Hey, big spender! Why this summer may mark end of free-agent excess
NBA owners are crying poor yet spending lavishly at the outset of free agency
The owners need protection from themselves -- they may get it in next CBA
Guaranteed contracts will be a source of contention in upcoming CBA talks
Enjoy this frenzied summer of free agency. You're probably never going to see anything like it again.
Lost amid the feverish maneuvering of NBA owners and front-office personnel to recruit individual members of the best free-agent crop ever is that next summer these same men are going to claim they can't afford to pay the contracts that they will so proudly distribute over the next few weeks.
The irony of the owners likely shutting down the league next summer in order to get their books straightened out is that speculation over free agents' destinations has generated unprecedented publicity for the NBA. But media coverage does not pay the bills these days, at least not enough to overcome the sobering deficits some teams are incurring by virtue of the very process they are undertaking in the last year of the collective bargaining agreement. And so a lockout, it seems, is inevitable, because as one owner admitted earlier this year, "We need protection from ourselves."
The first day of the free-agent negotiating period proved that point emphatically. Despite playing in a small market and losing loads of cash, Memphis owner Michael Heisley, who in the past has looked to sell the team, is giving a five-year maximum deal worth an estimated $82 million to the 23-year-old Rudy Gay, a four-year player who has never made the All-Star team or lead his team to the postseason; the Hawks, whose ownership has refuted reports that the team is for sale, is said to have offered Joe Johnson, 29, a second-tier star who did not perform well in the postseason, a max six-year deal for about $120 million; Drew Gooden, who last offseason as a free agent signed a one-year deal for less than $2 million guaranteed, is receiving a five-year, $32 million deal from his ninth team in nine years, the Bucks, who also are reportedly discussing a $39 million deal with journeyman scorer John Salmons; the Timberwolves moved quickly Thursday to reach a four-year, $20 million deal with a well-traveled backup center, Darko Milicic; and the Raptors agreed to a five-year, $34 million contract with 23-year-old Amir Johnson, a 2005 second-round pick who has career averages of 4.7 points and 4.2 rebounds.
And yet, after these next few manic weeks of profligate spending, the joy of signing free agents will be replaced by furrowed brows that suggest the machine is broken and badly needs an overhaul. This is precisely why there is so much mistrust between the owners and the players; essentially, the owners talk out of both sides of their mouths and the players don't know which side to believe.
In reality, if the players and the owners could work collaboratively, they probably could enjoy an unheard-of level of financial success. But it is not going to happen because there is inherent suspicion between the sides.
I asked one of the best financial minds I've come across -- who asked to remain anonymous because he consults for an NBA team -- what he would do to repair this broken system. No restrictions on ideas. Think outside the box rather than building off what is in place.
His suggestion was to remove cost-control barriers like the salary cap and the luxury tax -- which require more layers of convoluted rules in subsequent CBAs because teams inevitably find loopholes -- and focus solely on maximizing basketball-related income. The first step is to agree on what percentage of that income each side gets and then guarantee that percentage by using an escrow system. And the second step is to work in a non-adversarial fashion to make the league as popular, successful and, by extension, financially flush as possible. In effect, the larger the pie grows, the bigger the piece of pie everyone gets.
To me, one of the best ways to do that is to eliminate guaranteed contracts. Just look at the list of next season's highest-paid players to understand. And this is before even one contract is signed this summer.
Kobe Bryant will be the highest-paid player at $24 million, and very few would argue that he is unworthy. But Rashard Lewis, who averaged 14 points and 4.4 rebounds for Orlando last season, is next at $20.5 million. An injury-riddled Kevin Garnett will make $18.8 million with Boston. Milwaukee's Michael Redd, who has had major knee injuries in each of the last two seasons, will make $18.3 million. Yao Ming, who can't stay healthy with Houston, will be paid $17.7 million. The Wizards' Gilbert Arenas, who has played 47 games over the last three seasons because of injury and suspension, will make $17.7 million. And that's just among the top nine players.
Power forwards Elton Brand of Philadelphia and Kenyon Martin of Denver, both diminished by injury, are on the books for $16 million, or close to the same amount as another former star plagued by injuries, New Orleans' Peja Stojakovic. Notoriously lazy point guard Baron Davis will get $13 million from the Clippers. Over-the-hill Richard Hamilton will cash in $12.6 million from Detroit.
