I was following a number of Twitter discussions regarding Chris Paul’s apparent dissatisfaction with the Hornets and potential trade request, it prompted me to think about what system is best for the NBA.
Our esteemed ESPN TrueHoop colleague Matt Moore from Hardwood Paroxysm made these comments as part of a larger debate:
@HPBasketball: @needsrebooting so you have no problem with players being pawns, it’s taking control of the situation to creat superteams that’s lame
@HPBasketball: @ticktock6 so the owner can trade him whenever he wants, but the player made his decision and has to live with it?
These quotes certainly need to be viewed in context of the larger thread, but they provided inspiration for us to try to answer the questions:
How much freedom should the players have? And what impact could that have on compensation?
Give me six months and I’m sure I’d have enough to write a book on the topic. But we don’t have the time or space here. And this post is not a direct response to “Should Chris Paul have the right to ask for a trade?” – please don’t read it that way. It’s about maximizing the opportunity for both players and owners.
The league structure, as it exists today, has been quite effective. Why do I say that? The NBA salary cap gives us reasonable proxy as its derived from Basketball Related Income (BRI).
Source: Wikipedia
Over the last 25 years, this represents a CAGR of 11.7% – an incredible figure for that length of time. There are several explanations to explain this growth.
I will argue one key reason for the basis of this growth is: League parity
In part by its traditional definition
the “best” team is not significantly better than the “worst” team
But I would add that sport also needs
a structure also enables a poor team the opportunity to rebuild into a winner within reasonable time frame.
Certainly, in any one year, the best teams in the NBA are significantly better than the worst teams. However, there are not many easy wins over the course of a season. Most of the league is quite competitive – a quick highlight of this point is in the West last season, where the 2 through 8 seeds were separated by only 5 wins.
Why is this important? Why do you go to games? Why are TV ratings so high?
As Raptors fans, most of us keep going to games for a chance to see this and this. Or you’re constantly watching the game on TV to see these situations.
Revenue is driven by superstars – superstardom is a result of hitting big shots in close games. In close games. In close series. Going 7 games creates superstars. Close games are why fans show up. Close games drive revenue.
So what’s the point?
A completely free market basketball league will likely result in lower salaries.
Why? Let’s look at a completely free market system.
- No draft – you simply sign players – maybe you see potential at age 14 and you sign for their rights then.
- No salary cap.
- No restrictions on trade – no need to match salaries.
- etc.
What would happen in this scenario?
The vast majority of superstars would be signed early by the rich franchises. If they missed talent early, they’d simply pay up later.
So you would have teams like Boston, LA Lakers, Dallas (Cuban), New York, Chicago and perhaps a few other “haves”.
What would happen to other teams?
Below is a chart from NBA.com and Forbes magazine on the value of the top franchises.
We calculated that the top 10 teams averaged $24.1 million in operating income. The league average is only $7.8 million. Which means some teams are already losing a fair bit of money. In completely free market system, how would they have a chance in heck of signing marquee players? They couldn’t.
If you look at league attendance last season (here), you’ll find a solid correlation between filling the building and superstardom. What happens when you add a superstar? When the Celtics added Kevin Garnett and Ray Allen in the summer of 2007, home attendance went up 73,008 in 2008. With an average ticket price in the $65 range, that’s $4.7 million. Its also another 73,008 buying a couple of beer, hot dogs, hats, jerseys etc. The Celtics probably increased the luxury box fee as well. I More people are watching the local station for games. Thus, advertising revenue goes up. Can we round this to $10 million easily? I think so. The reverse is likely also true. Bloomberg pegged the loss of LeBron James could equate to the value of the Cleveland franchise declined $250 million. Yes, you read that correctly. The article also says:
The Cavaliers were coming off a 17-65 season when they took James, from Akron, Ohio, with the first pick in the 2003 NBA draft. Their average attendance that year was 11,497.
Over the course of 41 games, the Cavaliers sold 371,665 more tickets in 2009-10 than in 2002-03. Let’s call in $50 per seat – that’s an eye popping $18.6 million difference – without counting the spin-offs of luxury box price increases, more food and beverage sales, jerseys, etc.
Forbes claims that the Dallas Mavericks, Portland Trail Blazers, Orlando Magic, Atlanta Hawks, Sacramento Kings, Indiana Pacers, Charlotte Bobcats, New Jersey Nets, Minnesota Timberwolves, New Orleans Hornets, Memphis Grizzlies and Milwaukee Bucks are all losing money. In a free market scenario, could these teams take a further $5 to $20 million hit due to lower attendance? Not likely (well, besides Dallas).
What would this mean then?
It could mean that:
10 teams fold -> leading to significantly lower league attendance -> lower TV ratings -> lower merchandise sales -> lower basketball related income -> lower revenue for teams -> deepening losses.
And with perhaps 4 dominant teams, the remaining teams will struggle. Fans slowly stop showing up or watching – why bother if games are not competitive? Who wants to see 4 games sweeps through two rounds?
