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Thursday, July 13, 2006

LeBron James Will be a Cavalier Until at Least 2010

Wednesday was signing day in the NBA, which means that many of the trades and contract deals that have been speculated about became official. The top story without question is that LeBron James signed a contract extension with the Cleveland Cavaliers for three years, with a player option for the fourth year. The deal that he signed as a rookie ends after the 2006-07 season, so James will be a Cavalier until at least 2010. The coverage of this story has been fascinating and amusing. When Dwyane Wade and Carmelo Anthony immediately announced that they planned to re-sign with their teams but James was silent, speculation ran rampant about whether James planned to leave Cleveland early for greener pastures. Then, someone came out with the "scoop" that James would stay in Cleveland after all. Next, a "bombshell" dropped when word leaked out that James would not sign a five year extension but instead agree to a three year extension; supposedly, James' decision influenced Wade to make a similar move.

Some commentators are acting as if James and his agent discovered some secret loophole in the collective bargaining agreement but if they would have been more concerned about getting the story right as opposed to getting it "first," James' decision would not seem so mysterious. Tim Duncan signed the exact same kind of deal in 2000. There are two good reasons for not signing a five year deal: one, the player is not stuck with the team if the organization fails to make the right moves to contend for a championship; two, the player will have the opportunity to become an unrestricted free agent when he will presumably be in the absolute prime of his career. Scottie Pippen opted for the security of a long term deal early in his career and spent many years resenting how underpaid he was when player salaries exploded but the Chicago Bulls refused to renogiate his deal. Michael Jordan was similarly underpaid but made up the difference with his tremendous endorsement deals. Both he and Pippen received large contracts at the end of their careers that at least somewhat compensated for the seasons in which they did not receive full market value, so in the end they obtained both security and a big payday.

What nobody is talking about is the one potential downside of James signing a three year deal: an injury or off-court problem that diminishes James' value. Everyone assumes that James will be getting a huge payday with his next deal in three or four years but in the meantime he is giving up the option to have two more years of guaranteed salary, which amounts to roughly $30 million. Remember Ralph Sampson? He won Rookie of the Year in 1984 and All-Star MVP in 1985. In 1986 he and fellow "Twin Tower" Hakeem Olajuwon led the Houston Rockets to the NBA Finals. At that point, Sampson certainly would have been considered worthy of a max deal if the current system had been in place then. In 1987 he suffered the first in a series of injuries that derailed his career. James won Rookie of the Year in 2004 and the All-Star MVP in 2006. He certainly seems destined to become one of the game's all-time greats and he has already banked tons of endorsement money--but the future is promised to no one, not even the self proclaimed "Chosen One." So, opting for a three year deal may turn out to be a good move, but--contrary to what you are reading and hearing--it is neither precedent setting, nor is it without risk.

posted by David Friedman @ 4:29 AM

15 comments

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15 Comments:

At Thursday, July 13, 2006 7:45:00 PM, Blogger alternaviews said...

" but in the meantime he is giving up the option to have two more years of guaranteed salary, which amounts to roughly $30 million. "

not exactly -- as you mentioned, there is a player option for the fourth year. So all Lebron is giving up is one year of guaranteed salary.

giving up 1 year is no big risk for Lebron. He has plenty of endorsement millions (didn't Nike alone initially pay $90 m) -- so $15 million is not that big a portion of his net worth.

 
At Friday, July 14, 2006 3:07:00 AM, Blogger David Friedman said...

My point is that in the worst case Ralph Sampson/Jay Williams scenario that something could happen to LeBron that ends his career before that fourth year. If he is out of the league at that point then he can't exercise the fourth year option. Granted, this is an extreme scenario and I obviously hope that it doesn't happen but there is a downside/risk to signing for less than five years. There is also the possibility, however unlikely it might seem now, that in four years LeBron's value goes down appreciably and he is not a max value player when he negotiates his next contract. I agree that $15 million or even $30 million does not seem like that much to risk considering the amount of money that he has already made and the huge payday that seems to be in his future; I just think that it is important to emphasize that signing a three year extension is neither precedent setting nor completely devoid of risk.

 
At Friday, July 14, 2006 2:30:00 PM, Blogger alternaviews said...

"There is also the possibility, however unlikely it might seem now, that in four years LeBron's value goes down appreciably and he is not a max value player when he negotiates his next contract."

More likely that Michael Jordan will make the hall of fame...for baseball.

 
At Friday, July 14, 2006 2:40:00 PM, Blogger alternaviews said...

other factor is King James has incentive deals in his Nike contract that pay more if he is in a bigger media market (NY, LA, Chi). This deal will probably be in place or renewed for at least the next 5-8 yrs. (The league should try to ban such deals, but it hasnt.)

