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Miami Heat Face Halloween Deadline for Norris Cole Extension

October 30th, 2014 No comments

Despite tweeting about it yesterday, I have been asked quite a bit about Norris Cole’s situation. I therefore offer this very rushed post to explain my humble perspective. My apologies for the lack of depth or writing qualify, as I am quite busy today. I hope it helps! 

It was a stellar night for Norris Cole.

After being named the opening-night starter for the first time in his career, against the Washington Wizards on Wednesday night, Cole delivered in a big way. The fourth-year point guard played 27 minutes, went 9 of 15 from the field and scored a career-high 23 points. For a large part of the game, Cole was the only thrilling part of the Heat’s offense.

With that, a significant decision looms for the Miami Heat: Whether to lock him in for the long-term right now.

As with all players selected in the first-round of the 2011 NBA Draft who are playing under their rookie-scale contracts, the Heat are facing an October 31 deadline to decide whether to offer Cole an extension. After the Halloween cutoff, an extension would no longer be possible. Cole would instead become a free agent during the 2015 offseason.

Rookie-scale contracts may be extended for up to four additional seasons. The salary in the first year of the extension may be any amount up to the player’s maximum. Raises are limited to 7.5% of the salary in the first year of the extension.(1)

Given the confluence of factors involved, an extension for Cole appears decidedly unlikely.

If you were Cole, or his agent Rich Paul, how much would you demand?

Cole is a starting point guard. In his first and only regular season game prior to the extension deadline, he showed a world of promise. His backup, Mario Chalmers, will earn $4.3 million next season. And the league is about to get a huge influx of cash from its new media rights deal, which could vault player salaries by more than 25%. How much, then, would you demand from the Heat in order to forgo the opportunity to test the free agent market next summer?

If you were Heat president Pat Riley, how much would you offer?

The Heat are trying to keep their salary commitments to a minimum for the summer of 2016 – with only Chris Bosh and Josh McRoberts holding Heat contracts that extend beyond 2015-16 – when they hope to be active in free agency.

Cole is still very much an unproven commodity for the Heat – a natural reason to allow the deadline to pass and take another season to get a read, which would give the Heat the flexibility to evaluate his play in his more prominent role before committing to anything.

The approach could certainly backfire. If his performance from yesterday proves to be anything approaching sustainable, Cole’s valuation this summer would surely soar. But is it a risk worth taking? What if Cole doesn’t excel? What if rookie Shabazz Napier exceeds expectations? Would Cole even be part of the long-term plan in such a scenario? With so much uncertainty, is it wise to lock in a long-term commitment now, or wait until you get a better feel?  Read more…

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NBA Reaches 9-Year, $24 Billion Media Rights Deal with ESPN/ABC, TNT

October 6th, 2014 No comments

The central question of the 2011 lockout, endlessly paltered, parsed and probed was whether the league was actually losing money. While it was a key point of negotiation, its importance was somewhat overstated. A new CBA shapes the future of the league; it doesn’t necessarily need to address the past. It must be asked: How much of the lockout, then, was about owners feeling poor in 2011, and how much of it was about owners trying to get rich in 2016?

2016 is when the NBA’s current national TV deals expire – eight-year agreements that promise pro basketball a total of $7.44 billion from Disney (ESPN/ABC) and Turner (TNT) starting with the 2008-09 season and running through 2015-16, an average of $930 million per year. The deals were originally signed in June 2007.

The NBA was cratering back then. New stars had struggled to grow in the darkness of Michael Jordan’s ever-enveloping shadow. The Shaq-Kobe drama had breathed temporary life into the league, but their eventual break up left the NBA to slowly wither in its wake. Big market teams like the Lakers, Knicks, Celtics and Bulls were brands lacking a product, with no signs of future improvement. The Spurs had just pummeled LeBron’s Cavaliers in the finals, a dismal four-game extermination that limped its way into the record books as the lowest-rated series in NBA Finals history. Things were getting ugly.

An eight-year, $930-million-per-year combined deal? Sold!