What happens in free markets? Industries often start with dozens of competitors, but only the strong survive over time. Ultimately you end up having a few strong players in a market segment. But that will not work in sport – it needs and thrives on many strong competitors.
Thus the need for the current system – tweaks can always be made. But its the draft structure, Bird rights, salary cap, revenue sharing that makes this league as successful as it is. Please don’t compare it to the “real world”. Yes, most of us have the opportunity to leave our employer for greener pastures if we don’t like the situation we’re in. A far-fetched example, but what about this offer – you have less flexibility in your choice of city, but because of this system we can pay you $5 million a year instead of $85,000. And you can live 4 months a year wherever you want. And after a few years, you can go wherever you want year round subject to a couple of conditions. Would you take it?
Here’s another simple way of looking at the situation: if the players are so constrained and would like a free market system, then just do it. All should quit the NBA, pool all their money and create a new league. One with complete freedom. They collectively have the money to do it. Go for it. Just don’t hire LRMR Marketing to run it. But without the checks and balances in order to keep some semblance of league parity, you’ll only have a few successful teams. And without group success, the rewards will be smaller. How many games will you enjoy when the final score is 132-96? Will you attend the next one between those two teams?
The NBA are experts in marketing. And to market this game to maximize revenue it requires some form of competitive balance. That’s why we pay big money to watch it. And its a system that greatly rewards the best players on this planet.
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62 Raps
European club football is probably the best sports example of a free market and you don’t need to be a huge fan to know that it results in the creation of ‘haves’ and ‘have nots’.
Parity is obviously very important and is the key to having a competitive league, but I think the NBA needs to do more to maintain that. Sign-and-trades are a good step but I’d love for the NBA to have a “franchise player” rule like the NFL. I also wouldn’t mind seeing a hard cap, but I don’t think the players union would ever agree to that.
It also features players who make much more money than NBA players, so doesn’t this undermine Tom’s argument? (Which I found very persuasive at the time, by the way.)
Another wrinkle – I would argue that what’s happened in Miami is not the product of a increasingly free market but rather an artificial price constraint. Lebron James and Dwayne Wade are worth way more than $16 MM a year to a team. Because they cannot be paid more than that, it enables a team to get two of them.
Neil, I disagree with your statement that soccer players make more money. The top salaries in the EPL are approaching 150k pounds per week = 250k dollars per week = 13 million dollars per year. Players over 100k/week are few and far between.
I agree with you Neil re: the price constraint.,
I’m not familiar with the “franchise-player” rule in the NFL, but if that is a way to stop teams from loading up on franchise players, then I’m all for that.
The counter argument to Tom’s article is MLB. Obviously you have Yankees and Boston dominating and teams like Toronto, Baltimore, Cleveland, Kansas city etc are seeing declining attendance.
That said, I have heard that revenues for the entire MLB league are stronger than ever, despite the lack of parity. It might just be that those revenues are concentrated in a couple of teams so that the ‘rich get richer’ and the ‘poor get poorer’. But if more money (whatever the source) is flowing into league offices, what is wrong with that?
“I have heard that revenues for the entire MLB league are stronger than ever”
I think this is a bit relative. The MLB is much stronger than it used to be but its viewership and income dropped drastically after the lock out.
It also grew tremendously by turning a blind eye to ‘illegal’ drugs. They saw fan following start to come back when players were using substances and hitting ridiculous amounts of home runs. I guarantee I can run a very successful business if the governement lets me sell heroine.
I’m agreeing with Tom. Free market = not good.
Nobody’s suggesting Miami was the result of a free market, it was the result of Riley’s planning. The only thing suspicious about it was the players colluding which is more or less legal in the NBA.
The CBA is what’s keeping the NBA together, I just think more can be done to prevent teams from losing money. For example, TV revenue needs to be shared even though the Raptors or TWolves are never on TNT.
great article. this is exactly why baseball is failing as sport. that sport NEEDS a salary cap!!!
First, there isn’t necessarily a material correlation between BRI growth and the current cap system despite your assertion. You have to account for inflation and other cost/price increases, new markets, new revenue streams, etc. The fact that overall revenues might decline if you take the number of teams from 30 to 20 is a non sequiter – profit per team is what matters. By that measure, your own argument concedes the current system doesn’t work for 1/3 of teams.
Two, your assertion that there is parity in the NBA is laughable. Dude, this is a league where one player made the rest of the teams almost entirely irrelevant for nearly a decade. Today, you have, what, 3 teams with a shot to win the title next year? Doesn’t look much different from the EPL to me.
Third, let me make a quick argument that a free market would lead to more parity. First, you are correct that the number of teams would be reduced. This would concentrate the talent making every team better and vastly improving the quality of play. Two, it would prevent scenarios like Miami and spread elite talent around. Bosh would be in NJ and Lebron would be in NY if not for the cap cause New York would ahve thrown $40mm/year at Lebron and NJ would have given Bosh $30mm. They would also all have decent supporting casts. In a 20-team league, you could conceivably have 7 or 8 teams that are championship calibre in any given year.
