This is the third in a three-part series based on an ESPN the Magazine feature. The full feature is available in the Mag's Money Issue.
Lesson seven: The NFL's new rookie pay scale is a game changer
NFL owners took a PR hit during last year’s lockout, but fans should be glad that the suits stuck to their guns on one key demand. The new rookie salary scale should introduce a more sensible financial structure, with the biggest NFL deals based on performance, not potential. In the 2010 draft, top pick Sam Bradford got a six-year, $78 million deal from the Rams. Last year, though, Panthers rookie QB Cam Newton received only a four-year, $22 million deal. “Newton is a very good young quarterback,” says Vikings GM Rick Spielman, “but if he had been a bust, his contract is nowhere near the competitive disadvantage that it would have been.”
Wharton believes the new model could help establish a relationship between spending and success in the NFL, as the worst franchises will no longer be forced to pay exorbitant amounts on high draft picks, freeing up money to pay proven veterans.
Lesson eight: The NBA has two huge market inefficiencies
An anonymous GM sums up one of Wharton’s points perfectly: “The only two ways to create an edge is by having either maximum-salary players worth more than their contracts or guys outperforming their rookie deals.”
LeBron James will make just more than $16 million this season, less than Carmelo Anthony, Joe Johnson or Gilbert Arenas. But underpaying a star veteran might not be as big a bargain as locking up a marquee rookie.
In 2008, the Bulls signed Derrick Rose to a four-year, $22.5 million deal. Last season, under his rookie contract, Rose won the MVP award but made $11.1 million less than runner-up Dwight Howard. That difference is just shy of the $11.3 million that the Bulls paid star forward Luol Deng last season.
Lesson nine: The Garden is rotten
Jim Dolan, Cablevision honcho and owner of the Knicks and Rangers, has made a big impact on the NBA and NHL. But not in the way New Yorkers had hoped. If not for his teams, there would be much stronger correlations between spending and winning in both leagues. In the past 10 NBA seasons, a team in the upper quartile in spending finished in the bottom half of the league standings just 26 times. Nine of those were Knicks squads. During the past 10 NHL seasons, just 15 upper-quartile spenders had below-average seasons. The Rangers accounted for six of them.
The only fact more staggering than one owner accounting for so much futility? The Rangers and the Knicks are both in the playoffs this year. Let’s hear it for long-term plans!