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Monday, October 20, 2014

Changes in the CBA Could Help the Fans

Back in February the New York Times published an article on agent David Falk and the next NBA Collective Bargaining Agreement. In it, Falk said that the NBA owners will push for serious changes in the next CBA and since they are prepared to lock the players out for two seasons, they will likely get their changes approved. Two weeks ago the player’s union president, Billy Hunter, refuted the claims that the league will win on all fronts, saying the players would negotiate not surrender. As opposed to the overhaul Falk is suggesting, Hunter said the players will only agree to minor changes to the CBA. Some of the changes that Falk is proposing won’t affect the average fan, like the percentage split between players/owners or the age limit. However there are a few changes to the salary cap that could benefit the common follower.

Understanding the ramifications of the NBA’s salary cap can be difficult for the average viewer. The NBA has a soft cap, meaning all teams over the cap are unable to sign new free agents except for the mid-level exception (about $5/$6M per year) and the low level exception (about $1/$2M per year). Using the Bird exception a team over the cap can usually resign their own player. Additionally a team that is over the cap can only swap players whose annual salaries match. Although the rules are simple, their constraints make for strange results. For instance, last year the Blazers sent Zach Randolph to the Knicks for Steve Francis and Channing Frye. Randolph played nearly every game for the Knicks for a year and a half, while Portland instantly cut Francis, and Frye eventually fell out of the rotation. Yet the Blazers received the better end of the deal!

NBA trades aren’t evaluated at the talent level, but at the financial one. There’s a problem with the league when fans can’t analyze a trade without consulting an accountant. It’s hardly something you’d expect from a business in the entertainment field. The issue stems from guaranteed contracts, or more specifically bad contracts. Nearly all NBA contracts are guaranteed, which means that if a team cuts a player, his contract stays on the cap for its entire length. A player can be overpaid when a team misjudges his potential (Eddy Curry, Larry Hughes), the player regresses due to injury (Antonio McDyess, Darius Miles), or bad management (Jared Jeffries, Jerome James). Since NBA contracts can last 6 years, when a team hands an oversized contract to a player the effects last a long time. Once the contract is signed, the only option the team has to get out from its length is to trade for another player with a contract of similar size but shorter length. But from the league’s perspective, the unwanted contract isn’t removed. It is just redistributed to another team. Hence as these bloated contracts float from team to team until their final demise, the overpaid player becomes a burden on the entire league. It’s not a surprise that players with bad contracts are the ones that are frequently mentioned in trade rumors, since teams are always looking to move them.

While it’s easy to lay blame at the feet of the team presidents that hand out such ridiculous contracts, it’s ultimately the fans that end up suffering. One GM with a few bad moves can cripple a team for half a decade. It will take the Knicks two years post Isiah Thomas (on top of the four years with Zeke at the helm) to be able to get out from the salary cap landslide he created. But this isn’t isolated to the Knicks, because bad contracts are commonplace in the NBA. One misguided front office can hurt a team years after they have been removed.

Adding to the problem is the league’s tough stance on guaranteed contracts, which are seemingly written in stone. Darius Miles was given a contract extension by Portland back in 2004 that lasted until 2010. He played his last game for the Blazers back in the 2006 season. The team petitioned the league to remove his contract from their books due to injury, and the league capitulated. However this year Miles has resurfaced to play in a handful of games for Memphis, and the league has applied his salary back to Portland’s cap. Also this year the Knicks received Cuttino Mobley in a trade, who was forced to retire due to a heart condition. New York was denied a disabled player exception from the league, even though Mobley’s “hypertrophic cardiomyopathy had progressed to the point that playing professional basketball could be life-threatening.

The two other major American sports don’t have this problem. Major League Baseball’s lack of a salary cap means teams are able to sign any player regardless of how much the team has already spent. Unfortunately this model would be a disaster for the NBA because the league isn’t as stable and lucrative as baseball’s. However the NFL’s model would be a good fit. Football has a hard cap, which means teams are not allowed to exceed their cap number. And to allow teams to accomplish this goal, most contracts in the NFL are not guaranteed. According to wikipedia:

Because of this treatment, NFL contracts almost always include the right to cut a player before the beginning of a season. If a player is cut, his salary for the remainder of his contract is neither paid nor counted against the salary cap for that team. A highly sought-after player signing a long term contract will usually receive a signing bonus, thus providing him with financial security even if he is cut before the end of his contract.

