Tuesday, October 21, 2014

The NBA God Contract

"He's the best player in baseball, and the best players in each sport should be rewarded. It'd be nice to sign a 10-year deal worth $300 million." -LeBron James, reacting to Miguel Cabrera's 10-year, $292 million extension with the Detroit Tigers

I never used to think pro athletes deserved big contracts.  I always felt that after a certain threshold, the benefit derived from each additional dollar or two or million had to be so marginal that to gripe about having earnings capped at multiple millions of dollars bordered on offensive.  I was one of those people--and "those people," probably make up 90% of the population, so I guess I should just say I was a "person"--who recoiled in disgust at deals like A-Rod's (twice!) and Ryan Howard's.  How could anyone be worth such obscene amounts of money?  How could somebody even ask for such sums?

Then, I started working.  I got a job out of school in a management development program for an international corporation worth billions of dollars.  I was a company man, staying late, taking on any assignment that came my way, striving, achieving.  At my first annual review, I nearly aced my assessment, and I was rewarded with a better-than-expected pay bump.  I continued to achieve, took on more responsibility, and by the time my two-year review came around, I found myself a part of the upper management team.  I went in for the review with a number in mind that was still a deal for the company based on research I did regarding similar roles at other companies performed by people with similar experience.  My assessment this time around was nearly identical to my glowing first year, but my bump this time was nearly half as much as the first time around.  When I pointed out A.) the vast difference in monetary increases for nearly identical performance, and B.) that at this rate of increase I wouldn't reach the (generous!) number I had in mind until 2017, I was informed that corporate policy capped the earnings of associates in the development program at my Year 2 number (and that I should be proud that I earned the highest possible amount).

And suddenly, I found myself feeling sorry for players like the Cleveland Indians' pitcher Corey Kluber, who may win the AL Cy Young Award this year but currently is only slated to make the league minimum next year (which is identical to what he made this year) and then find himself subjected to the MLB salary arbitration process through 2018.  If Kluber pitches at his 2014 level through his arbitration-eligible years and the Indians don't sign him to an extension (they probably will), it is estimated that he will earn about $40 million total through the 2018 season.  Assuming a win is worth between $5-7 million, Kluber's 2014 alone was worth between $37 and $42 million, meaning the Indians will have already gotten their money's worth even if Kluber never throws another pitch and (for some reason) still gets David Price-like money (Price signed a $14 million in 2014 to avoid arbitration with the Tampa Bay Rays) throughout his arbitration years.

Perhaps the most extreme example of production vs. compensation is Mike Trout's first two seasons with the Los Angeles Angels of Anaheim.  From 2012-13, Trout's production was worth between $98 and $138 million, and yet he only cost the Angels a little over $1.5 million.  If Trout had hit the open market after leading the majors in Wins Above Replacement as a 20-year old in 2012, he most likely would have received offers worth upwards of $300 million spanning across the next decade, but, due to the MLB's labor structure, Trout wouldn't have hit the market until 2017 (the Angels signed him to a 6-year $144.5 million extension prior to the 2014 season).  Why would the MLB Players' Association ever agree to a system that potentially suppresses the earnings of marquee players for six years, keeping them off the market until the vast majority of them are past their primes (Mike Trouts of the world excepted)?  The answer lies in the length and dollar amount of the very contracts that used to boil my blood.

For the majority of young MLB players, their production will never merit salaries beyond what they are promised throughout the years they are under team control.  Many of them will never last all six years with one team, and even more of them will never merit a salary above what the labor structure dictates.  Similarly, many young NBA players will never be worth the salaries they are slotted to earn under the Rookie Salary Scale, and some of them won't even last in the league to see the end of those first contracts.  Both of these systems are in place to encourage teams to invest in the development of young talent while also protecting them from long-term commitments to one- or two-year washouts (the NBA system can keep a player under team control for 5 years without any extension).  While middling-to-average players in both sports are fairly compensated under these respective systems, the differences between the MLB and the NBA is most felt by those players that produce at a high level from day one.

Mike Trout could have signed his extension two weeks into his rookie year (Tampa Bay third baseman Evan Longoria signed a six-year extension less than a week after making his major league debut), and the deal could have been identical to the Miguel Cabrera contract described in the opening quote of this post had the Angels wanted.  Even though Trout "settled" for the deal he did, he still will find himself in line for a Cabrera-type contract when he hits the free agent market entering his age-29 season.  Assuming his leg doesn't fall off, Trout could challenge the career earnings of Alex Rodriguez thanks to the complete absence of salary and length limitation on MLB contracts.

Compare Trout's earnings trajectory with another prodigy, LeBron James.  While James wasn't instantly the best player in the league (he finished his rookie year 4th on the Cavs in Wins Produced (WP), just behind Kevin Ollie), it didn't take him long to get there (16.5 WP in his second season, surpassed only by an in-his-prime Kevin Garnett).  Over those first two years, James earned just over $8 million, which is pretty darned good compared to the (estimated) $900k Trout earned.  Prior to the start of Trout's third season, however, he signed his six-year $145 million extension, a deal possible due to the complete lack of salary or contract length limitations of MLB contracts.  Is there any doubt that Dan Gilbert wouldn't have thrown out an offer worth at least that much after LeBron's second season?