A free market would definitely put stars in the big cities, but it wouldn’t stop stars from going together to one team. Just stop them from going to small market teams together. I hasn’t stopped the Yankees and Red Sox from buying multiple stars.
1) a) Your inflation argument is poor. I could easily strip it out – it’s not a big factor. See: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt for historical prices.
You’ll see that inflation was an issue in late 70s/early 80s, but not in the time period as displaying. Probably avg only 2-3% during that period.
b) if you clicked on http://www.red94.net/basketball-related-income/559/ as per my post, you would see the revenue streams that BRI takes into account. Part of having competition and players from several different countries (made possible by having 30 teams of 15 players) accounts for new markets and actually proves my point very nicely.
c) it’s spelled “Non sequitur”, I believe. There is a multiplier effect. If 1 Italian/Chinese/Spaniard/etc is in the league you have some foreigners watch. If 5 of each are, you’ll have much more interest. If Canada has a team, you get 3 stations showing all Raptors games. If they don’t your fan base in Canada is cut materially. National stations want audiences in LA, Phoenix, NY, Chicago, and everywhere in between. Having local teams grows the viewing audience significantly.
2) by my count 18 teams have appeared in the finals over that time. Several upsets and seven game series along the way. Jordan was amazing. But was beaten sometimes. And whoa “irrelevant”? Did you watch any of the series? The Jazz were irrelevant, I guess, as they were blown out here weren’t they? http://www.youtube.com/watch?v=vyL0FxS-F6E&feature=related
or were the teams quite close and a superstar was born? Did that drive ratings – that close game?
3) Not likely to be true. NYC would have an easier time throwing big money at three players. Today, Miami had to work their but off to get under the cap. And players had to wink wink to make the math work.
When the league had 9 teams in the 60s – THEN 14 BY THE LATE 60s, ONE team won 9 times. Doesn’t support that argument. U.S. population has doubled since then – likely reasonable to assume the talent has – especially since the NBA is drawing more int’l players.
1. You still haven’t shown that BRI has increased solely because of, or mostly because of, the salary cap. If BRI is solely affected by the existence of artifical price restrictions, why did BRI go down by $400mm last year? Right, the recession and the macro-economy. One of those immaterial factors among dozens (like the advent of luxury boxes, massive ticket price increases, something called the internet, international marketing, massive competition for broadcast rights, etc.) easily stripped out. Whatever, gross league revenues are beside the point if everyone is losing money – the only number that matters for the survival of individual franchises is profit, which you concede in your post currently has 1/3 of teams losing money.
2. You haven’t shown a cap = parity. Competitive balance in the NBA is skewed heavily by the presence of one or two players league-wide. OK the Celts won 9 title in 11 seasons. What’s your point? The Bulls won 6 in 8 in your vaunted cap era and would have won 8 in a row if Jordan hadn’t gotten bored. The key factor wasn’t the cap, it was Jordan/Russell. It was ever thus in the NBA – one or two teams dominate for a period of time.
1) a) You haven’t proved that it hasn’t.
b) More teams would suffer in a non-cap, no draft, free for all. Period.
Every industry shows that over time – if open and free, only a few strong survive.
2) Chicago drafted Jordan and became competitive. Absence of a draft, NY or LA would have signed him for 10 years and $X00 million when he was 15 or something. Chicago wouldn’t have won all those championships. James has similar talent and has not won – if one player = multiple championships, then please explain this to LeBron.
1) a) You haven’t proved that it hasn’t.
b) More teams would suffer in a non-cap, no draft, free for all. Period.
Every industry shows that over time – if open and free, only a few strong survive
—————–
That is not necessarily true. Free markets lead to increased competition where the cost of entry into the market in relatively inexpensive.
On the other hand where government rules regulations and other laws make the cost of entry into a market almost prohibitive than only a few survive, like in Italy under Mussolini.
Open free markets are better for the consumer because
1. Only the best products brought to the market at the lowest costs survive and the poor and weak ones fall by the way side. This fact of life leads to market competition which drives the price down and benefits the consumer.
The arguments that the economics Progressives bring is that you need government to control the producers so that the consumers don’t get the shaft. History has shown otherwise. It has shown that when the government gets involved in controlling the production and distribution of products that there is always a shortage, the costs are more and the quality is inferior if not more dangerous. How many bad and dangerous drugs has the FDA approved. What about the false N1HI pandemic scare that led to the production of tens of millions of wasted does of a drug was unnecessary to not the best to begin with?
I completely agree with you wrt to most industries.
But we’re not trying to create an environment where only a couple of “companies” (i.e. teams) ultimately survive – are we?
Free markets can also result in an situation where dominant firms can create huge barriers to entry.