Yes, teams agreed to these contracts. But teams should not be penalized for five or six years for making a bad choice, or because circumstances like Redd's injury intervene and make their investments basically a total loss. Isn't having to pay somebody $15 million for one season of nothing penalty enough? To be locked in for half a decade is absurd.
It makes teams worse, and in the end it makes the league worse. And because the product is not as good as it could be, it drives down overall revenue. After all, what fan wants to pay an astronomical ticket price to see Davis loaf up and down the court, or Brand and Andre Iguodala make about $27 million combined and team up for 27 victories as they did last season?
Wouldn't it be better -- and downright refreshing -- to see players have to compete for and justify their contracts every season? Wouldn't the level of play be higher if the guidelines were similar to those in the NFL, where production and quality of play are paramount and insouciance is not tolerated? Wouldn't the overall quality of the NBA improve if the players who are producing are paid, while the ones unable to compete for whatever reason -- age, injury, lack of skill -- are jettisoned?
I asked Lakers guard Derek Fisher, the president of the players' association, this very question: Why have guaranteed contracts?
"Because the owners agreed to them," he said.
But why do players who are actually contributing care whether a guy who is unable to help either the team or the league gets his $10 million?
"Because that is the contract that an owner signed and the player is entitled to that money," Fisher said.
This is why a lockout appears inevitable. There is a disconnect between what is needed and what is wanted. Players have become so accustomed to getting their money that they can't see an alternative solution to the obvious problem. But make no mistake, guaranteed contracts are the very thing that will bog down CBA negotiations next summer and could cost a good portion, if not all, of the 2011-12 season. The owners will not completely eliminate the guarantees, but they will limit them -- again, in part to protect themselves from their own errors in judgment.
Hornets forward David West is among those players who doesn't believe an owner who is given the chance to cut a contract will use that opportunity to improve the team.
"Performance is subjective," West said. "One owner may think that what you are doing on the court is worth your salary, while another may not think he is getting his money's worth. That gives them the opening to cut somebody loose just because their salary is too big. You would never see an older player get to the end of their contract because the team would just use the excuse that he is not being productive enough and cut him before they have to pay him."
The solution to that is to front-load the contract rather than backload it, the latter being the current formula because teams are always trying to defer their initial costs, thinking they can trade a player in the final year of his contract to a team seeking cap relief.
The other solution is to implement a minimum salary threshold so that if a team cuts a player to save salary or renegotiates his contract, it has to spend at least a portion of that money on other players to upgrade the club.
"I just don't trust that owners will do that," West said. "Some guys want to save money more than they want to win."
The other factor, West acknowledged, is that players feel their careers are short-lived and they want to maximize their earnings in that span. But that goes against the very argument that it is better for the overall health of the league for the best players to be on the floor and earning money -- something the players are going to have to reconcile in their minds during the upcoming negotiations.
Player agent David Falk, who represented many of the players who helped shape the current version of the CBA -- including Michael Jordan, Patrick Ewing and Juwan Howard -- said he believes the mid-level exception has been the league's downfall and that eliminating it will go a long way toward restoring the sport's health.
The mid-level exception is a contract equal to the average player salary, which last season was $5.85 million. Falk said allowing teams to sign players to that contract while limiting what they can give players like LeBron James has made the league far weaker.
"Why is Jerome James allowed to make $5 million and LeBron James is only able to be paid $15 million?" Falk said. "Nobody is going to an arena to see Jerome James play, and yet he is making one-third as much as LeBron. LeBron drives interest in this league. He is why people are coming to the arena and buying tickets. If you put a Ford and a Ferrari side by side, which one are you doing to drive? The Ferrari every time. LeBron James is the Ferrari. He should not be limited in how much he can earn so that Jerome James can make $5 million."
The very prospect of smaller salaries and shorter deals for players in the next CBA is why so many stars opted out of their contracts this summer. A new day is dawning soon in the NBA, one that embraces fiscal responsibility and temperance through institutional design.
It will take six years -- the maximum length of a current contract -- to get to the end of this cycle, at which point we'll remember those heady days of obscene spending as perhaps the last of their kind.
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