A Business Model Combining Huge Guaranteed Contracts With Nearly Unrestrained Player Movement is Not Smart
NBA players--or, at the very least, NBA stars--enjoy unprecedented power. They can decide that they no longer wish to honor the terms of their contracts, and then strong-arm their current team to not only trade them but to trade them to their preferred destination. The superficial argument in favor of this business model is that everyone should have the right to choose where he lives and works--but in the real world, that freedom comes with risks and responsibilities that NBA players do not face.It is true that in many circumstances, a person can quit his job, move to his city of choice and get another job--but that person's salary will generally not be paid during the transition period and there is no guarantee that the person will ultimately be paid as much by his new employer as he was paid by his old employer.
The NBA operates under a franchise model, which means that if enough franchises do poorly or fold then the whole enterprise is at risk (think of the ABA and other rival leagues in a variety of sports that could not maintain enough healthy franchises to survive as independent entities). Taken to its logical extreme, the power plays that we have seen recently by players like Anthony Davis and Paul George could result in a situation where most teams will never have a realistic chance to compete for a championship. Some people may think that this has always been the case in the NBA but the difference is that in previous eras talent was concentrated on a handful of teams because those teams made shrewder personnel moves; a team that acquired a talented roster did not have to worry that another team would be able to raid and pillage that roster in collusion with players who decided that they wanted to leave before their contracts expired.
Some form of free agency is necessary and proper, but that has to be coupled with an understanding that a player under contract is going to honor his contract. Otherwise, if players want unfettered movement then they should agree to abolish guaranteed contracts; if players are willing to assume the risk of being injured or waived without having a guaranteed contract to lean on, then they will have earned the right to leave at any time (and teams will have the right to replace them at any time without any financial obligation to the players).
It was not fair to the players back in the day when the teams had most of the power and true free agency did not exist--but it is not a sustainable business model for the NBA if players are going to decide, while under contract, that they want to play for another team right now.
A player who becomes a free agent has the right to sign with any team--but a player who is under contract should not be able to force his way out and receive the full value of his original contract. Anthony Davis and Paul George did not live up to their contracts with the New Orleans Pelicans and Oklahoma City Thunder respectively. One way to discourage this type of behavior would be to enact a rule stipulating that players who, by their own volition (i.e., not because of injury or because the team decides to waive or trade them), do not fulfill the terms of their contract pay a 10% penalty on their next contract; if such a player is eligible to sign for three years/$90 million, then he can only sign for three years/$81 million. The difference is paid by the team acquiring the player to the team that lost the player, in addition to the agreed upon terms of any transaction between those two teams involving the player who did not fulfill his contract. These funds would not count against either team's salary cap.
Such a provision may not put an end to the breach of contract situations that have become more common, but it would at least give the players pause before attempting brazen power plays, and it would provide meaningful compensation to the team that is losing a star player much sooner than it could have prepared for or expected.
Labels: Anthony Davis, NBA, Paul George
posted by David Friedman @ 5:55 PM
8 Comments:
If players are prevented from forcing their way off of a team that has that player signed to a multi-year contract, should all player contracts have no-trade clauses or at least a clause that is just as punitive to the owner as you propose for the player? For example, if a team trades a player to another team, the originating team would have to pay a 10% trade bonus to the player and have the 10% count against the team's salary cap?
Reality is, owners have had far too much power in the NBA. It's about time the players took some of that power back. The fact that there is a salary cap in the NBA to save owners from their own stupidity is benefit enough for team owners.
Anonymous:
NBA players already have guaranteed contracts; if a team cuts or trades a player, that player still gets paid. The players are already protected under the current system; it is the owners--and the fans of so-called small market teams--that are not protected from having their franchises gutted.
There is not only a salary cap but also a salary floor, and a guarantee that the players receive a specific percentage of BRI ("basketball relate income," as defined in the Collective Bargaining Agreement). If the players have sufficient capital and are willing to assume the risks and responsibilities of franchise ownership then they can certainly create and run their own league; I recall at least one "stat guru" thought that was a great idea during the last lockout.
When Michael Jordan was playing, he told the Wizards' Abe Pollin that if he could not afford to pay the salaries or did not want to pay the salaries then he should sell his team. I wonder why Jordan offered Kemba Walker far less than the max this summer? Should Jordan sell his team?
The point of a player contract is the team owns the player's rights for the term of the deal, and in exchange for that the player receives a large sum of guaranteed money, a sum far exceeding what that player could make in any other endeavor. The current players want to continue to receive guaranteed money yet terminate their contracts at any time and still get paid. If that trend continues, it will be bad for the league because it is not a smart business model.