Which leads us back to the NBA’s next CBA. Falk suggests the owners will push for a hard cap and shorter contracts. And I hope they win, because the soft cap/guaranteed contract is bad for the league and its fans. Imagine if player deals were only guaranteed for the first 3 years. Almost instantly the Knicks could have jettisoned any unwanted players and reshape their team in a single offseason. On his first day Donnie Walsh could have cut Stephon Marbury, Zach Randolph, Eddy Curry, Jerome James, Jamal Crawford, and Malik Rose. With the players cut from other teams, Walsh could have had a wider berth of players to chose from when building the 2009 roster. Unfortunately the current cap rules forced Walsh to stick with these undesirable players and allowed him to trade them only for matching salaries (and in Eddy Curry’s case – not at all). It’s easy to see why this would benefit teams and their fans. Bad franchises would be able to fix their mistakes quicker, which means fans wouldn’t have to wait years for the hometown squad to turn things around. And since winning correlates to ticket sales more than anything else, it means the owners would see more money in their pockets.

Switching to a hard cap would probably add one more added benefit to the league: parity. The NFL’s popularity can be partly attributed to the ability of teams to make single season turnarounds. This means that every franchise with competent management (everyone but the Oakland Raiders) has a chance to make the playoffs and go to the Super Bowl. Last year the Dolphins, Falcons, and Cardinals had years that surpassed their fans’ wildest dreams. Over the last three years, the NFC has seen a different winner in 3 out of 4 of their divisions. In that same time span the NBA has had only 1 of their 6 divisions with three different winners (the Southwest). With the current rules, rebuilding in the NBA is a slow and tedious effort. Allowing GMs to cut their players without long term harm means that more players would become free agents each year. This increased player movement would give teams more flexibility to address their needs.

Of course the biggest hurdle in this change would be the players. Overall shorter contracts probably wouldn’t fly with players, since that curbs the earning power of the sports’ best players. And many players would balk at non-guaranteed contracts, since that wouldn’t allow them get that lucrative 5 or 6 year deal for financial security. However by asking for non-guaranteed contracts instead of shorter ones, the league can keep their top earners happy (who would cut LeBron or Kobe?) while making a pitch to the underpaid. For instance if teams weren’t bound by large contracts to undeserving players, there would be more money to sign those who merit it. In other words, some of the younger Knicks might be splitting Stephon Marbury’s $19M per year. And Portland could take the nearly $40M they’re giving to Steve Francis, Raef LaFrentz, and Darius Miles and use that on some of the players that have actually played for the team this year.

Perhaps to even things out for the players, the league would have to make the concession to raise the salary cap. Currently the cap is at $57M, but since it’s a soft cap teams can exceed that number. Using the salary data from hoopshype, it seems that the league paid out an average of $72M this year. Although some players may object to such a concession, there seems to be room for negotiation. And it does redistribute the wealth to players that deserve it more. If there’s resentment in NBA locker rooms over disproportionate salaries, this would go a long way to remedy it. When some players are getting paid more than they are worth, it hurts both the league and the players that deserve more money. And last but not least, the fans.

20 comments on “Changes in the CBA Could Help the Fans

  1. Duff Soviet Union

    There is no way that players are going to agree to non-guaranteed contracts. Not a chance in hell. And nor should they. It all goes back to the owners. If you think a guy’s going to be overpaid in a few years DON’T SIGN HIM. Seriously why should players suffer just because some of the idiots running teams can’t help themselves? Who has RC Buford, Daryl Morey, Sam Presti etc overpaid. No one, because these guys know what they’re doing. Just because you’re allowed to sign a Jared Jeffries to a 37 million dollar contract doesn’t mean you have to.

  2. Brian Cronin

    Good stuff, Mike.

    I wonder, though, if the reason the NFL system works so well is because all the teams are dealing on pretty much an equal plane (money-wise). Yes, some teams have more money to spend (which the hard cap cuts off), but basically no one is in the position of, say, Memphis or New Orleans, where they literally cannot afford to pay certain salaries.

    If the NBA had a hard cap, how many teams would even be able to afford to pay $62 million every year (which would basically be the NFL equivalent floor to the $72 million hard cap)?

    But yeah, the key thing I think for the NBA is that there has to be some way to get rid of teams being able to acquire key players in exchange for cap room (which you point out above how absurd it all is). That brings luck into the situation way more than it should. Denver is kicking ass right now because they happened to be one of the few teams who had a terrible player in the final year of his contract. The Lakers are amazing right now because they happened to have a terrible player in the final year of his contract last year.