Sport RELIES on good competition. Not killing it. Capitalism thrives on having the strong survive. It’s difficult to compare the NBA to a widget manufacturer. The consumer wants a)entertainment – usually a result of close games (NBA) – consumer is willing to pay more for the chance for their team to win – not to see a dominant team win by 50 points and b) best price (widget) given a level of quality.
Two different things. Two different profit maximization problems.
Where in the heck does government involvement in controlling the NBA come from?!!
The perspective that may be more interesting in your competitive scenarios is the NBA versus other leagues. That will give you some answers on why I believe what I do.
You know that the NBA is a profit maximizing entity and not run by the government right? The structure is set to maximize profits – its not even remotely comparable to the FDA.
You are wrong about Capitalism. Seriously
Capitalism thrives on competition not the strong surviving. What you are describing is Socialism. Amazing.
Absolutely it thrives on competition – and the strong survive. Some socialist programs allow companies that should not survive, to survive. That creates issues.
So Wal-mart isn’t a product of capitalism? And Wal-mart isn’t shutting down hundreds of smaller business? Wal-mart is strong – innovative and understands the advantages of scale. This leads to business closing down as they cannot compete.
You took my comment about the FDA out of context.
First off about the NBA
1. There is that league referred to as the NBA as one entitiy
2. Then there are 30 teams within that entity.
I do not know how the NBA itself is structured or even who owns that entity. Do the teams own the NBA or some other group? So I can not comment on their profit objectives.
As far as the teams go. Not all owners are interested in making profit from owning an NBA team or any sports team for that matter. Someone like Cuban who has a lot of interests in more interested in the prestige that it brings than in making a profit from it as long as he doesn’t lose his butt.
On the other hand some owners like Davidson used the income from the Pistons for charitable causes etc and was more interested in helping others and treating his employees the best he could with Pistons i.e. Palace Entertainment profits being almost an after thought again as as long as he didn’t lose his butt.
Years ago I know that a lot of the fancy nightclubs were owned by people as a cover for other activities or as a place to do other business but the owners never cared if they made a profit from the nightclub because the other activities tertiary to it generated tons of profits.
So it is not as simplistic as you make it sound.
The FDA should be eliminated just like the Fed. cheers
This is completely off point. All of these alternative theories completely neglect the fact that the NBA cannot be analogized to traditional products and services. This is something Tom mentioned before.
In a free market, companies compete to provide consumers with a balance between quality and cost. Some companies fail and new ones are created when the potential profit outweighs the barrier to entry.
The product the NBA sells to consumers isn’t any individual team, but the matches between teams. Fans simply do not pay to watch lopsided games. Neither the teams nor the league benefit when smaller-market teams fold due to their inability to provide a comparable on-court product, especially when the quality of the on-court product is affected by its length of existence. Stability, history and tradition are all big factors when selling that on-court product. While the free market normally benefits from potential new entrants into the market, thus keeping the current main players honest, there is no equivalent effect in a sports league. It is simply a poor analogy.
WOW
Man, it’s simple look over at euroleague basketball, soccer in Europe is a great example but an even better one is to look at the same exact sport. I live in Greece and each year pretty much the same teams end up in the final four. We always wonder why in the NBA the scores are so high and we blame it on the defense, but a small part of it could be that there are so many players in Europe with such good qualities (notice not great or amazing) and that is partly because the market is so free. When it cones to NBA players even the worst make a living in Europe. Example: Von Wafer, Olympiakos from Houston, I hadn’t even heard of him until they signed him. So yes players like David Andersen may be All-Stars in Europe but because the balance of teams and money is so much greater in the NBA they have problems because of it. This is very out there but it’s just a thought…
Interesting article if you are into economics.
In just a cursory reading of it I would like to point out a couple of things.
The big lift off in league revenues can with the advent of the Michael Jordan superstar era.
There is no doubt that the Celtics, Lakers and other teams had superstars before Jordan came along, but Jordan for some reason, and I am sure marketing people have analyzed it, became the rocket fuel that set everything in motion with regard to NBA financial prosperity.
If you look at the link below it is a history of NBA TV contract revenues with the networks
NBA CABLE TELEVISION CONTRACTS
1986-87 through 1987-88 TBS———-$25 million—2 years
1988-89 through 1989-90 TBS/TNT——$50 million—2 years
1990-91 through 1993-94 TNT———$275 million—4 years
1994-95 through 1997-98 TBS/TNT—–$397 million—4 years
NBA NETWORK TELEVISION CONTRACTS
1986-87 through 1989-90 CBS———$173 million—4 years
1990-91 through 1993-94 NBC———$601 million—4 years
1994-95 through 1997-98 NBC———$892 million—4 years
1989-90 Total TV Revenues combined (50/2)+(173/4) = $68.25 a year
1994-95 Total TV Revenues combined (397/4)+(892/4) = $322.25 a year
To in just five short years the CACR of TV revenues was an astounding 36.5%.
