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You couldn’t help but notice the frenzy on Friday. It seemed like every five minutes brought a new Woj tweet about an NBA player you’ve either never heard of or couldn’t pick out of a lineup signing a contract for dozens of millions of dollars. The most eye-popping example to me was Jerami Grant, who was a decent player on the Denver Nuggets and who has now signed a deal with the Detroit Pistons for three years and a total of $60 million. Grant started about a third of Denver’s regular season games last season, and he’s making about 90 percent of what Aaron Donald gets paid per year. The pay dynamics across the respective sports are wild.
Grant is a solid player, and I don’t mean to disparage him, but he averaged just 12.0 points, 3.5 rebounds, and 1.2 assists per game last season. He ranked 197th in the NBA in PER, an advanced stat that measures player efficiency. Grant is earning $20 million per year.
As of September the only non-QB NFL players who make $21 million or more on an average annual basis were Jalen Ramsey, Laremy Tunsil, Julio Jones, Aaron Donald, Khalil Mack, Myles Garrett, Joey Bosa, and DeAndre Hopkins. And the back-ends of their deals are often not guaranteed.
And the thing is, Grant may have gotten the highest deal in gross dollars, but there were some other NBA deals that look even crazier than his. Before Friday, I honestly couldn’t have told you if Christian Wood was an NBA player, a character in Fargo, or someone on Pfizer’s vaccine research team. He just signed a three-year deal with the Rockets for $41 million. Fully guaranteed.
Here are some other deals with wild numbers:
- Malik Beasley – 4 years, $60 million, Timberwolves
- Davis Bertans – 5 years, $80 million, Wizards
- Jordan Clarkson – 4 years, $52 million, Jazz
- Joe Harris – 4 years, $75 million, Nets
- Mason Plumlee – 3 years, $25 million, Pistons
I could make a list three times that size just from signings this past week, but you get the point. Crazy contracts are regularly thrown to middle and upper-middle class NBA players. With the possible exception of Harris, none of these signings will elevate these teams into legitimate contenders.
And yet, within the context of how the salary cap and collective bargaining agreement work, it actually makes some sense. The stars are artificially capped with max contracts, so they cluster together on about five or six teams. If you’re in the front office in the bottom 80 percent of the league, you have to spend your money somewhere. Because of the byzantine way that NBA salaries have to match trades, which a layman needs a PhD in capology to actually understand, bad contracts actually become trade assets when they near expiration.
Lots of people who haven’t read this far will yell at me that there are five times as many players on NFL teams and four times as many NBA games per season. The NFL also has the franchise tag, which can cause players to rationally conclude that it’s better to make less per year and have more long-term security due to the constant risk of injury.
That is, of course, true and explains some of this dynamic, but not as much as you may think. A large chunk of player compensation comes from TV money, and more people watch the NFL than the NBA. Significantly more. More people tune into nearly every window of regular season NFL games — Sunday afternoons, Sunday Night, Monday night, Thursday night — than tune into an NBA Finals game.
According to a study by Sports Business Journal, NFL windows comprised 78 of the top 100 most watched TV telecasts in 2019 — including sports and not sports. The NBA had two. The NFL had nine of the top 10 most watched TV programs of the year and 23 of the top 25. The Oscars and CFP title game were the outliers at No. 9 and No. 17. The top NBA game, a Finals game between the Raptors and Warriors, came in at No. 53. This year’s NBA Finals ratings were down over half from last year, and the NBA probably won’t have a single telecast in the top 100 of 2020.
Max contracts in the NBA mean that stars are paid considerably less than what they’d be worth on a true open market, and the middle class picks up the gains. If there were a system where teams could pay a superstar whatever percentage of the cap they want to, we would not live in a world where LeBron James plays on the same team as Anthony Davis or Kevin Durant with Kyrie Irving. The NBA salary cap is about $109 million. LeBron makes about $39 million. He would earn at least $60 million and maybe even more with no max contracts. If there were no max and no salary cap, he’d probably make over $100 million.
The other obvious question is whether this is a bubble just waiting to burst. The NBA revenue structure is buoyed by the cable and satellite bundle. ESPN/ABC and TNT monetize games not just through advertisements, but also through distribution deals with companies like Comcast and DirecTV. With TV bundle subscribers dwindling, is the NBA the most susceptible to a hit?
Perhaps, but not necessarily. NBA games still rate well in the valuable 18-49 demographics and amongst programming exclusive to cable. With the exception of Monday Night Football on ESPN and a few Thursday games on NFL Network, the NFL is mostly on broadcast TV, which you can access through means other than the cable and satellite bundle. NBA games remain a valuable cable commodity, though at some level it hurts their reach that a vast majority of their games are behind a paywall that is losing customers.
Surely, the loss of cable/satellite subscribers coming at the same time that the NBA’s audience has declined will hurt the top price the NBA can command in their next rights deal. The TV deal does not expire until after the 2024-25 season, but we are approaching the time when renewal discussions begin — if they haven’t begun already.
MLB, like the NBA, has had audience attrition on a national basis, but it recently signed postseason renewals with AT&T/TBS and FOX at escalating rates. MLB is making 65 percent more annually on its deal with TBS, which is tied to the same cable/satellite bundle we say is dwindling.
Furthermore, there may be two NBA rights partners, but there are probably more than two potential bidders for those rights. As I previously reported, FOX wanted to get in on this current NBA rights deal, but Disney/ESPN and Turner Sports (then a division of Time Warner, which since sold to AT&T) forked over a massive increase to prevent the rights from formally coming to market. It’s reasonable to believe the NBA will continue to have more than two suitors.
Whether the bubble bursts in a few years, a few decades or never, the NBA’s compensation structure is obviously fundamentally broken. I’m not saying more money should go to owners. They earn enough. Stars, especially in the elite stratosphere, are clearly underpaid relative to their value, but it’s hard to shed tears for them when players like James Harden routinely TURN DOWN extensions worth over $50 million per year. I’d argue that more of the equity should be shared with former players who contributed to building the brand that now sustains nearly $300 million guaranteed for Jerami Grant, Davis Bertans, Joe Harris, and Malik Beasley.