Then-commissioner David Stern had negotiated for an increase of more than 20% from the previous average of $767 million despite declining viewership (which itself represented a nearly 25% increase over the $614 million per-year deal signed in 2002, then, also, despite declining viewership). The networks were more than willing to comply with what amounted to a modest 2.5% compounded annual growth rate in rights fees in exchange for an atypically long eight-year deal. The preceding six-year 2002 deal had been the longest one Stern had ever signed.

The agreement looked even better for Stern and the league as the economy got even worse. In 2008, credit froze because mortgage insanity stirred by (us) Wall Street evil-doers planted massive hidden debts packaged in complex synthetic financial products throughout the business world. The ensuing global economic meltdown blazed its way into the NBA, spurring widespread layoffs and igniting fears that league revenues could collapse by, as Stern described it, “maybe as much as 10%.” The league seemed fortunate to be able to cling to a $930 million lifeline every year.

Times have certainly changed.  Read more…

A View Into the Miami Heat’s Local TV Deal

August 4th, 2014 No comments

“This is a hobby of passion, it’s not a business… The reality is we’re not a big market team. Where we find ourselves struggling is our local TV revenue is smaller than big markets…”

That was Heat owner Micky Arison in July of 2012, describing the difficulties of sustaining a winning basketball team while maintaining some semblance of profitability under the auspices of the new and far more restrictive Collective Bargaining Agreement.

Local rights deals for sports franchises are in the midst of a tremendous boom in the television landscape that social media sculpts, as regional sports networks (RSNs) bid up prices to secure access to one of the few remaining DVR-proof properties. And when I say “boom,” I want to do more than just evoke the idea of growth: In 2011, the Los Angeles Lakers signed the richest local television rights deal in NBA history; the 20-year contract with Time Warner Cable included the launch of two new regional sports networks – one English channel and one Spanish channel – and averages a payout to the Lakers of approximately $200 million per year, for a total value of $4 billion!

To give you an idea of just how astronomical that is: It’s roughly 10x the $20 million payout the Heat currently generates from its own longstanding TV rights deal. In fact, the average annual payout on the Lakers’ deal is more than what the Heat currently generates in total revenues!

The Heat is at a substantial disadvantage when it comes to negotiating the payout on its TV rights deals. That’s because the size of a team’s local television rights deal is directly proportional to the projected number of television households tuned into its broadcasts. The Heat, by the NBA’s own definition, is a small-market team. Read more…

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NBA Sets Salary Cap and Tax Level Numbers for 2014-15

July 9th, 2014 No comments

On Thursday July 10 at 12:01 a.m. ET, the NBA’s 2014-15 season begins. That’s when the league’s salary cap, luxury tax threshold, maximum salaries and other figures all adjust to their new values.

Most NBA business ceases for the first several days of July as the league conducts its annual audit to determine the league’s revenues from the previous season. With that figure in hand, the league huddles with the players association to project revenues for the coming season, and uses it to calculate the new cap, tax and related figures.

Revenues on the season came in at an all-time high $4.52 billion, up 5.3% from the previous year and more than $50 million higher than initially projected. On that basis, the league then projected revenues for next season to increase another 4%, to $4.71 billion.

To get the salary cap for the season ahead, they took 44.74% of that projected amount, subtracted projected benefits, and divided by 30 (the number of teams in the league). Adjustments are then made to the cap if players received too much (or too little) in salaries and benefits for the completed season relative to the finalized revenue figure; this serves as a mechanism to maintain the integrity of the agreed-to revenue spit between owners and players. The luxury tax uses a similar formula, but is based on 53.51% of projected revenues.

The finalized figures were announced at 5 p.m. Wednesday in a memo distributed by the league to all member teams.

The new salary cap has been set at $63.065 million, a 7.5% increase from last season. That is slightly less than the $63.2 million estimate teams had been using since April, but higher than previous forecasts. Last year at this time, the league initially forecasted a cap of $62.5 million, before increasing it to $62.9 million in November and again in April.

