The Changing Landscape of the NBA

May 11th, 2014 6 comments

The NBA is thriving!

Just three years removed from a time when we were all seduced by claims of poverty from owners facing supposed losses that were mounting so quickly and so heavily that they forced a nasty lockout that nearly cost us the entire 2011-12 NBA season, we’ve entered into a period of unprecedented success for a league which has never been stronger.

Profits are soaring.

Just about every team in the NBA that wants to be profitable can now be profitable, and without taking drastic Jeffrey-Loria-like actions that adversely affect their fan bases in doing so (here’s to you, Miguel Cabrera!).(1) Teams aren’t just profitable; they’re wildly profitable. The league as a whole projects to generate roughly $300 million in basketball profit this year. More than half of the league’s teams should produce eight-figure profits. One or two could touch $100 million!

Rising profitability means rising team valuations.

Just last year, the Maloof family sold a 65% stake in the Sacramento Kings along with Sleep Train Arena to a group led by tech entrepreneur Vivek Ranadive at an all-time record valuation of $534 million, despite the team playing in one of the league’s smallest markets. And that was after owners blocked the Maloofs’ agreement with investor Chris Hansen to buy and relocate the Kings to Seattle at a total franchise valuation of $625 million.

That all-time record valuation was eclipsed earlier this month, when Herb Kohl sold the Milwaukee Bucks, widely considering the least valuable team in the league, to hedge-fund billionaires Wesley Edens and Marc Lasry for $550 million (without an accompanying arena), a price which would likely have been significantly higher had Kohl, who paid just $18 million for the team in 1985, not required as a condition to the sale that the team remain in the city and with the fans of Milwaukee. It was a stunning amount for the Bucks, who are universally regarded as having the worst financial situation of any NBA team. And yet, Dallas Mavericks owner Mark Cuban called the purchase price a bargain, suggesting that even the least valuable NBA franchises are truly worth more than $1 billion.

That newly-minted all-time record valuation is about to get shattered. The impending forced sale of the Los Angeles Clippers, who play in the second largest market in the NBA, is about to multiply the current record times four! Former Microsoft executive Steve Ballmer has agreed to buy the team for a whopping $2 billion! That’s the second highest price ever paid for any professional sports franchise. The Dodgers baseball team, also of Los Angeles, were sold to the Guggenheim Group for $2.15 billion in 2012, but that price included land, parking lots and TV deals. The only real estate involved in the Clippers deal is for their training facility in Playa Vista. So, not a bad return on a $12.5 million investment by Donald Sterling in 1981. The deal has been submitted to the league for final approval.

Why the massive change?  Read more…

The Cost of All Those Traded Draft Picks Becoming Clearer for Miami Heat

April 20th, 2014 4 comments

In the summer of 2010, the Miami Heat changed the course of team and league history. As a result of two trade calls held with the NBA league office in less than an hour on July 10, the Heat completed sign-and-trade transactions with both the Cleveland Cavaliers and Toronto Raptors, acquiring LeBron James and Chris Bosh in the process.

James and Bosh were to be paired with Heat incumbent free agent Dwyane Wade as the launching point for what would ultimately become the Big Three era. In the three subsequent seasons, the Heat have gone on to reach the NBA Finals all three times, winning the NBA championship twice. Their pursuit of a third consecutive title begins tonight.

Amidst the jubilation of the day, some questioned the manner in which Heat president Pat Riley chose to acquire his two new players. The Heat had the necessary cap room at the time to sign them outright. Why, then, pursue the trade?

Both players were eligible for maximum salaries of $16.6 million in the first year of any new contract signed, whether it was with their prior teams, with the Heat, or with anyone else. But while the starting salary was to be the same no matter where they signed, the NBA’s Collective Bargaining Agreement gives the home team a financial advantage when it comes to re-signing its own players. Both players’ home teams were eligible to offer their respective player one more year (six instead of five) and bigger annual raises (10.5% instead of 8%). That translated to a maximum potential offer of $125.5 million over six years, versus the $96.1 million over five years that the Heat could offer.