I agree that this trend of players demanding trades is bad business. It definitely makes the NBA far less interesting as the top team is whoever the stars happened to pick that year. Running an NBA team with this modal no longer becomes about basketball but instead a game of trying to win the lottery of NBA's version of "the Bachelor."
While I agree this is a bad look for the league, I think reacting in the other direction has now become "overreaction".
Because an NBA player's career is both marketability and ultimately finite (especially compared to other professions – hence the significant compensation they receive), it is important that they don't get stuck under bad ownership (and due to the draft lottery, most players have little say in which owner chooses them, ie, where they can maximize their career earnings due to how the CBA is set up).
Having shorter contracts is one possibility, but there are many owners/GMs that want commitment beyond one or two years (you often cite Lebron utilizing one year contracts as him hamstringing the Cavs). Team building takes time, and if every player – especially a superstar – is year-to-year, it makes it incredibly difficult to grow a culture and consistency, or build a team around that star.
On the flipside, if a player signs up to play for a coach or believes in a GM's vision and commits for 4-5 years, and then the team under-performs due to injury, bad luck, or whatever, that coach and/or GM could be replaced the very next season with someone who has a completely different strategy and vision. Bryant committed to the Lakers, and then they wasted 2 of his best years surrounding him with replacement level talent and capitalizing on his star power to sell out Staples. These types of situations happen far more frequently than players forcing their way out. What then is protecting the interests of the players? What penalty is there for underperforming franchises that consistently make terrible decisions?
The slippery slope – this idea that players will begin to pick and choose where they want to play while under contract – is just simply not realistic.
There are intrinsic penalties for players who wish to make power moves and force themselves out of their obligations to their current team. First, let’s get the notion that all players will somehow be able to do this. Danny Green wouldn’t be able to force his way out of his contract. The league moves on from players at a lightening pace. Even recognizable ones that were at one time highly marketable. Jeremy Lin is living this right now. Or highly touted prospects like Markelle Fultz and Anthony Bennett.
Only the tippy top players can make these kinds of power moves. There are maybe 20 players today. Realistically, that number is closer to 5. Two of those players (Kawhi and Lebron) are the ones that made the power moves. It wasn’t Anthony Davis or Paul George.
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Regarding the penalties, the primary one for players is sacrificing their most valuable commodity, their age and athletic ability. Career time. Look at AD, who basically gave up 2/3rds of a season in order to get what he wanted. And he only got it after Lebron flexed. Players have brands they represent and fans that make them popular. If they’re holding out or not playing, that adoration and marketing cash flow can evaporate quickly. There’s a reason Kobe was willing to settle during the 2011 lockout. He saw sand through the hour glass. AD has a lot to prove this season and a lot of ground to make up. Even Lebron was not immune as he found out when he chose Miami.
The other penalty that at first glance seems like one against a franchise, is the assets that are needed to make these power plays happen. The Clippers and Lakers gave away…a lot. That didn’t work out so well for the Nets. How does this affect the player? While an organization that is run well (like the Clippers under Ballmer) planned well to make the move they did, they still put the franchise’s long term health in a precarious position with all the future picks going out the door.
The Lakers, a much less well run organization, gave up their present and future and have gone with a poo poo platter of leftovers that aren’t necessarily ideal fits alongside their two stars. And did so for an injury-prone player that has proven nothing but eye-popping, but ultimately empty statlines.
We have a clear example of a "superstar" forcing his way out of a contract early, his former team benefiting a great deal, and the team he lands on...getting screwed. See Anthony, Carmelo. How'd the Knicks fair doing that trade? How'd Carmelo fair? Who just went to the Western Conference Finals 2 months ago?
I think it is likely that in two years (or as soon as next year), we'll look back at the players who "forced" trades out of their respective small markets and see that those small markets actually benefited far more from the haul they received then the team that brought on the superstar. Basically, the Clippers and especially the Lakers, mortgaged the next 10 years to win a championship. The Lakers have basically this year (AD can walk next season and has not signed a contract) and the Clippers have a couple since Leonard signed a 2-year deal.
James:
I agree that the NBA is not as interesting as it used to be. In the 1980s, Dr. J's 76ers faced Larry Bird's Celtics in the Eastern Conference Finals four times in six years. The winner of that matchup faced the Lakers three out of four times (and during those six years the Lakers faced the 76ers and Celtics one time each in years during which the 76ers and Celtics did not meet in the playoffs). Those rivalries evolved in time to be Celtics-Pistons, and then Pistons-Bulls. There was change at the top, but it was gradual and organic. Now, Durant loses to GSW once and he jumps ship. Kawhi wins a title in Toronto and then leaves to team up with PG in L.A. The NBA went through an extended great run from the early to mid 80s through the end of the Jordan era but nothing lasts forever. MLB thought that it would always be America's favorite sport but decades of PEDs, long games, strikes, mismanagement and other problems have relegated MLB behind the NBA and the NFL. If the NBA is not careful, it could also decline in popularity, to parallel the decline in quality.
