NBA Contracts: Or, Why Allen Crabbe Just Made Bank
Early July saw the beginning of NBA Free Agency, a period which, for basketball fans, can elicit just as much excitement as the regular season. It is a time when every team’s record is 0-0, and the possibility of winning a championship is a hope held by every fanbase. This year, however, teams threw absurdly large amounts of money at players who, in the eyes of some, have proven little to nothing.
So, how does a bench player like Allen Crabbe, a player whom the casual fan would not have heard of until at least the 2016 playoffs (if not the moment he signed his deal), get $75 million?
Short answer? It’s because of you.
When we look at the contracts of players in the four major North American sports, there is a lot of disparity between the amount players make in each league. One of the best quarterbacks in the NFL, Aaron Rodgers, makes $22 million per year on average. Some of that is not guaranteed, but we’ll get to that. Forward Harrison Barnes, new signing for the Dallas Mavericks, has never even been selected as an All-Star, but will make $22 million guaranteed this season. Why does this disparity exist?
Contracts in the NFL and NBA are the direct result of a salary cap instituted in what is called the Collective Bargaining Agreement. This is an agreement between owners of teams and the players themselves, by way of a player’s union. The salary cap is determined by how the owners and players have agreed to split revenue that is made, the largest chunk of which comes from television deals. Television networks can pay billions of dollars because of a) advertisement revenue from the rights they are buying to show games, and b) cable and satellite subscriber fees. So, the money you are paying to advertisers and to the cable company are directly and indirectly fueling the growth of the salary caps in each league.
In the NFL, there are 32 teams with 53 players per team on the roster. This means that there are a total of 1,696 players that need to be paid at any given time. In the NBA, there are only 15 players per team divided among 30 teams. This means there are only 450 players to split the money between.
In the NFL this season, the salary cap is set at $155.2 million. This means that each team can spend up to that much money between 53 players. This makes the average salary for each NFL team to be about $3 million. While in the NBA, 15 players need to divide $94.1 million. This means the average NBA salary will be about $6.3 million. This means that by default, the way money is divided up, the NBA players will be making much more than NFL players.
So why then do players like Allen Crabbe, Tyler Johnson, and Evan Turner get such massive deals, especially when mid-tier athletes in other sports get significantly less? Part of it is the unique structure of the NBA collective bargaining agreement, and part of it is luck.
Something unique about the NBA is the maximum salary, or “max.” There are 3 different levels of maxes. For max players with 0-6 years of experience, they can earn 25% of the cap. 7-9 years gets 30%, and 10 years+ can get 35%. This means a superstar player like LeBron James is only able to make up to about $33 million this coming season because he has played 13 years in the league. In theory, as one of the most well-known players in the NBA, the best player in the world, and a global brand unto himself, LeBron should be worth much more than he is paid. Instead, he is limited in his on-court earning.
Because of this limitation on star players’ contracts, and the fact that minimum salaries and other exceptions have stayed at a very low number relative to the rapid rise in the salary cap, teams end up spending a lot of money on mid-tier players. Guys that might be a 5th starter or a bench player receive large paydays. All of the money has to go somewhere, and those are the players that get it.
But another aspect is, put simply, fortunate timing. These players are hitting free agency right as the NBA is at an interesting point. The league signed a $24 billion dollar national television deal in 2014 which will kick in this upcoming season. This means that ESPN and Turner Broadcasting (TNT) will be paying the league for the rights to show games. Even with all of this extra money, the players are owed their share. Thus, the cap goes up because the players are entitled to their agreed-upon 49% of revenue. This spike in revenue meant many teams this year had cap space available to sign players, something that generally is not the case.
And there you have it. Players that many out of the nonstop NBA coverage have never heard of received massive deals that, in a vacuum, appear exorbitant. However, when understood in the context of the collective bargaining agreement, such deals begin to make much more sense. As much as Tyler Johnson getting paid $50 million can make sense, I suppose.