Sluggish economy sapping all the fun out of 2010 shopping spree
Tracking changes in the NBA salary-cap and luxury-tax thresholds can start to feel as abstract as counting widgets for a Harvard business school case study, what with all those zeroes and commas and, where most folks would be thrilled to stick the dollar sign, a decimal point instead.
Still, high finance marches on, from Wall Street to Pennsylvania Ave. to the front doors of our favorite professional basketball teams. The recession of the millennium has been grabbing some headlines lately in the NBA, from commissioner
The news has been gloomy, the numbers headed down: If dips in the recently announced 2009-10 salary-cap and luxury-tax cutoff ($57.7 million and $69.92 million, respectively) from last season's $58.7 million and $71.15 million weren't bad enough, the projections for '10-11 seem downright dire. A feared drop of 2.5 percent to 5 percent in "basketball-related income" could push the cap toward $50.4 million, the tax threshold to $61.2 million. To some, divvying up even those numbers by 12 or 15 player salaries wouldn't seem tough. But as the old saying goes, a million here, a million there and pretty soon you're talking serious money.
At those worst-case levels, using last season's payrolls, more than half of the NBA's 30 teams would have been subject to the dollar-for-dollar luxury tax. The penalty actually hit only seven teams because a few that came close -- Denver, Houston, Sacramento, Milwaukee -- worked hard to avoid it, a logical maneuver but now a source of new cap- and tax-related concerns.
The biggest? That in adhering to the lower limits, what was anticipated as a spending spree of historic proportions on the most attractive NBA free-agent class ever instead could be as exciting as a milk run. The so-called Summer of
Remember, ticket purchases and sponsorship deals for last season were set before the worst of this downturn kicked in. Stern hinted at the NBA Finals that a 10 percent drop might be in the offing, which allowed for some buoyancy in his remarks in Las Vegas. "In this 'new normal' with the great recession, most businesses would sign on immediately for a 5 percent decrease in revenues," Stern said. "In fact, some businesses would sign on for any revenues."
It's a pinch that the NBA, its owners and its players are only beginning to feel. For perspective, the projected salary-cap rollback would take everyone back only as far as '05-06 levels ($49.5 million). But it's the direction (down) as much as the dollars, since so much was predicated on the up, up, up arrows to which NBA insiders had grown accustomed.
Here are ways in which various constituencies could be affected by the dip in salary-cap and luxury-tax numbers:
• James, Wade, Bosh
Whether these three still-young talents relocate, re-up next summer or sign extensions soon with their current clubs, they won't be living check to check. They might, however, have to forsake several million dollars in starting salary -- $15.6 million vs. $18.6 million, in some reports -- that compound over the length of their next contracts. Thus, the chance to lock in for the long haul before a possible reopening of the collective bargaining agreement after 2010-11 won't come without some sort of considerable price. The chance to select their whereabouts gets trickier, too, if a team can't afford both the marquee player and a sidekick-level talent. By synchronizing their three-year contracts, these guys could wind up competing for the reduced dollars of a tighter market rather than all hitting the lottery together.
• New York Knicks
No team has zeroed in on the offseason of 2010 with more purpose than the Knicks, manipulating their roster and hiring
"You're still going to have your max pieces, but instead of getting two of them, you might be getting one max and one half-a-max," an Eastern Conference general manager said.
• San Antonio Spurs
With ominous numbers on the horizon, teams with designs on a championship like the Spurs faced a choice: Wait and watch your plan unravel or spend, baby, spend. The Spurs have added pricey pieces like
• Detroit Pistons
• Milwaukee Bucks
This applies not only to the Bucks but also to all the other teams that weren't going to be big spenders next summer regardless, either because of their team's competitive arc, their finances or their market's lack of allure. Milwaukee is regrouping, shedding Jefferson's and Villanueva's salaries and setting itself up to shop not next summer or in 2011, but way off in '12. Maybe by then the recession will break. "Do I see a light? Yeah," GM
• The B-listers
The players who stand to gain or lose the most in a warped NBA economy could be guys like Nowitzki, Johnson,
Rancorous times ahead? Maybe. Humbler times? Hard to avoid, based on NBA numbers getting crunched like so many 401(k) plans these days.