Monday, July 20, 2009

2010-2011 Salary Cap

There was been widespread speculation about the NBA Salary Cap for the 2010-2011 Season.

ESPN reports, "In a memo announcing next season's salary cap and luxury-tax threshold, sent out shortly before the league's annual July moratorium on signings and trades was lifted at 12:01 a.m. ET Wednesday, NBA teams also received tentative projections from the league warning that the cap is estimated to drop to somewhere between $50.4 million and $53.6 million for the 2010-11 season."

A similar report from the Sacramento Business Journal citing another source states, "The report came during a meeting of the NBA Board of Governors on Tuesday, according to SportsBusiness Daily, an online sister publication of the Sacramento Business Journal. Stern said the league expects revenues to decrease during the upcoming season as teams are lowering ticket prices and sponsorship deals are being scaled back. Early estimates are that the league will see revenue decreases during the 2010-2011 season by as much as 5 percent."

If you combine the information from these two reports, one can safely conclude that the NBA Salary Cap will drop to a figure between $50.4 million and $53.6 million because the NBA is expecting decreased revenue.

The first question that must be asked is : Is this for real?

Will the NBA income drop so significantly that each team will have to reduce expected player salaries by eight million dollars? If you multiply eight million by thirty (for each team in the NBA), the league is looking to cut two hundred-forty million dollars just toward player expenses. In times when basketball has recently expanded into the global frontier, could the NBA expect to lose $240 million?

Yes, the United States is facing an economic recession, but there are still affluent and dedicated members of our national community that love basketball. Plus, if the NBA burgeons its commitment to European and Asian markets (both of which have become fond of basketball and western culture), then it is possible that the league can harness loses and nullify debt ramifications altogether.

Could this just be a vice by the NBA to encourage teams to spend available cap room this season instead of waiting around for next year. With Detriot sitting around with about $20 million and Portland with $8 million, could have the league been trying to hoax these teams into committing to players this year, so millions of dollars of cap room weren't sitting around. The NBA could have well and away been looking out for the security of its players and its premier franchises.

It is no secret that the NBA's main revenue sources are the Los Angeles Lakers and the New York Knicks. With the Lakers in fine grounds (they did just when the NBA Championship), the NBA may have been trying to winnow teams like Detriot, Portland, and Oklahoma City as possible destinations for next year's marquee free agents. The league knows that the Knicks are trying to dump salaries in order to bring in two superstar players to the NBA's biggest stage and I am sure the NBA wouldn't mind having the best show under the biggest lights even if that means deceiving a small market franchise. The NBA would not seriously consider strangling their best asset.

The second question to ask is: How will this affect next year's free agency if this is serious?

Well there are two paths this scenario can follow. Ideally, NBA teams would reduce offers and proportionalize the player's productivity to a salary under the given circumstances. This would allow free agency to play out the same way as it would have no matter what the cap is set out since players are earning what they are worth under the given market circumstances. For example, Carlos Boozer is asking for $14 million next year when he is worth only $11-12 million. In a tight salary year, Boozer would then be worth approximately $10 million for the season.

However Boozer and his agents will not settle for this value which will likely force the second scenario.

The other possibility is that teams offers players contracts based on what they are worth in previous market years. With the world of agencies and player representative companies this is likely how free agency will play out. Under these Darwinist terms, the best free agents will receive maximum deals leaving little room for average and below average players. This will either force players to sign for the league minimum, sit out to preserve their value, or play over seas. In turn, this creates a large wage gap where you have elite maximum contracts players and then everybody else. If this cycles for two or three more free agencies, then you are looking at a strained environment with pretentious elites and indifferent moderates. At this point organizations would be highly focused on preserving their elite players which will displease the moderate players and create a volatile locker room.

That is a terrible manifestation.

The NBA surely recognizes this ultimatum. Fans, league executives, and owners alike must be wondering how to discourse this route or compensate if reached. This leads us to the third question: How can the situation be avoided or eased?

First off, fans can remain dedicated to their teams. The nation is in an economic recession, so all of the expendable cash available in previous decades is not available at the same magnitude. There are obviously fans out there in very difficult economic situation where themselves and their families face penury term. For those we send out our greatest praise and hopes. Then there are better off fans who can still afford a little bit of entertainment. This middle-class of fans must decide what is most important to them. Is it watching their favorite team compete, is it going on vacation, or is it driving a nicer car?

It is upon these fans by which the NBA stands by. The league knows it as affluent fans who will show up for their courtside seats twenty minutes late. The league also has struggling fans who will be glued to the television or sneaking down from the bleacher seats. The only uncertainty is what the middle-class fans will be doing. Will they be supporting the team or another hobby? Their decision is their own and unfortunately for the rest of the league's fans, they will have to live with this decision - whatever it may be.

Lastly, if the league does settle for a reduced cap, then you have to expect the league to encourage smaller, scaled back contracts that permit flexibility for teams.

Brace yourselves we are in for an interesting ride.

No comments:

Post a Comment