Hard Times on the Hardwood
The NBA has some financial housecleaning to do, and that isn’t a bad thing.
The problem is at the executive level where these contracts are offered and approved. For many years, NBA front offices were run with the prudence of a teenager at a mall with an unlimited credit line. Absurd contracts were handed out with little regard for risk or future financial impact. Those deals are what have most NBA payrolls stuck near the luxury tax line (a dollar-for-dollar penalty imposed on by extravagant teams like the Knicks who spend more that the allotted amount). At the trade deadline, even the Lakers and Celtics were dumping players to minimize their penalties.
Teams were run in this irresponsible way because the bottom line didn’t matter. A little red ink was a good way for owners to hide the profits from their other businesses. What we’re seeing is what happens when those other businesses start coughing up losses. Suddenly the sports franchise was just another attack on the owner’s suddenly shaky finances. (And let’s get this much clear, no one owns a sports franchise to make money; there are—or at least were—better returns on the dollar in other sectors.)
Teams should be run like businesses, rather than self-aggrandizing devices. That should mean professionalization in the front office; real human resource managers with the ability to measure proposed salaries vs. production and projected production and who will negotiate contracts based on data rather than former players doing it on a hunch or two.
This also means that the NBA is up for a serious overhaul in a couple of years. The mid-level exception will probably drop substantially. The luxury tax penalty will probably increase, and the age limit will creep up to 20. The players’ union will object to all of this, but they’ll agree to it without a loss of any action. The players have no other way to make tens of millions of dollars via playing basketball in America.
What’s about to happen in the NBA is a combination of growing pains and a market correction. Players with skills will still become multimillionaires, but contracts won’t be handed out as if there’s no tomorrow. The league is discovering that there is tomorrow, and it isn’t as sunny as yesterday. Meanwhile all the doomsayers are failing to notice that the league is facing the prospect of several years in which the NBA finals will either involve storied franchises or the league’s top players, and the current recession won’t last forever.
For a long time, sports existed in a sort of fantasy universe where it was immune to ills that face those of us in the real world. That era is over, but the games will go on. Nothing that attracts millions of people to TV sets is ever really in peril.
Martin Johnson is a regular contributor to The Root.