and continue to resist the new paradigm. Those set-for-life contracts are going to be harder to come by, more players will be competing for lower-wage jobs more frequently and there will be far less certainty once they get those jobs. For so many decades, the players' fight was about winning the rights of free agency. The new NBA wants to flip that on its ear and give non-stars the near-constant burden of free agency. That's a good deal for everyone ... except those non-star players.

And that's why it's a deal that, right now, they cannot take. The question is why the NBA continues to flog the unicorn that is competitive balance without making the case for pay-for-production much more aggressively.


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