Can NBA Teams Win a Championship with a Maximum Contract Player?

NBA free agency is already in full effect and everyone is making their prediction about where LeBron James will end up. Beyond LeBron, there are a few other high profile free agents and a number of teams with enough cap space to make a big splash in free agency. The surplus of teams with cap room is going to create bidding wars between these teams and ultimately the players will earn a big payday. While securing elite talent is necessary to building a competitive team, overpaying for talent and signing players to maximum contracts makes it near impossible to create a championship team under the current collective bargaining agreement.

One goal of the collective bargaining agreement signed by both the owners and the NBA players' union in 2011 was to create a competitive balance between all teams regardless of salary figures. Under the new CBA, teams who spend more than the "soft" salary cap are hit with a more severe luxury tax and lose options which offer salary flexibility. This has caused teams to reign in their spending and think twice before offering big long-term deals to players. Still, there are 19 players in the NBA today signed to a maximum contract, and 12 of those players were named NBA all-stars in 2014. Only seven of those players failed to lead their team to the playoffs last season.

While none of these max contracts are identical, as Larry Coon explains, these players occupy a substantial amount of their team's salary budget. This is the problem of max contracts under the current CBA. NBA championships are never won by one player, as it takes at least two usually three core players and solid role players rounding out the team. The Spurs won the championship this year with four key players. General managers cannot surround their max contract player with enough complimentary talent having such a restricted budget.  Only Kevin Durant and the 2012 Oklahoma City Thunder have made it to the NBA Finals with a max contract player during the three years the current CBA has been in effect, and they lost to the Miami Heat 4-1. To put that in perspective, only six teams made it to the NBA Finals without a max contract player from 1999, when the limit on an individual player's salary was created, to 2011. Of those six teams, only the 2004 Detroit Pistons and the 2011 Dallas Mavericks won the championship.

It was reported by Brian Windhorst that LeBron would be demanding a max contract from whichever team he ends up with (fun fact: LeBron James has never been the highest paid player on his respective team). In the current market, many other players will be offered a max contract. Kyrie Irving signed earlier in free agency, Carmelo Anthony will surely get a max deal, the Houston Rockets offered Chris Bosh a max contract to play in his hometown, and Gordon Hayward could even be offered a max deal.

What does this mean going forward? I would be shocked a team with a max contract player has not won the championship in the next two years before the players union can opt out of the bargaining agreement. While it has not been done yet none of the players who have tried make their teammates better the way LeBron James does. This is a guy who took a team that started Sasha Pavlovic and Daniel Gibson to an NBA Finals! Regardless of where LeBron goes it will be fun to see where not only the stars of this free agency class wind up, but also where the role players sign. The NBA landscape could be completely changed within the next few weeks.

NBA Salary Cap Part I: The Problem

This is Part I in a two-part series.  To read the conclusion, click here.

After amnestying former math major Metta World Peace, the only contract on the Lakers books for 2015 is Steve Nash. In today's NBA, cap space is sacred. GM's wheel and deal, trying to clear their books so they can offer another max contract.

To contend it used to be an NBA franchise had to get bad enough to get in the lottery, get lucky enough to win it, draft carefully for years, and develop their players. The San Antonio Spurs, Thunder, and recently the Indiana Pacers, are examples of this philosophy. But the Heat, Knicks, Lakers, Rockets, and KG era Celtics are examples of a new way to rebuild- to varying degrees of success. It used to be the best franchise were card counters, playing the odds to the best they can. Now it’s just about buying out the best hands.

Draft picks are no longer the most sacred asset for building a contender. There's been a paradigm shift. Now draft picks are levied to get precious cap space. The Knicks give away draft picks like candy. Yet the team has gone from a bottom feeder to top two in the East, while only hitting on one pick in the process- Iman Shumpert. The Rockets look to be in the middle of a similar situation, if you swap Carmelo Anthony for Dwight Howard and Shumpert for Chandler Parsons. Although the jury is still out on their latest picks, the least important vertex of the drafting-free agency-trading triangle has undoubtedly been drafting.

This is unfathomable in any other sport (except maybe for the Yankees). The same goes for the two time defending champion Heat. Although Dwayne Wade was home grown, LeBron James, Chris Bosh, and Ray Allen, were all free agent signings or sign and trades. The Heat's most important draft pick among building this dynasty (besides the ones they traded away) was Norris Cole. The Rockets will have two players making max money on their books who were both drafted and developed by smaller market teams.

Could This Ever Happen?

Now the Lakers are taking a similar gamble. They believe there is a chance they could sign Lebron, Melo, or both and are willing to sacrifice the entirety of the 2014 season to do so. Whether they have a chance at either is a topic for another column (spoiler alert: no).

