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New Deal Likely Means Less (Not More) Competitive Balance

Not that the Bobcats had a chance to consistently hang with the uber-rich Lakers before, but the new CBA will only make the gulf worse.A new CBA has finally been reached, and it’s clear the players were gouged, David Stern is still so smug you want to punch him in the face, and supposedly some items have been put in place to help the complete lack of competitive balance in the league. Steve Aschburner, a writer for NBA.com, says “Restricting the flow of solid free-agent role players to the biggest-spending teams was a core value of the owners' ‘competitive balance’ claims.” Unfortunately, if you look closer at those mechanisms and extrapolate what can/will happen, I think the NBA just made itself more likely to remain a top-heavy league in which the richest teams with decent GM’s will continue to grab and hold top talent, and subsequently dominate.

Over the past few years, big-money teams have been able to abuse their position of power in order to consistently trade short contracts of bad players for long or soon-lengthened contracts of All-Stars (Pau Gasol and Carmelo Anthony to LA and NY come to mind quickly). Although there was a salary cap and luxury tax under the old CBA, teams with huge local media deals and deep-pocketed owners like the Lakers and Mavericks were able to go WAY over that amount year after year after year. The richest teams were able to add a mid-level exception (MLE) player every year, guys who often made great supporting starters or strong bench contributors, players the poorer clubs needed if they couldn’t afford to keep their All-Stars.

So what did the new CBA do to help small-market teams feel like they can compete if they don’t happen to land in one of the top two draft spots when special players like LeBron James, Tim Duncan, and Kevin Durant enter the draft?

For starters, the extend-and-trade (what happened with Melo’s exit from Denver) and re-signing of players with Larry Bird rights who were part of lopsided, mid-season trades (Pau Gasol) remain pretty much intact, so rich teams retain that humongous advantage when making deals that can decimate small-market clubs for years (which is what’s likely going to happen with Dwight Howard and Chris Paul this upcoming season). There is a provision in there that beginning in three years teams that are more than $16 million over the salary cap can’t participate in certain types of sign-and-trades (different than an extend-and-trade), but pretty much anyone can see how much of a non-deterrent this is on many fronts.

Next, teams can now only have one player on a max-salary contract (worth up to 30 percent of a franchise’s salary cap). Sounds nice on the surface, but do you know how many max-salary players the Heat currently have? None. James, Wade, and Bosh all agreed to take close-to-but-not-quite-max-level dough so Miami could re-sign Udonis Haslem, one of those very good supporting players that clubs in less ritzy destinations desperately need if they’re going to be losing All-Stars like James and Bosh. As long as groups of great players can agree to take slightly less than max-salary money so they can play together, which will definitely happen, this new caveat won’t help competitive balance at all.

The new CBA has made some changes to which clubs can sign players to a mid-level exception contract in the off-season. Whereas before any club could sign a player to a $5 million per year MLE every summer, now only clubs that aren’t already $16 million over the salary cap (the cap is $58 million, the luxury threshold is $70 million, and these teams can’t be more than $4 million over that) can give a full MLE. For those teams that are over what’s essentially a $74 million cap, they can only sign players to “mini” MLE’s worth $3 million per year. I like the idea in principal, but why are rich teams allowed to sign anyone new for more than the league minimum? Not only that, we already know that MLE-type players will often gladly take less money to play for super rich clubs that usually give them a good chance to earn some hefty playoff bonuses or good endorsement deals since they’ll be playing in larger cities (how the Lakers signed Matt Barnes for cheap last year). This provision also does very little to help competitive balance.

One item put into place that most fans wouldn’t think would affect competitive balance is the “stretch exception” that allows teams to waive players on future contracts (here’s a good explanation of how it works and why it’s a bad idea). The players will still get their money, but it will be stretched out over time and not count against a team’s salary cap. Like some of these other provisions, it sounds nice on the surface (player still gets paid, but the team’s cap isn’t tied up in a bad contract), but this is something that will clearly give rich teams an advantage. Because of this new rule, they can offer free agents longer/larger contracts than poorer clubs would feel comfortable doing based on a player’s age or expected long-term prospects, use the player for a couple years until he’s no longer worth keeping at that salary, then waive him and simply pay off his contract without taking a hit to the club’s salary cap. Rich teams have the money to do this, and this ensures they can keep signing more risky free agents than poor teams and not take a hit to their cap.