James and Bosh utilized the structure not to make the increased money, but rather to mitigate the impact of taking less. They leveraged the sign-and-trade structure to take a reduced starting salary of $14.5 million – $2.1 million less than the maximum – in order to accommodate the contracts of Mike Miller and Udonis Haslem. (Wade, too, did the same).

Each structured the longer six year deal with the higher 10.5% maximum raises, but with the lower starting salary. The contracts paid out $109.8 million over the six years, roughly $15.5 million less than they otherwise could have made had they accepted full max deals.

The sign-and-trade structure, however, came at a cost for Miami.  Read more…

Salary Cap and Luxury Tax Projections for 2014-15 Keep Rising

April 19th, 2014 2 comments

The NBA has issued new projections for the 2014-15 and 2015-16 salary cap and luxury tax thresholds. All 30 teams were informed this week via league memorandum that the 2014-15 cap and tax threshold are now projected to be $63.2 million and $77.0 million, respectively. The numbers for 2015-16 are now projected to be $66.5 million and $81.0 million, respectively.

It should be noted that these are non-binding forecasts that have been circulated more than months before the official salary cap and luxury-tax threshold for the 2014-15 season are announced in early July, following a league-wide audit (that’s what July Moratorium is for). As part of the audit, accountants jointly appointed by the NBA and the player’s association finalize the total revenue haul during the past season and, on that basis, project the revenues for the upcoming year.

They then take 44.74% of that projected amount, subtract projected benefits, and divide by 30 (the number of teams in the league) to get the salary cap for the season ahead. Adjustments are then made to the cap if players received way too much (or way too little) in salaries and benefits for the then prior 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 salary cap and luxury tax values for the current season are $58.679 million and $71.748 million, respectively, which means the new cap projection for next season represents a 7.75% increase over this season. This is a pretty big jump — the league’s baseline assumption for year-to-year increases is 4.5%.  Read more…

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Miami Heat Sets New Team Record for Player Payroll

April 18th, 2014 No comments

If the Miami Heat haven’t exactly lived up to expectations thus far this season, it isn’t because of their spending.

Despite making some unpopular moves last summer – utilizing the amnesty provision to waive Mike Miller, declining to utilize the mid-level exception – the Heat spent more on player payroll this season than in any other season in team history.

The Heat ended the regular season with a team salary of $80.6 million – which, perhaps surprisingly, amounts to $2.8 million less than last season’s record total.

But team salary isn’t an accurate depiction of a team’s actual spending on player payroll and related costs. There are several adjustments that need to be taken into account.

First, team salary doesn’t factor in mid-season trades. For example, if a team trades a player midway through the season, his salary comes off team salary entirely, even though salary payments will have already been made. Joel Anthony and Roger Mason, Jr. were each traded during the season. Prior to their trades, they had received a combined $2.4 million in salary payments from the Heat. Conversely, the Heat received Toney Douglas in trade midway through the season. Though his $1.6 million salary appears on the Heat’s team salary, the Heat itself was only responsible for $856K of that total. Adjusting appropriately for these trades, then, takes the team’s payroll to $82.2 million.  Read more…

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LeBron James Completes Historic NBA Shooting Season

April 17th, 2014 No comments

The dominant play of LeBron James has been one of the most compelling aspects of the NBA since his entrance into the league eleven years ago, but lately the experience of watching the world’s best basketball player has taken on an entirely new significance. Outrageously efficient shooting has become so predictable for James that every appearance has become appointment viewing.

For those of us who have had the pleasure of watching James so freely master his profession, his play in recent years has been a breathtaking experience. Yet for those players unlucky enough to line up opposite James, his performance must be infuriating. Every touch brings its own terrifying potential, as James approaches his on-court goals with an authoritative certainty. He wants to get to the hoop off the dribble for an easy score, and so he does – without much concern at all for defenses, physical limitations or other factors that inevitably steer the play of basketball mortals.

Every trip down the floor serves as a reminder that LeBron James simply cannot be stopped, and when he’s executing at this high a level, he can’t even be slowed. He is perhaps the most dominant player in NBA history.

Which makes his other exploits on the court all the more remarkable. When one reaches such a level of on-court brilliance, said player tends to develop an arrogance about his play — a me-first attitude that negates the potential contributions of others. Not James. Despite being constantly vilified in the media for his deference, James continues to be perhaps the most selfless superstar in NBA history.