The new luxury tax line will be $76.829 million, a 7.1% increase from last season. Tax projections started at $76.1 million last year at this time, before rising to $76.6 million in November and $77.0 million in AprilRead more…

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Miami Heat Struggling Early In Free Agency

July 3rd, 2014 10 comments

The Miami Heat would love to get younger.

The Heat would love to get some youthful assistance on the wing, as protection for Dwyane Wade as his advancing age and health restrictions cause him to miss so many games and render him so ineffective in so many others.

The Heat would love to get a youthful presence down low, a big man capable of imposing his will on the block and the boards.

But for as much as we, as fans, have dreamed it to be so, it was never truly possible. Supremely talented youth is almost never a possibility on the open market. The very nature of NBA rules makes it virtually impossible to attract youthful talent in free agency.

The intensity of recruiting these days is such that the vast majority of all of the best free agents will have once been first round draft picks. Such selections provide their teams the promise of cheap labor over an extended period – via four year “rookie scale” contracts which make it categorically impossible for them to shake free during the interim. If not for being operated under a set of rules which were collectively bargained, the concept alone would surely violate anti-trust laws.

And, yet, it doesn’t get much better for these players after just the four years. At that point, the door opens, but only very slightly. The player is then to enter free agency in restricted fashion, such that any agreement he strikes with any team can be matched by his prior team and, in-so-doing, obligate said player to play for his prior team under its terms. These rules are so restrictive that, typically, the only option for any team desiring such a player is to severely overpay for him, in the hopes that his prior team refuses to match such ludicrous payouts. Most teams don’t even bother to bid on such players. And, thus, by the time the better former first round draft picks are truly free to consider other alternatives, somewhere between eight and nine years will have already passed them by.  Read more…

Miami Heat Create NBA-Record $55 Million in Potential Cap Space

June 29th, 2014 5 comments

Many years from now, Saturday, June 28, 2014, could be remembered as a critical day in Miami Heat history. It marks the day when guard Dwyane Wade and forwards Chris Bosh and Udonis Haslem declared their intentions to join LeBron James and Chris Andersen in opting out of their contracts. It could ultimately mark the day in which the destruction of the Big Three era was initiated in earnest, or the day in which the remodeling of Pat Riley’s two-time championship-winning creation received a major boost.

Agent Henry Thomas, who represents all three players, has reportedly informed Heat president Pat Riley of their choices. Wade will exercise his Early Termination Option for the remaining two years and $41.8 million on his contract, Bosh will do the same for the two years and $42.7 million remaining on his contract, and Haslem will not exercise his player option for the lone season remaining on his $4.6 million contract.

Technically, there is no mechanism to notify the league that an option or ETO will not be exercised. Since the contracts of Wade and Bosh contain ETOs for this summer, they are required to inform the league of their intentions. Since Haslem’s contract contains a player option, he need do nothing but wait.

These actions, particularly in the wake of James, Wade and Bosh meeting last week on Miami Beach, make it rather clear that the Heat’s stars, as well as its supporting players, have decided to work together to provide the Heat the salary-cap flexibility with which to add additional components to a roster that earlier this month lost in the NBA Finals to the San Antonio Spurs, cutting spectacularly short the Heat’s bid for basketball immortality – four straight NBA Finals appearances and three straight NBA titles, a feat which has only been accomplished once in league history.

Without the opt-out decisions, the Heat would have gone into the offseason far in excess of what is projected to be a $63.2 million salary cap for the 2014-15 season, and without much ability to materially improve. Instead, the moves enable the Heat to create as much as an all-time NBA-record $55 million in cap space with which to reconfigure the roster(1).  Read more…

A Chris Andersen Decision to Opt Out Could Have Mutual Benefits

June 28th, 2014 No comments

Chris Andersen is impossible to ignore. The sometimes-bearded, sometimes-Mohawked 6-foot-10 forward/center has his nearly luminous skin filled in technicolor artwork to mask the body of a man who is part enigma, part cult hero, part unlikely role model.

Andersen’s popularity stems from some cosmic combination of hops, hustle, hair and history. His boundless energy speaks volumes about a life predicated on endurance.