Finally, the big new thing that’s supposed to be a game changer for competitive balance: new luxury tax penalties. In the past, teams that went over the luxury tax threshold (which again, is way over the thing called the salary cap) had to pay a $1-fo-$1 luxury tax. If they were over and added a $5 million player, they were actually going to dish out $10 million total for his services. We already know that when huge market clubs are bringing in over $100 million a year just on local cable deals, they will gladly go $20 million over the luxury threshold to stay in the title hunt. The new penalties for high-spending clubs are now larger and progressive, starting at $1.50-for-$1 (so a $5 million contact will cost $12.50 million) up to a $3.25-for-$1 tax for teams way over the threshold. This sounds like a great way to discourage teams from spending way more than other teams, but plenty of billionaire owners are already willing to pay the penalties that are in place. Plus it looks like teams above the luxury threshold might get some of that money back anyway (Sound impossibly crazy? Check this out).

Plus this now means that even less teams will go over the threshold, but the richest ones will continue to go just as far over. The franchises that are going to get pinched out and quickly scurry back under the $70 million threshold are the middle-class teams that were attempting to spend a little beyond their comfort zone in order to keep up with the big boys – teams like Denver and Houston whose player payrolls were $83 million and $75 million respectively last year. The Lakers, Mavericks, and Celtics (and sometime soon the Knicks) can laugh at this new, higher tax and will keep paying it so they can stay elite and because they can. What this new provision does is create an elite-of-the-elite group of teams that can go over the threshold and keep paying the tax. For example, health insurance is expensive, which is why 20% of Americans don’t have it. If the price of insurance went up 500%, the richest Americans would all still have it – this increase would not affect them, only everyone else. Same with these new luxury tax penalties. The result is that less teams will now be able to spend way more than the majority of other teams, meaning less clubs have a real chance to obtain big-name talent through trades and free agency. This obviously hurts competitive balance in a big-time way.

As you can see when viewing all of these new provisions together, nothing has been done to improve competitive balance in a league ruled by franchises that can charge insane prices for tickets and can obtain humongous local TV deals (FWIW: 4 teams have won 17 of the last 21 titles, and only 6 have won 26 of the last 28). In fact, the richest teams that can pay the luxury taxes and still turn monster profits just got a boost over everyone else.

And this sucks for fans who actually want a league with competitive balance, not just those people who talk about it.


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Reader Comments (7)

That last part iwth the luxury tax makes sense. I guess it's more of hte same from here?

November 28, 2011 | Unregistered CommenterHighLife

Not only is David Stern happy....although the player's BRI percentage went down, I'm sure there are some just as smug as Stern, as they'll try to build some power teams like the Miami Heat...

November 28, 2011 | Unregistered CommenterOJN

Two words: HARD CAP

Have a hard cap MAX and a hard cap MIN that are very close like 60 - 70 million. That way everyone is on the same playing field and no teams skimp out like crazy to save money and not try to do well.

November 28, 2011 | Unregistered CommenterGav

Every NBA owner is a billionaire who could spend money if they truly wanted to. There will never be balance in the NBA because there will never be population equity. The big market teams earn more from TV revenue, thats just the way it is. Small market owners have more than enough to offset the diofference, they choose not to.

Its like baseball. George Steinbrenner spent the most but he was usually the owenr with the least net worth. Carl Pohad in Minnesota was worth 3 billion dollars, but complained he couldn't generate money. Cut the BS out.

November 30, 2011 | Unregistered CommenterJamesD

What an owner is worth and what he's willing to spend on a sports team, which for many of them is just a vanity piece in the portfolio that is a means for him to gain more notoriety and business connections, are two VASTLY different things.

August 14, 2012 | Unregistered CommenterZachariah Blott

sports is all about winning, on the court and off the court. Just because a team has money doesn't mean they are guaranteed to win. Talent is limited. Social engineering will never acheive balance. Isn't it more thrilling to see a team like the Oakland A's win with limited resources than say the Yankees. Teams have developed over the years to create a fan base to support a product. So now you're going to say McDonalds you're going to have to pay into a pool for all these unsuccessful hamburger franchises because they were small and unpopular? This is nothing but welfare and entitlement ideology. Why don't we just go all the way and limit playing time for players that are better than others so that we can even the playing field. Or give the other team a 30 point lead so that it will be harder for good teams to beat the bad teams. Why don't we just be like China and take kids from their home and force them into training camps to benefit their ideology. This is not just a YMCA league. This is the NBA. Just like a player tries to make a team, the bottom feeders who aren't cutting it need to develop their product or sell their team to someone who knows how.

August 14, 2012 | Unregistered Commenterwilzuvsteel

You make many analogies that don't fit the environment and realities of the NBA at all, so I'm not really sure how to respond to your comment in a way that would be both truthful and understood by you. The best I can say is that I'll have a column posted in a day or two that addresses a lot of the issues that allow teams like LAL and Miami to compete at a level that does not exist for a vast majority of the league. If you believe the NBA is an even playing field and that team ownership for many franchises cares about anything other than making money, you're dead wrong.

August 14, 2012 | Registered CommenterZachariah Blott

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