Jordan ushered in the true superstar era. Not only did this lead to a massive increase in TV revenues but also due largely to the increased TV exposure a massive increase in NBA related merchandise sales and arena revenues.
The Michael Jordan marketing matrix changed the financial paradigm of the NBA.
http://www.insidehoops.com/nba-tv-contracts.shtml
=====================================
Regarding the free market system
Why? Let’s look at a completely free market system.
* No draft – you simply sign players – maybe you see potential at age 14 and you sign for their rights then.
* No salary cap.
* No restrictions on trade – no need to match salaries.
* etc.
The way that one looks at this will depend on whether they tend to believe in the London or Austrian school of economics.
This is obviously as pointed out in the article a very complicated subject. However, I would just like to raise one point of discussion. That is around the elimination of the draft and no salary cap.
Each team in the league will depending on the owners of team and the market that it plays in have so much money available to it in a given season. That amount of money will vary based upon a number of things and not all of them basketball related.
In any case under a free market system there is no guarantee the team with the deepest pockets will necessarily win all the time. There are a number of reasons for this but one is that just because a team has the most money
1. Does not mean that it will sign the best players. There could be several reasons for this including future injuries, certain players not wanting to live in certain cities or preferring to live in certain cities. Players that come out of college are to a certain extend unknown as to their future NBA level of success. For example the number of second round picks that become excellent players. A number of top picks also become busts.
2. Each team will be limited in funds by the owners money. Therefore they will not be able to afford to sign the best five guys in the planet in a free market system, without player collusion, which would of course be illegal in a free market system.
Bottom line is while there may indeed be fewer teams in the NBA with a free market system. In a free market system almost assuredly another independent pro league would be able to start up in other cities where arenas are available and sign their own TV contracts.
In any case this discussion is best left to the true economic brains from both the London and Austrian schools and not us amateur economists.
In thinking about it some more.
It seems to me that if one were to go back and look at the initial growth of the internet in the U.S. that one would find that it paralleled to a great extent the growth in NBA TV revenues in the 90s.
It seems to me that the advent of the internet made the NBA and NBA news and marketing a 24 X 7 phenomenon.
ESPN also grew significantly during this period through the internet and with the expansion of cable TV throughout the U.S.A.
All of these were tied in with Michael Jordan and the advent of the mega buck NBA superstar marketing matrix and financial paradigm.
1. If a player is injured, you simply pay up for the next best player to take his place. The really rich teams will have several great players, so an injury won’t likely be a major factor. Chances are parity will be reduced. Out of college and not good? Cut him and sign the superstar. 2nd round pick becomes superstar? then poor team cannot keep him, since rich team just offered him double. These arguments fuel the case against a free market system.
2. Of course, and the economics worsen such that players will eventually see less money. That’s my point – players should understand that the current structure – more or less in its current form – maximizes their pay.
(I do have a Masters degree in Economics, and many at that level and above are too engrossed in theory – and not enough in practice. Hence why “Freakomonics” was a huge success.)
1. You just can’t replace an injured player with one under contract to another team. Give us a break, will you.
2. Depends what school of thought your Master degree is in. If it is in Keynesian or Marxism we have nothing further to discuss. Been there done it. Both of those schools of economics are based upon a select few politicians controlling the lives of the masses under the the false assumption that people are too stupid to make their own decisions. Total economic tyranny.
And racist too boot.
Keynesian economics leads to Socialism which in turn leads to Marxism if the people let the tyranny go that far. Look at Europe and the EU. A perfect example of how Keynesian economics in practice has led to socialism. Bad new for the masses and definitely oppressive to the poor classes. America’s inner cities are the perfect example of this type of tyranny and modern day plantation slavery.
+10 on point number 2.
“An economist is someone who doesn’t know what he’s talking about – and make you feel it’s your fault.”
or
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”
etc. ; )
“Ask five economists and you’ll get five different answers, six if one went to Harvard.”
I actually haven’t heard that one before. : )
Thanks for not taking it personally. I have a few more.. but, meh.
Oh don’t worry – I don’t defend economists either. I’m more of Steven Levitt-type – if a theory can’t be easily demonstrated in practice, then I don’t have much time for it.
Then there is that old one about searching for a “one-handed” economist … or finding an “economy of words” …!!!
Economists are not supposed to predict the future.. only explain the past … like historians (people who think backwards)….!!!
interesting idea, but you don’t really put forth any ideas other than, free market nba is bad (which i agree with) do you have any opinions on the current parity of the NBA? What ideas do you have to make increase or decrease the parity? Feel free to write a book. We need more discussion on this topic, especially as we approach what seems to be an impending lockout.
One idea is either shorter or non-guaranteed contracts (like the NFL). The players would have to “earn” it every year. Eliminates the players that play hard in their last contract year and coast after signing the five year deal (cough, cough, Turkoglu, cough). I can’t imagine the union budging on that though.