If you’ve followed the story of his life, you might wonder how it’s possible that he’s been able to endure. Or where along his path you might have quit. The “Birdman” never has – not after impossible childhood circumstances, not after tragic personal relationships, not after the drugs that forced a mandatory two-year suspension from the league, and certainly not after the most bizarre of stories destroyed his reputation.

In May of 2012, detectives in the Internet Crimes Against Children unit of the Douglas County, Colorado came to his door – confiscating both his computers and his dignity, causing widespread rumors and whispers of hard drives and the age of consent, and forcing him to live under the worst kind of suspicion. He was amnestied by the Denver Nuggets two months later. Nobody would touch him. Serious talent wasting away. He kept quiet while his life was falling apart. Six months passed by. Nothing. His lawyer finally spoke up, proclaiming his client’s innocence. Within a week, Miami had signed him.

The next phase of his life story couldn’t be scripted much better. It’s a story of equal parts success and sacrifice.

A championship. A new two-year contract. Minimum salary. He was eligible for more. We all wanted to give it to him. He deserved it. But he sacrificed for team, his owner and his fans. Then, last September, complete vindication. It was revealed that he’d been the target of an elaborate online extortion plot engineered by a woman in rural Manitoba, Shelly Lynn Chartier. The case was so complex that even he didn’t know exactly what happened. He’s moved on. He even has a TV show in the works, called “Urban Outdoorsmen.”

The question now, for Heat fans, is how his journey will continue. Has a decision to make. He has one year left on his minimum salary contract if he wants it. Or he can opt out. It would appear he’s made it. It would appear he intends to opt out.  Read more…

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Miami Heat Trade Up to Acquire Shabazz Napier in 2014 NBA Draft

June 26th, 2014 No comments

The Miami Heat had perhaps never been as obvious about their intentions as they were in preparation for the 2014 NBA Draft. They wanted former UConn point guard Shabazz Napier.

They got their man, by making a trade for his draft rights with the Charlotte Hornets.

In return, the Heat dealt draft rights to its two picks P.J. Hairston (26th) and Semaj Christon (55th), a 2019 second-round draft choice, and $1 million in cash.

Napier was projected by many to be a mid-first round pick, with teams such as the Orlando Magic, Atlanta Hawks and Chicago Bulls showing strong interest. The Heat had made an all-out effort in recent days to move up in the draft to improve their odds of selecting him but lacked the resources to get up too high.

Yet as the draft continued, Napier’s name kept getting bypassed.

When he was ultimately selected at No. 24 by the Hornets, there was a brief moment of exasperation. The NBA’s draft order is determined as the inverse of each team’s record at the end of the preceding regular season. The Heat had tied the Portland Trail Blazers and Houston Rockets, finishing the 2013-14 regular season with identical 58-24 records. The NBA therefore held a pair of tiebreakers among the three teams on April 18 to determine the allocation of pick Nos. 24, 25 and 26. Portland, which had previously surrendered its pick to the Hornets in a February 2011 trade for Gerald Wallace, ultimately won a tiebreaker with Miami and Houston, and Houston then won a tiebreaker with Miami. The Heat, therefore, appeared to have lost out on Napier because of draft order tiebreaker unluckiness.

Moments later though, it became apparent that the Hornets had made their selection of Napier on behalf of the Heat. The Heat were apparently unwilling to wait and hope that Napier would fall to them two spots down. Between the Hornets at No. 24 and the Heat at No. 26 stood the Rockets, who are vying for the services of free-agent-to-be LeBron James. The Heat were fearful that the Rockets could poach Napier, a James favorite, as a means to improve their roster, to make the Heat a less desirable destination for James, or both.  Read more…

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Would the Big Three Take Less to Help the Miami Heat?

June 21st, 2014 5 comments

Update (6/28): I wrote the following article several weeks ago, and posted it exactly one week ago. Since that time, several things have changed (e.g., the Heat traded up in the draft to select Shabazz Napier, several Heat players opted out of their contracts, the Heat have been rumored to be seeking a trade partner for Norris Cole, etc.), which slightly alter the figures presented in this post. This table provides an updated depiction of the hypothetical situation described below.