The deal with the Cavs allows Lebron to get out of Cleveland if they're not winning titles (also) in next 3 years -- it also puts pressure on Cleveland. It's a great balance...right now, Lebron's letting Cleveland try to win and staying close to his hometown (Akron). Once he's older, if Cleveland isnt winning, Lebron can get more Nike money and find a team that is more likely to win.

And he wouldnt have to demand a trade to move ... as we've seen (Shaq trade), trades can be complex.

 
At Saturday, July 15, 2006 3:14:00 AM, Blogger David Friedman said...

I am not suggesting that LeBron's value will go down because he plays poorly. What if he gets injured like Ralph Sampson, Grant Hill or Amare Stoudemire?

I'm not saying that LeBron made a bad decision or that I think that the worst case scenario is likely. I understand LeBron's situation regarding his endorsement deals. My point is that, contrary to a lot of the "mainstream" reporting about LeBron's deal, it is neither precedent setting (Duncan did the same thing) nor is it without at least a theoretical risk, however slight or unlikely that risk may seem at the moment. Some of the reporting that I've seen/heard makes this sound like LeBron and his agent had some kind of Perry Mason "a-ha" moment while reading the collective bargaining agreement and found a previously unknown loophole. I think that what LeBron is doing makes a lot of sense; I just don't understand what the big deal is, nor do I think that it is out of place to at least mention the possibility that a career altering/ending injury could cost him some money that would otherwise be guaranteed. Wade signed the same type of deal and stated that he is not worried about the possibility of injury; so he at least acknowledged the idea that I am raising here, even if he is not concerned enough about it to go a different route.

Basically, we agree on the major point but are just refining the semantics of the issue.

 
At Saturday, July 15, 2006 8:26:00 PM, Anonymous Anonymous said...

Injury is a very realistic concern but the one i would worry more about injuring himself is Wade. He plays a little reckless sometimes but i see him improving even more on his long range shots so he'll tone down on that. I think this contract is a good business decision for both players and as for the hype, you can blame that on Espn. That's how they work. I would love to see Lebron play in Chicago after his contract is up or maybe Wade. By the time his contract is up, Shaq should be retiring and unless he has a championship team, why not go play for his hometown team? Man, i miss the basketball season.

 
At Sunday, July 16, 2006 2:37:00 AM, Blogger alternaviews said...

on an unrelated note...

Sports Ill-stated should use the following as its This Weeks Sign of the Apocalypse: World Wrestling Entertainment now has a fantasy league, with full scoring, like the other sports ... http://www.wwe.com/play/fantasy/scoring/

back to hoops, does anyone know if the Pistons cheaped out (Ben went for something like $9m /year more than Nazr) b/c (1) they didnt have cap room, (2) they're just cheap, or (3) they have cap room but intend to spend the money they saved on retaining the other 4 starters and/or shoring up the bench?

 
At Sunday, July 16, 2006 3:51:00 AM, Blogger David Friedman said...

Anonymous:

You are right that injury could potentially be an even bigger concern for Wade than for LeBron. I focused on LeBron in my original post because his signing is the one that received mega-coverage in a way that I found to be misleading and sought to correct.

I'm not sure if Chicago would have the cap room to sign LeBron or Wade in three-four years, assuming that either of those guys even wants to leave his current team. Chicago's plan is to go for a title now with B. Wallace and P.J. Brown anchoring the frontcourt, the young guys leading the backcourt and Thomas developing as fast as possible.

 
At Sunday, July 16, 2006 4:01:00 AM, Blogger David Friedman said...

Alternaviews:

The WWE having its own fantasy league is indeed bizarre; that sounds like one of those made up stories from Saturday Night Live's Weekend Update.

B. Wallace and Flip Saunders did not see eye to eye at various points during last season and the playoffs. I suspect that this is an instance where the team chose the coach over a player who they perceive to either be in decline or heading toward it rapidly. I also think that re-signing the other starters is a higher priority for Detroit, in part because of the above reasons. I wouldn't describe the Pistons as cheap, per se; they are spending money but just chose to allocate their resources in a way that did not include re-signing Wallace for the max.

It seemed that the Pistons got by despite getting nothing for the pick they used to take Darko but the next few seasons could be when that mistake comes back to haunt the team. Also, Flip Saunders is a good, solid and knowledgeable coach, but I am not convinced that he is the guy to get the maximum out of a championship contending team. Of course, with B. Wallace gone, the Pistons may no longer be a championship contending team, anyway. Without him anchoring the team's defense and rebounding, it will be interesting to see how many Pistons have All-Star seasons this year. I don't think that Billups is going to receive quite so much MVP hype this time around.