The second involves the quality of GMs and scouting – they have a large impact on parity. But its not the system that should change. It should allow for great GMs to be able to rebuild quickly while poor GMs should be allowed to make mistakes.
I think the idea of a guaranteed contract also give the teams the right to trade a player at their whim.
If I have to pay someone x amount, regardless of change in preformance level and quality, then I want some rights of “ownership”.
The level of play and competition would greatly improve if contracts were more incentive based or non-guaranteed.
It’s no coincedence that the NFL, where the players have the least control and weakest unions have the most parity and successful franchises.
I think if you wanted to make a fully free market system viable you would also need to introduce a farm system for player development.
uh, it was my understanding that there would be no math…
Maybe the top 8 teams should be left out of the draft, and give the teams that don’t make the playoffs the extra picks in reverse to their first picks. This would give the bottom teams a quicker rebuilding structure, either by gaining two new first rounders or by gaining trade-able assets. Players should be paid by years of experience, and consistency. Players should be paid on accomplishments by the team and themselves equally. I have no problem with the league MVP being the highest paid. Players contracts should not be guaranteed entirely. Although injury should not shut them out either. There has to be some common sense among all parties. They need to stop spending virtual money on intangible assets, such as a persons potential to be great. They need to pay players based on their “actual” performance.
Somewhere there is a mathematician that can come up with a formula to take into account player and team stats. I’ve seen the craziest statistical analysis on this site!. A system like this would almost guarantee that every night, every player is playing at his best. That would make for exciting basketball, and a competitive league. Thus resulting in full arenas, full bellies from beer and hot dogs, and full ensembles with their teams logo on it. That way players could easier defend their high salaries!
Owner’s deserve to make money, they take all the risk. A league run by the players would be a disaster. The players need to realize that they are being paid quite well for what they are doing, and that really they have no business on the business end of the team. Unless, they want to share some of the risk. And taking $10 million a year over $15 million a year does not count as risk or sacrifice. A real sacrifice is saying, “Pay me the minimum, and give me some incentives, to prove all these naysayers wrong. Both about me being money hungry, my character, my ability to lead a team, and above all my willingness to share the spotlight and the ball for the good of the team”. Something like that is a statement! That would attract more new fans than any super team.
That is how you will make the league fair and competitive. I personally did not watch b-ball at all during the Jordan years, and got extremely bored of the LAKERS/CELTICS. I felt the game was too predictable and controlled by the presence of one player. I as recently as 5 years ago, began watching as TEAMS where beginning to win and not just the teams with the best player. (I also do not watch baseball after 1995, and I watched or listened to 162 games a year for over a decade).
Anyway, that’s how I feel
Both your draft and incentive-pay ideas seem pretty solid to me, and something that shouldn’t be that hard to work into a new CBA. Why not create a bit more flexibility for owners, and fan-friendly incentives for players, by increasing the availability of performance increases in contracts. It could get quite interesting when advanced-stat geeks like Morey in Houston get ahold of this. Imagine some player’s horror (and some players’ pleasure) when they find out part of their pay will be determined by their Win Shares.
I agree with your essential argument: that parity benefits everyone and that parity is well-served by constraints on free agency. However, I take issue with your characterization of the alternative as a “free market” system. It is silly to reason that in a free market, where teams and players could contract with each other on whatever terms they agreed upon, they would do so to their ultimate demise. It is their (teams and players) self-interest to preserve/expand the fan base. If there were no restrictions on free agent signings it would be in everyone’s interest to agree upon some. Economic suicide is not a reasonable expectation of actors in a free market.
Unrestricted free agency is in no one’s economic interests and no party is going to use their freedom to act in their own self-interest to advocate the league’s economic suicide.
Great points. I would suggest rich owners like to crush competition – usually is the case. Not as much thought goes into the long term consequences of those decisions. Look at Steinbrenner. Baseball is more difficult though since so many players influence wins/losses and guys like Jeter can’t bail out a batter, etc. But Steinbrenner wanted to crush the opponents and wasn’t thinking much about how well Milwaukee was doing financially.
Sport is a reasonably unique market where a team’s financial success is somewhat dependent of keeping the competition reasonably competitive (if that makes sense!).
“But without the checks and balances in order to keep some semblance of league parity, you’ll only have a few successful teams.”
That’s why the players need the owners? I think the players in every sport should create their own leagues. And I do not think they need the owners. You’ve left something very important out of your analysis: players want playing time, and a superteam would have very limited playing time for all but the top 6 or 7 players. Guys like CP3 are not going to play 25 minutes a night for a superteam. That limits their marketability outside the game. A players’ league would eliminate the following problems:
* No labour strife/lockouts/strikes/holdouts.
* More rounded teams/teams have fewer weaknesses because of freer player movement.
* League doesn’t have far too many teams like now because it’s easy to fold a team and disperse the players.
* No rotten owners like MLSE, Donald Sterling, et al.
* Players would not have longterm guaranteed contracts, but would be paid based on ongoing performance/leadership/usefulness.