Instead, due to the confines of the Rookie Salary Scale, LeBron wouldn't be eligible for an extension for another season, and, even then, the most that could be offered under the NBA's collective bargaining agreement was $80 million over 5 years (LeBron famously [infamously?] signed for only 3 years and $60 million).  Even when LeBron hit free agency, easily the best player in the league and still only 25 years old, the maximum he could be offered was $125 million over six seasons by the Cavs or 5 years, $96 million by another team (he of course signed with Miami for six years, $110.1 million via a sign-and-trade).  The $129 million career earnings of the two-time NBA Champion, 4-time NBA MVP, and 2-time NBA Finals MVP fall far short of what Trout will have earned through 9 years with far less accomplished to date (not to say Trout won't achieve similar greatness on the diamond as James has on the court) and with far, FAR less star power (be honest: did you know what Mike Trout looked like prior to seeing his picture earlier in this post?).

So how is this conundrum solved?  LeBron (and Kevin Durant, and Kobe Bryant, and Carmelo Anthony, and...) all feel they are grossly underpaid (hahahahahahaha Kobe, good one), yet the owners have no desire to eliminate the maximum salary.  And why should they?  The players have almost zero leverage, and the league will gladly overpay the Gordon Haywards of the world to continue to leach off the efforts of LeBron, Durant and all of the plucky up-and-comers still working on rookie deals (Anthony Davis, Adam Silver thanks you).  Mark Cuban is willing to get rid of the contract ceiling, but in exchange he wants to eliminate guaranteed contracts, which is a complete non-starter.  The owners probably would take better care of the elite players, but it would come at the expense of the Haywards and Mike Millers and Kent Bazemores, so the votes wouldn't be there to approve any deal that takes from the middle and bottom tiers to reward the top tier (not to mention the ironic March-On-Wall-Street-style protests that would erupt in support of a handful of men earning $200,000 instead of $500,000).  So how do the stars get their proper rewards without robbing the rank-and-file of the league?

First, you don't change a thing about the current salary structure.  Keep the cap, keep the luxury tax, keep the rookie scale, keep it all.  The only change is the introduction of a one-per-team, no-limits, no-tax implications monster contract.  Call it the God Contract, and it can be any length for any amount, without counting against the salary cap nor the luxury tax.  The only caveats are that it can only be used to re-sign a player, that it cannot be traded and that a team can only have one God Contract on its payroll at a time.  The God Contract keeps the status quo, allowing Jodie Meeks to continue to get grossly overpaid while also allowing Durant to get what is due unto him.  It solves the big-market, small-market dilemma by allowing Dan Gilbert to throw 20 years and $500 million at LeBron in 2010 to get over whatever happened in the Boston series and stay in gray, cold Cleveland over four years of fun in the Miami sun while still giving the Cavs flexibility to add pieces around their King.

Now the big concern would be a team such as the Kings giving such a contract to a player such as DeMarcus Cousins, but I don't think that would happen as often as it initially may seem.  Remember, these contracts could not be traded, so not only would the Kings be stuck with Cousins for a decade at a debilitating salary (assuming he doesn't build on his productive 2013-14 and mature showing in the FIBA World Cup), Cousins would be stuck in Sacramento.  The permanence of the God Contract would cause both teams and players to pause and carefully consider the commitment they are about to make.

In fact, as I see it, there are only three sure-fire, no-doubt-about-it locks that would get a God Contract right now: LeBron, Durant, and Anthony Davis.  LeBron & Durant are 1-2 right now atop the league pecking order, and will probably swap back and forth over the next few years, while Davis is the only under-25 player I would say appears transcendental right now.  If you think I'm being conservative, let's look back 5 years at five players from 2009-10 who looked like they were worthy of a God Contract:

1. LeBron--Still a no-doubter. SIGN
2. Dwight Howard--Injuries and attitude have hindered what looked like a Hall-of-Fame career.  The HOF is still in play, but if Orlando had locked him up for 10 years and $200 million, they would have to be kicking themselves right now.  NO SIGN                
3. Rajon Rondo--Rondo would have been coming off his age 24 season, having made his first All-Star Game and producing 15.6 Wins Produced.  He was amazing in the Celtics' surprise run back to the NBA Finals, averaging 20.9 points, 12.3 assists, 7.4 rebounds and 2.5 steals in the playoffs (including an insane 29-18-13 in Game 4 of the Eastern Semifinals vs. Cleveland).  All that said, injuries and diminished performance with lesser teammates shows that Rondo was/is not worth God status.  NO SIGN
4. Kevin Durant--Yes.  SIGN
5. Dywane Wade--This is a toughie.  Wade remained elite through 2013, and was still a high-caliber All-Star when he played last year.  When you factor in his legendary status in Miami and the cache that comes with that, you can make a compelling case that Wade is worth the God Contract.  SIGN