Jordan:
NBA players and other pro athletes do not receive large salaries because their careers are relatively short; they receive large salaries because they are participants in a sports/entertainment business that is generating vast amounts of revenue, and the salaries represent their compensation for contributing to that revenue.
There is no inherent value in being able to make a basket, or being able to jump very high. Athletes are not curing diseases, or putting out fires or protecting society from criminals. Without the infrastructure in place--via media promotion, corporate sponsorship, etc.--no one would know who these athletes are, and these athletes would be making much less money.
So, there is an business model here. Athletes are performers, and they are well compensated during the years that they are capable of performing at a high level. Meanwhile, the leagues, the media organizations and other entities promote the athletes and turn the performances into commodities that people will not only pay to attend/watch but that intrigue people enough that they will buy products associated with these athletes.
As I said during the most recent lockout, if the players think that the owners are making too much money in exchange for generating public interest in these performances, the athletes are certainly free to form their own leagues and corporate alliances, and attempt to generate similarly large revenue streams.
Until that happens, the people who take the financial risk and create the overall infrastructure have some right to--via collective bargaining with the athletes--establish some ground rules.
It is my opinion that, in the long run, the power plays by LeBron/AD, Kawhi/PG and others are damaging to the NBA. I understand your counterargument, and there is some validity to a few of your points, but overall I stand by my original argument that it is bad for the league when star players can get out of their contracts years before the contracts terminate without facing any negative ramifications.
Will it be interesting to see Kawhi/PG and the rest coached by Doc Rivers? Yes. Will that team be very good? Yes. Nevertheless, I would have preferred to see Kawhi attempt to defend his title in Toronto and I would have preferred to see Westbrook and PG playing together in OKC.
Everything that LeBron does seems to be driven by marketing, not by a desire for competitive greatness. First he took his talents to South Beach. Then he played the role of prodigal son returns. Now he has gone Hollywood and had to undertake various machinations to get another star to play with him since KD, Kawhi and PG (among others) refused to team up with LeBron voluntarily.
LeBron is a marvelously gifted basketball player. I just do not understand him, because he is wired so differently than Russell, Magic, Jordan and Kobe--men who each had outside causes and/or interests but also were obsessively focused on winning championships.
Jordan:
NBA players and other pro athletes do not receive large salaries because their careers are relatively short; they receive large salaries because they are participants in a sports/entertainment business that is generating vast amounts of revenue, and the salaries represent their compensation for contributing to that revenue.
There is no inherent value in being able to make a basket, or being able to jump very high. Athletes are not curing diseases, or putting out fires or protecting society from criminals. Without the infrastructure in place--via media promotion, corporate sponsorship, etc.--no one would know who these athletes are, and these athletes would be making much less money.
So, there is a business model here. Stars in most walks of life are paid well and have more power than typical workers. That is certainly true of star athletes as well. Athletes are performers, and they are well compensated during the years that they are capable of performing at a high level. Meanwhile, the leagues, the media organizations and other entities promote the athletes and turn the performances into commodities that people will not only pay to attend/watch but that intrigue people enough that they will buy products associated with these athletes.
As I said during the most recent lockout, if the players think that the owners are making too much money in exchange for generating public interest in these performances, the athletes are certainly free to form their own leagues and corporate alliances, and attempt to generate similarly large revenue streams.
Until that happens, the people who take the financial risk and create the overall infrastructure have some right to--via collective bargaining with the athletes--establish some ground rules.
It is my opinion that, in the long run, the power plays by LeBron/AD, Kawhi/PG and others are damaging to the NBA. I understand your counterargument, and there is some validity to a few of your points, but overall I stand by my original argument that it is bad for the league when star players can get out of their contracts years before the contracts terminate without facing any negative ramifications.
Will it be interesting to see Kawhi/PG and the rest coached by Doc Rivers? Yes. Will that team be very good? Yes. Nevertheless, I would have preferred to see Kawhi attempt to defend his title in Toronto and I would have preferred to see Westbrook and PG playing together in OKC.
Everything that LeBron does seems to be driven by marketing, not by a desire for competitive greatness. First he took his talents to South Beach. Then he played the role of prodigal son returns. Now he has gone Hollywood and had to undertake various machinations to get another star to play with him since KD, Kawhi and PG (among others) refused to team up with LeBron voluntarily.
LeBron is a marvelously gifted basketball player. I just do not understand him, because he is wired so differently than Russell, Magic, Jordan and Kobe--men who each had outside causes and/or interests but who also were obsessively focused on winning championships.
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