Monday, February 28, 2011
Small salaries will increase superstars' power
By Henry Abbott
You don't have to be able to throw a rock very far to hit somebody worried about the power now in the hands of NBA superstars.
Top players gathering in places like Miami and New York! Billionaire owners grovelling for the services of players like LeBron James or Carmelo Anthony!
Whatever happened to the good old days of owners and GMs making these kinds of decisions in smokey back rooms? What does it mean that players are making these decisions with each other?
The idea that players are merely laborers is evaporating before our very eyes, and that has a lot of people very unsettled.
One of the big questions is: Where did those superstars get all that power?
I'd argue that superstars, like all celebrities, got that power from the open market, where people show, with their dollars, that a very small group of players matter a ton. Not only do top players' teams win more, but they can also drive people to spend the money that keeps the league afloat. Superstars sell tickets to NBA games, they sell things advertised during NBA games, they sell jerseys and more. The fact of the matter is that people care irrationally about the very best of the best. If you're one of the NBA's truly great players, you're worth many times your salary.
I remember working for a magazine years ago. I was making the case to a PR person for a one-on-one interview with Allen Iverson. The Sixers' representative, who spent all day brushing off such requests, tried an interesting tactic, noting that the Sixers had several good players, and maybe I wanted to interview Eric Snow or Theo Ratliff instead? My response was that, much as I loved those players, there are some players who help the magazine by being on the cover. And there are other players the magazine helps by putting them on the cover. Feature too many of the latter, and you'll feel it on the bottom line.
NBA teams are in the same predicament.
If you're merely a really good NBA player, the weird truth is that not all that many people care too much. It's those top few players who drive the dollars off the court, and, evidently, on it.
Last week on The New York Times, Nate Silver played around with a John Hollinger metric (Estimated Wins Added) and came up with approximations how much top players' basketball skills are worth. He explains the thinking like this:
Collectively, the 30 N.B.A. teams will spend a hair over $2 billion on player salary this year. For this, they will “purchase” 1,230 wins -- that is, 41 wins per team, or half of the games in an 82-game season. That means that the price of a win is about $1.63 million dollars.
Based on that, Hollinger's metric suggests that, for instance, LeBron James' play is worth north of $47 million. Dwyane Wade is worth nearly $41 million. Dwight Howard, Kevin Durant, Chris Paul, Kobe Bryant, Blake Griffin, Dirk Nowitzki, Pau Gasol and Tim Duncan are all worth, accoring to this very rough estimate (which ignores, for instance, the playoffs), more than $25 million a season.
And that number gets even bigger when you consider off-court things like the sell-outs, jersey sales and TV exposure that come with employing top stars.
Yet, we live in a world where superstar salaries are severely constrained. Because of the collective bargaining agreement, those players I just listed make about a third to half of what they are evidently worth for their play alone.
And in the next collective bargaining agreement, the best bet is that maximum contracts will get even smaller. Players as a whole are almost certain to give up salary. In a union where every player gets one vote, superstars are easily outvoted and tend to make the big concessions. (The other group -- incoming rookies, have no voting rights at all. It's no coincidence that rookies and superstars represent the best value contracts in the NBA.)
Those rattled by the power of players like James, Wade and Anthony may take some solace from the idea of reducing their salaries. Cut them down to size with a blow to their wallets!
That's not going to work.
Think about it this way. Let's say LeBron James was limited, by some upcoming CBA provision, to earning one dollar a season. In that world, every team in the NBA would be crazy not to sign him up. He'd be beyond valuable. He'd be a winning lottery ticket, that you can purchase for a dollar after they reveal the winning numbers.
With a salary like that, James really does have 30 owners at his feet. As he can't ask to be paid what he's actually worth, he can instead ask for ... whatever he wants. Get me this teammate! Hire my buddy! Let me out of practice! Fire the coach! Stock this champagne on the team plane! It's all worth it to the team, for a player who would be, effectively, contributing $50 million or so to the bottom line every year of his prime.
On the other hand, let's say there were no limits at all on player salaries. Let's say teams were allowed to pay James the $47 million Silver suggests his play is worth. Or maybe some owners make their own calculations about James' value, and somebody offers James $75 or $100 million per season.
Well, now James is a guy with a fatter salary, for sure. But he's also a guy whose return on investment has dimished. Now instead of 30 owners lining up, he might have one or two eager to employ him. Now instead of making a long list of demands to a team, a team would make a long list of demands to him. Now instead of telling the team how things were going to be, the team would be telling him how he can best make good on the enormous sums they are paying for his services.
In other words, to determine what happened to make superstars so powerful, you need to understand what made them so valuable. And a big part of the answer lies with a CBA that leaves superstars woefully underpaid.