So three players were worthy of the contract 5 years ago, and only two of those three are still worthy of one today.  Of course, it would not have been surprising if all five of the listed players received a God Contract in 2010, if not more players.  The same goes for today, where just because a player doesn't deserve a God Contract doesn't mean he wouldn't get one.  Owners can be dumb when they have a bunch of money to spend, and the God Contract gives them literally all of their money to spend (albeit on one player).  I still don't think a rash of God Contracts would cripple the league, since 1.) once a team agrees to a God Contract, they cannot offer another for the length of that initial deal, and 2.) the first God Contract that goes sour will make teams and players very apprehensive to wed themselves to each other through such an ironclad commitment.  Following his MVP season in 2011, it is very likely that the Bulls and Derrick Rose would have agreed to a God Contract.  Since then, Rose has played 49 games of largely below-average basketball and there are lingering doubts that he will ever approach his 2011 season again.  Cases like that of Rose and the Bulls would certainly give teams pause in subsequent seasons.

The God Contract would also hinder future flexibility.  Now that he has returned to the Cavs, there is no doubt that Cleveland would offer LeBron a God Contract the second it became possible to do so.  But if the God Contract had been possible even last season, isn't it conceivable that Dan Gilbert would have already offered one to Kyrie Irving?  And would LeBron have come back to Cleveland knowing that the possibility of the God Contract was off the table for the length of Kyrie's deal?  Or how would Al Horford be feeling if he had signed a God Contract earlier in his career to stay in Atlanta, and now found himself stuck on a team with ownership in flux and a front office reduced to shambles due to racially-charged comments?

That is why I feel both teams and players would eventually realize that the God Contract is applicable to only very special cases.  Still, it would shock no one if several teams threw them around in the first year or two after they became a possibility and the future ramification were still not fully being realized.

The following are players who could conceivably have signed a God Contract this season broken into tiers based on the reasoning behind why they would receive a God Contract.  This exercise is conceived on the premise that the God Contract would have been available immediately following the season (so Kevin Love, for instance, could have signed it in Minnesota).

Really, Really Good:  Kevin Love, Blake Griffin.  Love in Minnesota actually probably deserves a God Contract.  It's the only thing that would keep him a Timberwolf, and he is still only 25 and a super-productive player.  Griffin gets the nod over Chris Paul due to his youth, Paul's injury history, and Blake's superior marketability.

Lifetime Achievement Awards: Dirk Nowitzki, Kobe Bryant, Dywane Wade, Tim Duncan.  The reasoning behind these deals would be two-fold.  1.) They would reward long-time franchise players in various stages of the twilights of their careers. 2.) It would allow the Mavs, Lakers, Heat and Spurs to move these rewards off of their salary cap and better supplement their respective franchise cornerstones with talent.  The Lakers would gladly extend Kobe's deal a few more years if it would clear the remaining $48 million off their cap number over the next two seasons.  And couldn't you just see Gregg Popovich signing Duncan to 1-year $20 million deals off the cap for as long as Duncan wants to play?

Paying For Potential & Size: DeMarcus Cousins, Andre Drummond, Jonas Valanciunas.  All three of these guys have shown flashes of being dominant big men, but for various reasons are still not there yet.  Cousins has already put up eye-popping stats (22.7 ppg, 11.7 rpg in 2013-14), but immaturity and a bad temper have held him back.  Drummond is an athletic freak who will probably still be smoothing out his rough edges in three seasons, while Valanciunas is a traditional lumbering big who may find himself obsolete in some playoff series.

Mistakes: John Wall, Kyrie Irving, LaMarcus Aldgridge, Paul George, Carmelo Anthony.  These guys are all fine players, but if their respective franchises ever truly believed they were the centerpieces of championship squads, they are gravely mistaken.

Enigmas: Stephen Curry, James Harden (or Dwight Howard), Marc Gasol, Joakim Noah.  You could talk me into any of these players deserving a God Contract, but you could also make an equally valid case that such a move would be a franchise-crippling mistake.

So would the God Contract solve the big labor issue facing the NBA right now?  It would certainly take care of the stars at the top who truly are underpaid, while also keeping the system in place that has made the NBA's middle class of players the most well-compensated of any of the major American sports leagues.  The God Contract would also protect the owners from themselves, just as the current max contracts do, by limiting each team to one and by keeping the value of the contract off of the cap and tax ledgers.  It would also give small market teams that have lucked their way into a superstar (Cleveland with LeBron, OKC with Durant, New Orleans with Davis, Washington with Otto Porter) a legitimate advantage over big market teams trying to lure those players away.  Of course, solving this issue only brings one of a myriad other issues to the surface (minimum age limit? draft lottery reform? season length?), but I will solve those issues in a future post (hopefully).



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