* More players would succeed because they’d be more likely to be in positions which would foster success.
* More money set aside for pensions and medical funds for the players.
by having Jordan as an owner how well have the bobcats done? Having a former NBA player as a coach/gm/owner for an NBA franchise does not necessarily mean they will do well at that platform. Although, a players’ owned league is an interesting theoretical idea, there is no space for that argument for the nba in the next decade or so. We need more small step ideas… like the one mentioned above of taking away draft picks for the teams that make the playoffs.
Perhaps, more rules limiting the use of draft picks in trades?
‘I think the players in every sport should create their own leagues’
Novel idea… but in reality its only a matter of time before you still end up with the same or similar results.
Everyone cant be equal in the business world… someone needs to lead and someone to follow. Even if you try to give equal control, it will eventually gravitate to this result. Its one thing to give more control to non-management its another to give them equal say. Unfortunately players dont have the time to learn or know all it takes to run a successful business while still being successful on the court. Both take a lot of time and effort and if they will need to sacrifice one for the other. Even businesses today who give their employees a say don’t give them equal control. Management is still management and will have the ultimate control in the end.
Which means one, or atleast a few, individuals will end up running teams, and running leagues…. which means you are left with, the same thing you have today. A few running from head office, with employees (players) having a say because of their influence on the product.
Egos would get in the way of a player run league.
The issues you say would go away, would not necessarily go away once they realize how little money they are going to actually make.
Pensions and crap like that shouldn’t even come into play when even the worst players are making close to a million. That type of money allows you to easily set-up retirement fund, or even start a business if you only play until your 28 or 30 yrs.
These guys need more guidance on how to invest their money wisely, instead of putting it on the owner’s and league to take care of them if they get injured or spend their cash. The owner’s and league are already doing these guys favours, by allowing them to make that kind of money in the first place. How many jobs right out of university get you a million bucks a year! How many jobs get you a million bucks a year if you don’t prove yourself academically first. (that is not a blanket statement, as I am aware some players are actually quite intelligent).
High risk – High reward: If I want to spend 1/3 of my entire life getting good enough at something to play it for 1/10 of my life that is my choice. If I am not good enough, well then I guess that’s one-third of my life wasted, at least I got in shape. If I am good enough and get hurt, well that is one third of my life wasted, but at least I made that million the first year and got my degree. If I succeed, AWESOME because I knew when I started this journey, the odds of success where against me, and really a free education gives me the opportunity to succeed outside of the fantasy world of professional sports.
Sorry Paul – didn’t see your response before I started mine – I tried to make several of the same points. Cheers.
” I think the players in every sport should create their own leagues. And I do not think they need the owners.”
With all those egos and differences of opinion? Would be difficult.
Some players haven’t made very good decisions in their personal life (60% is the estimate – of players that are broke within 5 years of retirement). Owners get to that position as a result of years of business acumen and financial prudence. Players with 1 year of college and no real business experience should not be collectively running a multi-billion dollar enterprise (my view). In your experience, do young players have the knowledge and experience to make proper long term decisions to enhance franchise value? After years of experience, maybe, but just maybe.
You’re probably right that the league does have a few too many teams – but I do think the current system should be maintained (subject to a few tweaks perhaps).
There could very well be labour issues – just one easy example: “have” players/teams could sign exclusive rights in a city that benefits them only. Veteran players could give themselves more rights than young players, etc.
Free player movement would more likely cause imbalance, no?
What makes Sterling/MLSE any more rotten than if Eddy Curry, Antoine Walker, etc were owners?
They should start teaching basic accounting and finance in mid-schools and then more advanced finance in high schools. It should all be required. This way kids would come out of high school with at least a basic understanding of proper personal finance if not more. In college finance course should also be required for all matriculating areas for the first two years in college.
Kids need to go into the post school world versed in finance and basic accounting. They don’t need to have an understanding of macro-economics but personal and family finance should be a must.
You’re preaching to the choir. But the Marxist educators would never allow it. In public school here our teachers spent more time teaching us about the plight of the poor Central American dirt farmers than about accounting, business and finance.
+1!! “They should start teaching basic accounting and finance in mid-schools and then more advanced finance in high schools. It should all be required.”
+2. I believe mandatory courses out of college should be:-
1. Basic accounting(the high school suggestion is much better here since most of our students actually finish high school as the highest level of education now).
2. Microeconomics(1 and 2 go hand in hand as a combination of both actually gives a “more realistic” economics and accounting)
3. Social course – Philosophy or Psychology(to encourage people how to think, ask questions and question things when they don’t necessarily look right).