    In the NFL, when a Jay Cutler becomes available, everyone has an equal shot at getting him.

    In the NBA, when a Chauncey Billups becomes available, only the teams who have bad players making too much money in the last year of the contract have a shot at getting him.

    That’s obviously an absurd situation, and the NBA needs to get rid of that, even if it requires something as silly as “Not in the best interest of the game” rulings, like MLB does.

  3. jon abbey

    “There is no way that players are going to agree to non-guaranteed contracts.”

    I don’t think they’re going to have much choice in this economy.

  4. Mike K. (KnickerBlogger) Post author

    “I wonder, though, if the reason the NFL system works so well is because all the teams are dealing on pretty much an equal plane (money-wise). Yes, some teams have more money to spend (which the hard cap cuts off), but basically no one is in the position of, say, Memphis or New Orleans, where they literally cannot afford to pay certain salaries.”

    Yeah in the second Times article, Billy Hunter basically says teams should share their revenue better as well.

    “And I would be obviously encouraging and promoting a system like the one that exists in the N.F.L.,” Hunter said.

    N.F.L. teams share local gate receipts, with 60 percent going to the home team and 40 percent to the visitors (minus expenses). In general, 82 percent of all N.F.L. revenue is shared among its franchises.

    In the N.B.A., teams share revenue from sponsorships, merchandising and national television rights, but they do not split local TV revenue or gate receipts. The league imposes a luxury tax on high-payroll teams, although the list of tax-paying franchises is shrinking. The league also has a program that pays $49 million a year to low-revenue teams.

    It is not clear whether the league would consider a broader, N.F.L.-style program. The league declined to comment Wednesday. It is also not a given that the union will push for it.

    If the league pushes for a hard cap, then it makes sense for them to share the revenue better. Of course the Knicks/Lakers of the league aren’t going to agree to this. Thinking about this spins your head, because there are times when a percentage of the owners/players will agree with each other, but disagree with the rest of them. Of course that makes it difficult to do what’s best for the league in general.

  5. Brian Cronin

    I love the new look for the site.

    Unless I just made a mistake and the site is not supposed to look like this.

  6. KnickfaninNJ

    I agree with you that a shorter maximum length for contracts would be good for the league, but not about the non guaranteed part, or about the NFL analogy.

    In the NFL, the reason teams can seem to change their quality greatly from year to year is that teams that were good the previous year get a tougher schedule than teams that were bad the year before. This is called “parity”, and I guess it’s a success in some sense, because it does actually make who gets in the playoffs each year more unpredictable; but it means that as soon as you get a decent team the deck starts getting stacked against you. Philosophically, I hate it.

    Also, in the NFL, average careers are much shorter than in the NBA and players can get cut easily, so there isn’t really a point to a long term contract. It means that the NFL can be very cruel to role players who get hurt. Their careers can be over soon, without much to show for it. I know it’s not that great for the GM’s but I think guaranteed contracts are fairer to these role players, who are most of the league.

    In the NBA, since players’ careers are longer and it is more star oriented than the NFL, endorsements are more prominent sources of income for star players. This means that if there were a hard cap and cuttable contracts, star players would migrate to media centers where they could get endorsement dollars. Fans in moderate size cities would hate that, and, even though I root for the Knicks, I don’t like the idea either. The way the NBA system is now, the Cavaliers can sign Lebron for more money than anyone else can and this makes Cleveland more fair competition for New York. which is good for basketball overall.

    I do agree one hundred percent about shorter maximum length contracts. Six years is too long. From a sports fan’s point of view, looking for an improved team, it’s an eternity.

  7. Mike K. (KnickerBlogger) Post author

    “In the NFL, the reason teams can seem to change their quality greatly from year to year is that teams that were good the previous year get a tougher schedule than teams that were bad the year before. This is called “parity”, and I guess it’s a success in some sense, because it does actually make who gets in the playoffs each year more unpredictable; but it means that as soon as you get a decent team the deck starts getting stacked against you. Philosophically, I hate it.”

    It can’t just be the schedule. What kind of schedule would turn the Knicks in to a 50 win team? Maybe if was filled with NCAA division 3 teams.

    Granted I think it’s easier in the NFL to have a fluky season (only 16 games), but I think the player movement is a big help. Imagine if the Knicks could have gotten rid of Marbury like the Cowboys dumped Terrel Owens?

  8. Brian Cronin

    Congrats to the NBA for finally giving Lebron the MVP.