The Nets are going for it. So much, in fact their salary commitments for next year exceeds $100 million, in a league where the cap is set under $60 million. Brooklyn won't be under the cap until the 2016-17 season, and it will be interesting to watch how newly acquired Paul Pierce and Kevin Garnett gel. Their owner is crazy rich, and teams like San Antonio, OKC, Indiana just can't go that deep into the luxury tax, as Brooklyn will be paying over 70 million dollars in luxury tax alone. The Nets total payroll obligations could touch $180 million. A team will be paying one hundred and eighty million dollars in a league where the cap is a third of that.

Although the goal of the new CBA was supposedly to help the balance of the NBA and prevent the big market teams from buying the best players, it seems to have done the opposite. It is certainly not impossible for small markets to win (as the Spurs just demonstrated), but their margin of error is a lot smaller. Even if a major market team has been plagued by bad drafting,it is easier for them to contend then their small market counter parts.

The result is major market teams are at a huge advantage. More troubling, small market teams are not keeping their home grown super stars. The luxury tax penalties are steep, but not steep enough to deter big markets for dipping into the tax to get another max guy. It's like an electric fence that hurts small market teams disproportionally when they try to run through it. 

The max contract is hurting the NBA. Or not. Ratings are up, and one of the best finals ever was played. The NBA has a real villain in the Miami Heat. Does David Stern or Adam Silver really want to change a winning formula?

This is Part I in a two-part series.  To read the conclusion, click here.

LeBron: How Much is He Worth?

Apparently, Lebron James feels underpaid.

On February 1st, he said the following:

"I have not had a full max deal yet in my career — that's a story untold. I don't get (credit) for it. That doesn't matter to me; playing the game is what matters to me. Financially, I'll sacrifice for the team. It shows for some of the top guys, it isn't all about money. That's the genuine side of this, it's about winning. I understand that."

LeBron followed this statement by having arguably one of the greatest months in NBA history. LeBron scored 29.7 points per game on 64.1% shooting with 7.5 rebounds, 7.8 assists, 1.8 steals and 0.6 blocks per game as the Miami Heat went 13-0. LeBron’s month of February put him on pace to have his greatest season of his exceptional career. LeBron is on pace to join the exclusive club of Oscar Roberston, Larry Bird, and Michael Jordan by averaging 28 points, 8 rebounds, 7 assists per game for a whole season while shooting over 50% from the floor. LeBron, if he can continue his current pace, would be the first of the four to hit all of those marks while shooting over 55%.  LeBron is the ninth highest paid player in the NBA this year making $17.5 million, less than the maximum contract. Even if LeBron had signed for the maximum, he would be extremely underpaid. So what is LeBron really worth?

Even if LeBron were paid the highest amount allowed by the NBA, he would earn approximately an extra 1.8 million per year.  LeBron then would still only be the sixth highest paid player in the NBA, and LeBron is definitely better than the NBA’s sixth best player. LeBron is the best player in the NBA, and if he could be paid any amount, what would it be? To understand what LeBron is truly worth, you have to assume that basketball did not have a salary cap and were like baseball in that players could be paid as much as possible.

The first place to start is LeBron’s own comments on the situation. During the lockout of the  summer of 2011, LeBron stated it would take $50 million for a European team to sign him until the NBA resumed play. That estimate appears to be much closer to his actual worth than his current salary.

The best way to determine Lebron's worth is to determine what he is worth to the team in revenue, not just wins. The Miami Heat have sold out every home game since they signed LeBron. They went from fifteenth in the league attendance in the years before LeBron to being top five the past three years. The Cavaliers finished no worse than fifth in attendance the last five years LeBron played in Cleveland and have been nineteenth in the league the last two years of attendance.  LeBron fills the seats, yet he does not get paid for it. The Cavaliers have played three nationally televised games total the last two years while James' Miami Heat have played 52.

The amount of value LeBron James brings to the team goes beyond what he brings on the court.

The extra revenue he brings in terms of ticket sales, as well as the extra revenue that comes from the increased exposure for the Miami Heat brand is of a different magnitude than his salary. The Heat have a waiting list for corporate sponsors currently because of LeBron James. That doesn’t even account for the fact that LeBron’s Miami Heat jersey is currently the NBA's best selling and that the amount of extra Heat merchandise that is sold because of his presence on the team. Although it is impossible to articulate excactly what LeBron James means to his team, it is obviously more than what he just brings on the court.

Since LeBron’s comments about being underpaid, there have been numerous guesses on what he would be worth in an open market. Economists from the University of Oklahoma put the value of LeBron at $40-50 million per year. Bleacher Report’s Jared Wade in a February article put the guess at about $65 million per year. Further, ESPN's Bill Simmons postured that LeBron is worth $75 million per year. Regardless of what LeBron James would be worth in the open market, there is one thing everyone can agree upon:  LeBron James is definitely underpaid.