Miami Heat president Pat Riley is squarely focused on the summer of 2010.
He is attempting to structure the biggest free agent coup in N.B.A., perhaps sports, history.
The economy isn’t helping him.
When Riley stepped down as coach to focus squarely on his duties as president in April 2008 – before the global economic downturn that, as with most businesses across the world, hit the N.B.A. hard – some teams around the league were projecting a 2010-11 salary cap in the range of $63 million.
It seems liked a reasonable projection at the time. The league was in the midst of the biggest expansion in its history. Commissioner David Stern was about to announce a record $58.68 million salary cap for 2008-09 season, a massive $3.0 million jump from the prior season. The future was looking bright.
Since the N.B.A. instituted a salary cap starting with the 1984-85 season, the cap had only ever declined one time from the previous season, in 2002-03, and that was only due to the allocation of a massive new ABC/ESPN television contract which was to pay out $4.6 billion over six years, far more than the previous NBC contract, but allocated less to 2002-03 than NBC paid in 2001-02.
Projecting the cap to grow from $58.68 million to $63 million in two years seemed like a relatively safe bet.
Then came the global economic meltdown.
In July of 2009, Stern announced the league’s second ever drop in the cap, to $57.7 million in 2009-10. He also delivered shocking projections for the following season, warning that the cap was estimated to drop a second consecutive time, this time to somewhere between $50.4 million and $53.6 million for the 2010-11 season pending league-wide revenue performance during the upcoming 2009-10 season. The high end of the range was predicated on a 2.5% drop in league-wide revenues (technically termed “Basketball Related Income,” or BRI), and the low end on a 5.0% drop.
Teams had been bracing for such significant reductions in the cap heading into the 2010-11 season, fully aware of the crumbling economy, but seeing such numbers circulate was still jarring for many team officials.
“Teams should be aware of this projected BRI decrease and plan accordingly” said the memo that was distributed to each team.
So in the best-case scenario outlined by the league that day, Miami would have roughly $10 million less in spending money this summer than it originally planned for, although the memo did include a disclaimer stressing that these were “early” projections that could “change based on economic conditions and as more information on league-wide business performance becomes available.”
Things have changed for the better in the intervening six months, if only slightly.
With N.B.A. gate receipts down less than anticipated, the doomsday scenario of an $8 million drop in the salary cap for the 2010-11 season now seems overly pessimistic.
Everyone still expects the cap to drop heading into the summer of 2010, when the league will have its strongest free agent class ever, but by how much is the critical question.
The Heat are apparently the most conservative of all teams in their estimates, reportedly basing their planning for next summer’s cap at $52 million. That could have serious ramifications for how they plan to utilize the upcoming N.B.A. trade deadline. It could make the goal of acquiring three maximum contract free agents virtually impossible. The Heat could, in turn, seek to short-circuit the process and start the rebuild early. Amare Stoudemire has emerged as a prime focus for the Heat after it became clear earlier this month that he would be unable to work out an extension with the Suns.
The league office told teams on the eve of the season opener to expect the cap to come in somewhere around the $52 million range, but agents who have been briefed on updated financial figures now are using $54 million as their operating number. Such estimates have re-invigorated hopes of a potential Big Three scenario for the Heat.
Gate receipts over the remainder of the season will impact the cap calculations going forward (the other primary source of league-wide revenues, national and local television contracts, are locked-in prior to each season), so the numbers listed above are merely the best available estimates at this time.
But one thing is certain: the Heat is desperately hoping that ticket sales and gate receipts continue to come in stronger than originally forecast, which will give them more money to throw around when Dwyane Wade, LeBron James, Chris Bosh, Amare Stoudemire, and a host of others become unrestricted free agents.