    It is a bit of a shame that he’s only the third-youngest MVP of all time, but that’s still pretty darn impressive.

  9. Z

    How about mutual options at the end of every season on every contract. That way only the players earning the money are making the money, but the total amount of money moving from owners to players stays the same. (And it would eliminate the absurd precedent of giving players with one good playoff series on their resume a 5 year $30 million contract).

    You could also eliminate the faulty, non-fan friendly luxury tax this way too.

    You’d have set salary slots that adjust to league revenue each year. Teams can chose to fill the slots or not, with no punishment or reward either way. That way the teams that want to spend money are free to, but are not crippled in the long term.

    Contracts are nothing more than legal unions. If a player wants to return and a team wants him back they re-sign at market value every year. If either is unhappy, they go in a different direction.

    I think marriage should have a mutual option to renew vows every year too, but I guess that’s a proposal for a different site…

  10. KnickfaninNJ

    I agree it’s not just the schedule. But I think part of the rapid change in NFL teams is because the average NFL career is 3years, so a third of the team turns over every year. Some of this is probably due to a higher rate of injury in the NFL, and some due to the fact that some NFL positions aren’t as skill sensitive as NBA ones are. A little bit probably is due to non guaranteed contracts, but I don’t think a ton of the difference is. There just aren’t that many Jerome James types in the NBA. Also, it’s hard to find someone to bring in to the NBA who can immediately play. Look at the Knicks. At the end of this year they brought in top players from the D-League. Apparently, they didn’t impress much in practice, because none of them got much playing time in games. Or look at Roberson and how well he performed when actually in a regular season game. In the NFL, the pool of available replacements seems closer to being able to play at the NFL level. Teams seem to find replacements for injured players that can go in and play pretty quickly.

  11. cgreene

    A couple of things. (Great topic btw). 1) Couldn’t you split the difference and make 1/2 of each contract guaranteed on years/$. If we sign Jerome to a 6/$30M than we are on the hook for at least 3/$15M. 2) One of the essential tenets of the CBA was that teams KEEP the good players they draft and obtain long term. That is the whole purpose of the Bird rights. A hard cap NFL style would sully that. Plus IMO the NFL parity is only good for the bad teams not as good for the good ones. Dynasties and long term success have generally been good for leagues. The NFL is denied that to a degree because a team MUST let go of core players each year in order to accommodate the cap and new acquisitions.

  12. Mike K. (KnickerBlogger) Post author

    I agree that the turnaround in the NFL is partly due to the shorter life of an NFL player. But I think the contract situation helps greatly. Look at how many great RBs are just discarded after their usefulness is up. If they were going by the NBA’s rules, those guys would be eating up cap space. At it’s not just the bad teams that use it. Look at how New England dumps their veterans once they find cheaper replacements.

    And if I were the players I would fight for non-guaranteed contracts over shorter contracts. When you’re worth $10M a year, and you can get a 10.5% increase, you want as long a deal as possible, so the added raise nets you a much larger deal.

  13. Ted Nelson

    Great post. I like the point about getting the money in the hands of deserving players.

    One worry I have about the hard cap is that it will reward poorly run franchises relative to the current system. As a fan who has little control over how NBA franchises are run this doesn’t seem so bad, especially when poorly run teams can luck into some lottery magic or a lopsided trade and emerge as contenders anyway.

    Considering that NBA franchises are already monopolies in a financial sense, I’m not sure it’s a good idea for the quality of the league to offer incentives for teams to be inefficient both financially and basketball wise.

    I’d really like to see some competition added to the league with a European style, worst two teams fall to a B league and best two teams from the B league are promoted. This would open franchises up to basketball competition (no tanking, drown-out rebuilding) and financial competition from better run organizations in the same city. Local governments would no longer be expected to waste tax dollars building new stadiums, or at least if they did multiple teams could play there–the best team eventually replacing the others. A real minor league system would complement this approach.

    “In the NFL, the pool of available replacements seems closer to being able to play at the NFL level. Teams seem to find replacements for injured players that can go in and play pretty quickly.”

    Very true. There are important differences between the NFL and NBA that I think warrant discussion.

  14. Marc R

    Excellent topic and I agree that it would definitely be better for fans (especially Knicks fans) if there was more player movement.

    That said, I take slight issue with some of your statements:

    It will take the Knicks two years post Isiah Thomas (on top of the four years with Zeke at the helm) to be able to get out from the salary cap landslide he created.