In NBA history, the list of players to average at least 25 points and 6 assists while shooting at least 54% from the field in a season is as follows:

LeBron James.

No other playmaker has ever had a scoring season as potent, and no premier scorer has ever had a season with such productive passing as James. And James hasn’t just done it once; he’s done it twice in a row. And he didn’t just eclipse those numbers; he shattered them!  Read more…

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Dwyane Wade Completes Historic NBA Shooting Season

April 16th, 2014 No comments

Before the playoffs begin, before championship aspirations are fought for, before future planning is deliberated, let’s take a moment to acknowledge something truly remarkable that has quietly transpired in the midst of a largely torturous regular season. Dwyane Wade has completed a historic shooting year.

For a second consecutive season that started with questions about whether his skills were in serious decline, Wade has transcended the doubters, and the injuries, to accomplish the spectacular.

He shot 54.5% from the field in 2013-14.

How good is that?

Well… It represents the best shooting season for any shooting guard in the past 31 years. It represents the second best shooting season for any shooting guard who averaged double-digit points of all time. It represents the third best shooting season for any starting shooting guard of all time. And it represents the fourth best shooting season for any shooting guard of all time.

That bears repeating: Dwyane Wade just produced the best shooting season for any shooting guard in the past 31 years, and the fourth best in NBA history!  Read more…

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Miami Heat Sign Justin Hamilton, Release DeAndre Liggins

March 14th, 2014 1 comment

Many of the mid-season maneuverings by Pat Riley and the Miami Heat have appeared somewhat erratic, confused and questionable. But did they, accidentally or otherwise, end up in the right place? That’s for you to decide.

On Jan. 7, former All-Star center Andrew Bynum was released by the Chicago Bulls. Upon being waived, he expressed an immediate interest in joining the Heat. 

It seemed inevitable. The Heat had a definitive need at the position. They had the non-guaranteed contract of Roger Mason Jr., which could’ve been terminated at no further cost to the Heat, to release in order to free up the necessary roster spot. They had the financial wherewithal to get a deal done, having traded away Joel Anthony in a financially-motivated move that saved the Heat far more than Bynum was sure to cost. They had a player in Bynum who, when healthy and properly motivated, provides exactly what this Heat team needs.

The Heat instead chose not to waive Mason Jr., not to create the roster spot, and not to pursue Bynum. Heat officials were concerned about how adding Bynum would affect Greg Oden, who had done everything the Heat has asked, because Miami wanted to give him minutes. Heat head coach Erik Spoelstra called the decision any easy one, insinuating that Mason Jr. never even had anything to worry about.

Bynum went on to sign with the Indiana Pacers. In his first game with the Pacers, against the Boston Celtics last Tuesday, he showed a great deal of promise – grabbing an avalanche of rebounds, showing explosiveness at the rim and putting his sweet interior passing on display. His 16-minute performance in a reserve roll behind incumbent starter Roy Hibbert was better than anything Oden has produced thus far this season for the Heat. Read more…

Did the Heat Turn Down An Evan Turner for Udonis Haslem Offer?

February 27th, 2014 No comments

It has been suggested that the Miami Heat were engaged by the Philadelphia 76ers with an interesting proposition at the Feb. 20 NBA trading deadline. It has been suggested that Sixers general manager Sam Hinkie proposed a trade to Heat general manager Pat Riley of Evan Turner, in exchange for Udonis Haslem and a future first round draft pick.

Riley reportedly rejected.

Did he do the right thing? Well, that’s for you to decide.

The Mechanics

Let’s get a couple things out of the way before we begin.

First, the rumored trade, as described, doesn’t work. It violates salary cap rules.

Taxpaying teams like the Heat can only take back up to 125% of their outgoing salaries, plus $100K, no matter how much salary the team is sending away.

Haslem makes $4.3 million this year. He can therefore only be traded for a player(s) who makes as much as $5.5 million. Turner makes $6.7 million.

When trades are rumored about, oftentimes only the vital components are leaked. The technical details are often either not yet established or not considered vital, and are therefore not leaked alongside the rest of the trade. If indeed this rumor is true, that may be what’s happened here, particularly because the solution is simple. If the Heat were to add an expiring contract to the deal – say, for example, Rashard Lewis – the trade would be legal.

