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Attention, NBA owners. You are now entering a No Chump-Change Zone. Be prepared to fork over long-term contracts in excess of $70 million. Expect further increases in compensation ahead. Extreme danger for dullards, cheapies and the weak of heart.
No, it's not some sort of warning sign from Demolition Man. It's flashing right here, right now. With players' salaries smashing through one multimillion-dollar barrier after another, NBA executives are numbly shaking their heads and checking their wallets. Many of the players who have been grabbing the big bucks, the execs grouse, aren't even household names; in fact, most are rookies. The $40 million deal Orlando Magic center Shaquille O'Neal signed last year as the league's top overall draft pick suddenly looks, well, paltry. Just skin and bones next to Golden State Warrior rookie forward Chris Webber's hefty $74 million contract or Charlotte Hornet forward Larry Johnson's fat $84 million deal. So what gives? How is it possible to pay a man 35 times President Clinton's $200,000 annual salary just to put a ball in a hoop?
Simple. It's the going rate. It's what the market says the owners have to pony up. A more salient question: Will these stratospheric packages eventually bankrupt the league? The answer here is simple, too. No one knows. Certainly if every Dwayne Schintzius or Manute Bol is handed $3 million a year, red ink will flow, but for now the NBA is more than capable of shelling out big clams to incipient superstars like LJ and Shaq, especially with Magic Johnson, Larry Bird and Michael Jordan doing the pasture thing. Remember, too, that these princely sums are being paid out over more than a decade, so the contracts aren't quite as mind-boggling as they first appear. And take a look at the kind of money the league takes in.
Since 1984, NBA revenues have grown from around $200 million to roughly $1 billion last season. The values of franchises have also soared. In 1980 the Dallas Mavericks anted up $12 million to join the league; the owners of the next franchise—most likely it will be awarded to Toronto—are expected to pay $125 million for the honor of joining the league. Meanwhile, the average NBA player's salary has climbed from about $275,000 in 1983 to $1.2 million last year. "It's fair to say these new salaries are keeping pace with the growth of the league," says Washington Bullet general manager John Nash.
Two things, however, are making Nash and other team executives quite nervous: the length of the new contracts and the big bucks being handed out to rookies.
So how did we come to these megacontracts? Each sprang from a unique combination of factors and is custom-tailored with bells, whistles and lollipops that reflect the high-stakes tug-of-war among players, teams and the league. The contracts have created a domino effect, each deal affecting the one that follows.
Grandmama Gets Her Nest Egg
The story of Larry Johnson's $84 million contract begins last February at the All-Star Game in Salt Lake City. According to his agent, Steve Endicott, Johnson, who was at the game as a first-timer, expressed to reporters an interest in signing a long-term contract. The news quickly reached Hornet president Spencer Stolpen, who that night at a party approached Endicott. The two men agreed to hash out a new deal over the summer. "It then became kind of a joke with Larry and me," says Stolpen. "After a win over the [Boston] Celtics in the playoffs, I said, 'How about a 10-year contract?' and he said, 'Why not?' After another win I said, 'How about 11?' " Turns out neither one was kidding.
According to both sides, the negotiations, which began in May, were almost a lovefest. The first order of business was the length of the contract. Both parties wanted to go long. Fine, but the league has a rule discouraging contracts that stretch out beyond a player's 35th birthday (any salary earned in a long-term deal after a player reaches 35 is factored into the team's payroll liability for the pre-age-35 years of the contract). So, since Johnson is 24, he and the Hornets agreed to an 11-year guaranteed deal, with a one-year option for the team in year 12.
Next came the dollars. Two years ago Johnson, the No. 1 pick in the 1991 draft, signed a six-year, $20 million deal with the Hornets. He proved to be a bargain, averaging 20.6 points per game during his first two seasons. Last year O'Neal signed his whopper, and this summer the Philadelphia 76ers signed part man, part project Shawn Bradley, the No. 2 pick in the '93 draft, to an eight-year, $44 million deal. All of this set the stage for Johnson's final number. "I broke Larry's 12 years into three parts," says Stolpen, "and tried to calculate what someone of Larry's talents would be worth. For the first four years I figured $5.5 million a year; the next four, $6.5 million; and the final four, $7.5 million." Endicott countered with higher figures, but the quibbling was brief. They shook hands on $7 million a year for 12 years, or $84 million, the biggest team-sport contract ever.