The day LeBron James, Dwyane Wade and Chris Bosh agreed to join together with the Miami Heat in the summer of 2010, they laid out a plan. They would each play four years together, then re-evaluate. They each signed nine-figure, six-year deals containing opt out rights prior to the final two. They were expecting titles. We all were.

Through the first three of those years, all was as projected to be. Three straight NBA Finals appearances, two straight titles. But that was before this past year turned into a disaster, before they got throttled by the San Antonio Spurs.

James, Wade and Bosh are all on vacation now, a sort of rejuvenation for a trio who have played more basketball over a four year stretch than any other in league history. They will each take some time to consider their futures, to consider whether or not they wish to terminate their contracts.

The wait is unnerving. It is a reminder that the Heat and James, in particular, have a very uncertain future together, that his potential free agency, which could arrive in just days, looms over this city with as much significance as did Wade’s four years ago. It’s caused us to lose our equilibrium. It’s caused us to lose our perspective. We need to “get a grip” on reality. The Miami Heat, as presently constructed, can still be a championship-caliber team.

Sure, the team has it flaws. Lots of them. And they need to be addressed. But we, as fans, are hoping for much more than that. Cutting corners in the repair of a leaky dam will eventually cause it to burst. Like it did in 2006-07. Which caused 2007-08. Nothing short of a complete overhaul, then, will appease us.

A tear down and restructure requires sacrifice. It requires James, Wade and Bosh to each opt out of his contract and take less. Much less. It’s the only way. But is it possible?  Read more…

Where Do the Miami Heat Go From Here?

June 20th, 2014 No comments

The Miami Heat’s bid for a three-peat – to many, the ultimate basketball accomplishment, and a prerequisite for dynasty status – has fallen short. In the wake of this frustrating failure, we’re all left wondering what the future holds. We’re all left wondering if this is the end of something great, or maybe just a bump in the road at the start of something greater.

LeBron James, Dwyane Wade and Chris Bosh are all eligible to become free agents this summer, but, following last Sunday’s crushing loss to the San Antonio Spurs, they deflected questions about their NBA futures. They each plan to take some time and talk with their families before eventually deciding how to move forward. The wait is infuriating. The uncertainty unnerving.

Of the 15 players currently under contract, 13 can or will become free agents at season’s end.

There are eight players with expiring contracts: Greg Oden, James Jones, Mario Chalmers, Michael Beasley, Rashard Lewis, Ray Allen, Shane Battier and Toney Douglas. Battier will retire. Allen may retire. The status of the rest remains unclear.

There are five players with player options/ETOs: James, Wade and Bosh, as well as Udonis Haslem and Chris Andersen. Haslem and Andersen are likely to be back with the Heat next season, though they may opt out of their contracts to help the Heat maneuver around salary cap issues. Andersen has reportedly already declared his intention to decline his option.

The final two current Heat players are under contract through next season as well: Norris Cole and Justin Hamilton. Hamilton’s salary is non-guaranteed.

The Heat also has its first round pick (No. 26 overall), its second round pick (No. 55 overall), and its 2013 second round pick James Ennis to consider.

Amid this cloud of uncertainty, the Heat did receive a bit of good news in April, when the NBA issued new projections for the 2014-15 salary cap and luxury tax thresholds. All 30 teams were informed via league memorandum that an increase in the cap from this season’s $58.6 million to $63.2 million next season is expected. A corresponding rise in the luxury tax threshold from $71.7 million to $77.0 million is also expected. These are the last non-binding forecasts that will be provided by the league until the official cap and tax thresholds for next season are announced in early July, following a league-wide audit.

With the gravity of these projected increases, many of us have been seduced into thinking that the Heat will have the necessary maneuverability with which to materially improve this summer. But does that line of thinking have any basis in reality? It all depends upon what you believe James, Wade and Bosh are willing to sacrifice.  Read more…

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