 
At Monday, July 17, 2006 4:37:00 PM, Blogger alternaviews said...

I find it tough to evaluate coaches, but I'm convinced the Flip is mediocre at best, and that any disagreements with Ben should have been resolved in Ben's favor.

My other thought is that the model of 2-superstar or 3-superstar teams is the way to have a dynasty (Jordan/Pippen, Shaq/Derek Fisher (kidding), Duncan-Robinson, Duncan-Parker-Ginobli).

Detroit's 5 stars made for nice teamwork articles, but it made change too difficult. The team became static. You need new blood, and change to keep motivation and keep improving. Detroit lost that w too much balance.

In fact, part of my Shaq argument was that he needed a change of scenery. Again, ask NExt Town Brown about that one.

But on the Pistons, maybe the balanced approach was untenable long-term, esp. due to salary cap.

Either way, Ben is a huge loss, and Flip is a joke to me.

 
At Tuesday, July 18, 2006 3:01:00 AM, Blogger David Friedman said...

I would also be inclined to choose Ben over Flip, all things being equal, but it seems that Dumars is convinced that Flip is the long term solution at coach. Ben is closer to the end of his career than the beginning, so if he and Flip are at odds then I understand Dumars not going out of his way to re-sign him--that is not to say that I agree with Dumars, just that I understand what he is thinking. If Flip's tenure there is not as long as Dumars seems to expect it to be, Dumars' reputation as a talent evaluator will take a hit--the shadow of picking Darko looms larger and larger, not keeping Ben could prove to be a mistake and the jury is still out on the Flip hiring.

 
At Tuesday, July 18, 2006 2:11:00 PM, Blogger alternaviews said...

on DARKO...

I think Dumars may have intentionally punted, b/c the chemistry was so good with the other players. Carmello or D Wade take too many shots to fit that offense. I dont think they win the 04 title w either of those guys, as rookies.

On the other hand, 17-year-old Darko wasnt even eligible for that draft -- the exception was a nightmare.

Certainly Darko was a mammoth mistake, perhaps motivated by a desire to please white fans, in a racially volatile city.

I think they should've traded the pick for Sheed -- who they were lucky to get, later on. Without Sheed, they dont win that title -- so they should've traded the pick for a veteran like him.

In hindsight, w Wade or Melo, the Pistons probably win the '06 title, and maybe '05, as well. So it's a question of win-now or not. BUt in hindsight, the Pistons have a dynasty with Wade. Instead, they're probably never going back to the FInals with these guys -- next year, Lebron will be the Heat's biggest challenger in the East. And Chicago is also on par with Detroit now, I think.

 
At Tuesday, July 18, 2006 4:07:00 PM, Blogger David Friedman said...

I agree that although Carmelo is a better player than Darko that he would not have been a great fit in Detroit--shoots too much, plays too little D. Trading that lottery pick to get Sheed or someone else of value would have been a good move. Taking Wade may have made for a crowded backcourt initially but, as you suggest, that could have turned the Pistons into a dynasty--if for no other reason than that Miami would never emerge as a serious threat without Wade (or Shaq, who never would have gone there without Wade).

I saw Darko play after he arrived in Orlando and I don't think that he will be a complete bust; he will be a solid NBA player and teaming up with Howard will be good for both of them. Darko can block shots, is a surprisingly good passer and has a decent shot. Of course, Darko will never be able to get out of the shadow of being drafted so highly, nor will he even approach the number of All-Star appearances that LeBron, Wade, Bosh and Carmelo (eventually...) will get.

 
At Sunday, December 02, 2007 1:20:00 PM, Blogger joe2130 said...

How much money can one make to be happy. i think after 2010 this kid will not be chassing money but a championship instead. He was set for life after his first contract.

 
At Sunday, December 02, 2007 3:52:00 PM, Blogger David Friedman said...

LeBron has also talked about making a billion dollars, so the answer to the question of how much money one needs to be happy in his case may be more money than you think. He is already more than set for life by any reasonable standard, because he has signed Nike contracts and other deals for well over $100 million (in addition to his guaranteed NBA contract). LeBron has also said on numerous occasions that anyone who plays with him is going to be successful, so he does not believe that he has to stay in Cleveland to win. If the Cavs are not able to add some pieces to the current roster it is certainly possible that LeBron could decide to go elsewhere at the end of his current contract.

 

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