Those are very good points, but in my system what would happen is that as a player’s career progresses, he accumulates shares in the league based on his contribution. So the very best players over a long period of time accumulate huge numbers of voting shares and become the strongest voices upon retirement — the “commissioners” if you will. Based on that type of system, Kareem would have the most shares due to his longevity, championships, MVP awards etc., but Jordan, Barkley, Hakeem, Russell, Oscar Robertson, these are the guys that would effectively be overseeing the league as a board of directors. And then there would be people like World Wide Wes on the periphery also advising the players. The issues you mention regarding player responsibility have happened under the current system, and the disconnect between the players and the owners (whose incentive is to get the most production out of the players at the cheapest possible cost before their skills erode) is obviously much greater than it would be between retired stars and current players.
Obviously I never intended to suggest that the executive structure of the league would be run by Eddy Curry and Antoine Walker. The bookkeeping and day-to-day operations of each team and the league at large would be run by specialists, not the players. But the executives would be ultimately working for the players. There is already a similar organization which runs the professional Tennis world, called the Association of Tennis Professionals (on the women’s side it’s called the Women’s Tennis Association). Although it is different than my idea for a player’s league, it was started with the same intentions.
RR should encourage more well-researched / synthesised articles – I guess we have some talents to provide an alternative to ESPN analyses (basically a non-US-biased perspective). It can even perhaps be a potential new revenue stream if it is reviewed and endorsed by some respected peers and after the credibility is established.
Though, it may make us more “a different country” in the eyes of the NBA (blog) fans, but RR can also open a (“dumbed”) lite RR website to cater our neighbour.
I completely agree with the idea that a closer to true Free Market will not work (atleast not as intended). Its only benificial for a few while a detriment to the majority. Therefore, in the long run, would be worse for the league as a whole.
To me its the ultimate irony. Its a system based on greed for success; however its that very greed makes it impossible to truelly exist.
People will try to have as much and as many resources as possible. ie. they will try to make and save the most amount of money as they can. Competition makes this savings and earnings possible by driving down prices. Monopolies ruin a free market as they end up controlling everything (atleast within a certain market). They can then control both their inputs and outputs, and eliminate the possibility for competition. However, the best way to make and save money is to have a monopoly. You see the problem. The system needs to work within restrictions in order for it to work… as soon as you have restricitons you no longer have a ‘free market’.
In the end.. there always has to be some level of control put on any market or system from an external source for it to actually ‘work as intended’. Thats not to say that more controls are better than less controls… but rather some controls are etter than no controls.
and we also have to remember externalities from free market systems, make a cost-benefit analysis to the society, and hope for a more efficient system in an equality-efficiency trade off which is why restrictions are in markets in the first place.
To say the NBA has parity is nonsense. You have got your head up your a##?
Look at the last four teams playing in the playoffs and what they
spent on salaries vs the rest of the NBA. Do this for last 5, 10, 20 years.
Free market doesn’t even work in the business world. Look at China and India.
Two countries who have lead the world in economic growth the last 20 years.
They don’t operate a free market system. They have a select market system.
Now look at USA. They almost caused a world depression. They are zillion of
dollars in debt. They have lost alot of their manufacturing sector. There average
citizen is in huge debt. United States is in serious, serious trouble. And there is
no end in site. It just doesn’t work.
Why did you waste your time? Why didn’t you look at the most competitive leagues
and see what their doing? The NFL and the NHL. Both have a hard salary cap. It works.
Why do anything else?
The United States doesn’t have the freest economy in the world, and the international finance system is based on the decidedly un-free Keynesianism.
A true free market system could not be implemented by a sports league.
There is to much risk for the average player to take on. Also a league owned by it’s athletes would do away with the players union and before long the unprofitable teams would be unable to pay it’s players without profit sharing by the profitable teams. That isn’t a free market model.
I think it was Charles Barkley who said the NBA talent pool is badly diluted amongst too many teams resulting in a poor athletic and entertainment product.
Now we have the talent concentrated in Miami and LA and a few other teams. It’s almost as if the NBA has two divisions … a playoff team division and a non-playoff team division.
If one was to reduce each of the 6 NBA divisions by one team, which teams would you eliminate ..???
Concomitantly, which teams would you not pay to watch .. or bother spending the time to watch this coming season?
I believe it was “The President” – Oakman.
“They’re spending more money on marketing now than all-time because they don’t have the product.”
He also gave us these pearls of wisdom on the Raps:
CB4 – “They’re going to pay him $20 million to shoot jump shots?”
AB7 – “You ain’t going nowhere with 7-footers shooting three-pointers.”
They just don’t make em like they used to, FAQ. Real ball and real players are now fossils from the 90s. These “I’m a business empire” kids are raping the game to make money. When Shaq, KG, Duncan, CBills and Kobe retire it’s Goodnight, Irene. Well, maybe KD still has love for it, but the rest are watching too much Entourage.
+1.
Clippers, Hornets, Tumbleweeds, Bullets, Cavs, Nets. But that’s if it has to be by division. I’d rather get rid of the Clippers, Hornets, Kings, Grizzlies, Tumbleweeds and Schmucks. I’d also be tempted to get rid of the Pistons, since Detroit is a dead city.