    In fairness, Isiah inherited an incredibly large salary cap mess from Layden (cursed be his name) that would have extended through almost all of Isiah’s years here even if Isiah did nothing.  But, of course, Isiah made it worse.

    A highly sought-after player signing a long term contract [in the NFL] will usually receive a signing bonus, thus providing him with financial security even if he is cut before the end of his contract.

    But that signing bonus is prorated to the years of the contract.  So an NFL player with a nonguaranteed contract, but a big signing bonus, still has a massive effect on the team’s cap once he’s cut.  I believe Washington has paid an enormous amount of its cap to players that no longer play for the team.

    For instance if teams weren’t bound by large contracts to undeserving players, there would be more money to sign those who merit it. In other words, some of the younger Knicks might be splitting Stephon Marbury’s $19M per year.

    Well, I’m all in favor of that but it would require another significant rule change.  The only Knicks that are underpaid (arguably of course) are those that are still on the rookie salary scale.  I can’t see the NBA owners getting rid of that little perk and, unsurprisingly, the NFL commish is trying to put a rookie scale in his league.

  15. ess-dog

    Call me crazy (or a Knick fan), but I would love to see the league eliminate the cap all together.  The bidding wars for the best 3, 4 players would be  fantastical events unto themselves.  The better teams would return to the major markets (no more San Antonio in the finals!)  And the greatest players would be on the biggest stages (NY,LA) and get to maximize their endorsement potential.  It would be better for player and owners (ticket prices would be another story.)  Teams could just cut their mistakes and move on if they have the money.  Smaller market teams would have to play smarter, infuse the roster with european players, and spend smartly (Like the Oakland A’s.)

  16. KnickfaninNJ

    Mike,

    You may be right about the running backs.  I don’t know the NFL well enough to notice something like that.    I assume you some are getting dropped who could probably still play but no longer at a level that justifies their salaries?  If so, then I would agree, the lack of committed contracts is having an effect.

  17. Mike K. (KnickerBlogger) Post author

    You may be right about the running backs.  I don’t know the NFL well enough to notice something like that.    I assume you some are getting dropped who could probably still play but no longer at a level that justifies their salaries?  If so, then I would agree, the lack of committed contracts is having an effect.

    The analogy isn’t perfect, because high paid NFL running backs are usually productive until their body wears out. In the NBA overpaid players are more likely the result of poor GMing than injury. But the end result is similar: being handcuffed to a player financially who isn’t producing in games. And the NFL has a great way to deal with it (from everyone but that player’s pov), where the NBA doesn’t

  18. Ted Nelson

    “And the NFL has a great way to deal with it (from everyone but that player’s pov), where the NBA doesn’t”

    I think that one problem is that the NBA is much more of a player’s league than the NFL. As KnickfaninNJ pointed out earlier, NFL players are generally easier to replace (AI has said repeatedly that he could be an NFL CB and most people seem to agree, Antonio Gates is a Pro Bowler after spending his NCAA career playing basketball, and Nate Robinson had a bunch of interceptions at UW). Plus, there are simply more of them.

    If NBA owners institute a 2 year lock-out (which I don’t see them doing in the interest of their own wallets in the first place) I think you’ll have LeBron and the NY Nikes taking on Kobe and the LA Adidas and DWade and the Chicago Converses. In other words even a guy like me who believes in efficiency, defense, team play, and the little things is willing to say that stars drive the NBA (for better or worse). In the event of a lock-out, lesser players could go to Europe and still live very comfortably. I see Congress, Obama, and/or the Supreme Court getting involved and the players winning.

  19. jimjamj

    here’s a solution that nobody has suggested yet: you know how if we were to waive Eddy Curry right now, his contract will still count towards the salary cap until the summer of ’11, even though, hypothetically, his contract has already been paid in full? Make that not the case. As in, if a contract is waived or bought out, it comes off of the salary cap right away. That fixes most of the problems: it’s not completely unfair to the players, the way the NFL’s contracts are, and although it doesn’t let GMs undo mistakes, because the players still must be payed, it means that the mistakes of the past don’t constrain a team in the present.

  20. Mike K. (KnickerBlogger) Post author

    jimjamj – then in essence this would make an imbalance between the teams that can afford to pay guys not to play and the ones that can’t. Teams like New York and L.A. would be able to trade for guys with noxious contracts (along with some young player/draft pick) then simply cut the offending contract. It would be like a tax for poor teams – if they want to get rid of that bad contract they have to send a prospect/draft pick.

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