Second, there’s the matter of the draft pick. The concept of including a first round draft pick is quite vague. When would that pick be conferred? What protections would be attached to it?

The Heat’s current predicament answers these questions, and quite nicely.  Read more…

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Miami Heat Sign DeAndre Liggins to 10-Day Contract

February 25th, 2014 No comments

The Miami Heat have made the first use of their NBA D-League affiliate after purchasing operational control this season, with Tuesday’s questionable signing of swingman DeAndre Liggins of the Sioux Falls Skyforce to a 10-day contract.

Liggins had been playing with the Skyforce as an unaffiliated player, and was free to sign with any NBA team.

The 6-foot-6-inch, 209-pound Chicago native was originally recruited out of high school as a point guard by the University of Kentucky for the incoming class of 2008. He spent his first two years mostly coming off the bench, but in his junior year, coach John Calipari decided to start him as a shooting guard. After his junior season, he elected to enter the 2011 NBA Draft.

Liggins was selected with the 53rd overall pick by the Orlando Magic. He spent the year with the Magic on a one-year minimum salary contract, barely playing. He went on sign with the Oklahoma City Thunder for the 2012-13 season, during which time he had multiple assignments with the D-League’s Tulsa 66ers.  Read more…

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Miami Heat Dump Roger Mason Jr. in Trade Deadline Deal

February 20th, 2014 No comments

The Miami Heat have dumped the contract of Roger Mason Jr. at the Feb. 20 trade deadline, in a move that saves owner Micky Arison $1.05 million and opens up a roster spot to utilize either on a current free agent or on a player to be waived over the next 10 days.

The Heat will send Mason Jr. to the Sacramento Kings, who are expected to immediately waive him. They’ll also send $786,095 in cash to complete the deal.

While that amount of cash may seem random, it actually isn’t.

Mason Jr. is a 10-year N.B.A. veteran. He is playing under a one-year contract. He is earning $1,399,507, the minimum salary for a player with his tenure. However, he is only required to be paid $884,293 of that amount, equal to the minimum salary for a two-year N.B.A. veteran. The league will reimburse the rest at the end of the season. Therefore, he really only costs the smaller amount, and only the smaller amount is included in team salary for cap and tax purposes. They do this so teams won’t shy away from signing older veterans simply because they are more expensive than younger veterans.

As for the mechanics of how the reimbursement works, he is to be paid his full prorated salary of $8,232.39 per day (equal to his $1,399,507 salary divided by the 170 days in the regular season), until the total reaches $884,293. At that point, he continues to get paid his fully prorated salary but the league reimburses the rest. With the regular season having started on Oct. 29, he earned that much by Feb. 13, 2014. Since that time, his services have essentially been free of charge for the Heat.

However, since the contract has now been traded, the reimbursement will get allocated to the respective teams based on the number of days accrued with each team. Therefore, while the Kings will be responsible for the $452,782 remaining on his contract for the 55 days left in the regular season, they will actually only owe $286,095 after accounting for the reimbursement.

The Heat essentially covered his remaining salary obligations for the Kings, and then topped it off with a $500,000 profit, which serves as the only impetus for Sacramento to make the deal.

In order to send something back, which is required in all trades, the Kings will return the Heat a 2015 second-round pick which is protected for selections 31-49 and 56-60. If the pick ultimately falls within either of its protected ranges and is therefore not conveyed, then Sacramento’s obligation to Miami will be extinguished. This essentially means that the Heat will only get the pick if it lands between pick numbers 50 and 55.

While this range may seem random, it actually isn’t.

The Kings intended to provide enough protection on the pick to ensure that it will never be received. Such trades are commonplace in the N.B.A., and are typically accomplished by trading away a second-round pick on condition that it lands within the last five of the draft. However, the Kings have previously traded the pick to the Boston Celtics with that condition. So, now, the Celtics will receive the pick if it is among the last five, the Heat will receive the pick if it is among the previous five, and the Kings will retain the pick if it is among the first twenty of the second round, as is likely.  Read more…

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