Would you forgo a minimum of $11.4 million in guaranteed net income and possibly much more to play with Derrick Rose, LeBron James or Dwight Howard? Reports suggest that Knicks forward Carmelo Anthony might be willing to do just that. Anthony, who has made more than $130 million in salary and tens of millions in endorsements during his 11-year NBA career, has until Monday to inform New York whether he will opt out of the final year of his contract and become a free agent on July 1. Several media reports indicate that Anthony will test free agency and explore signing with the Bulls, Heat or Rockets.
Despite Anthony's apparent intentions, the NBA's collective bargaining agreement creates powerful incentives for the seven-time All-Star to remain with the Knicks. Under the CBA, so-called Larry Bird rights enable a team to re-sign qualifying players for an extra year and at higher annual increases than they would receive if they signed with another team. A player qualifies for Bird rights by being on the team's roster for at least three seasons, among several other conditions adroitly explained by Larry Coon in his NBA Salary Cap FAQ. Anthony, who has been a Knick since February 2011, meets the criteria and can sign with New York for five years and $129.1 million. Rival teams can offer him a four-year, $95.9 million deal, after which Anthony would be a 34-year-old free agent.
Anthony's financial decision-making is also affected by income tax rates, which vary widely by state and, as New York City residents know, municipality. SI.com and tax expert Robert Raiola have crunched the numbers for Anthony (whose projected contract amounts are provided by Spotrac.com). We break down how much he would likely earn, after taxes and the standard 4 percent agent commission, if he signed max deals with the Knicks, Bulls, Heat and Rockets.
Keep in mind, however, that Chicago and Houston would have to make multiple moves to sign Anthony to anything approaching a max contract, and Miami would face an even more difficult challenge. If those teams fail to create the space, Anthony would have to sign for even less than what is indicated below:
These numbers make clear that Anthony should be paid extraordinarily well regardless of the team employing him, the state he plays in and the income tax rates in the place he calls home. Anthony is also poised to earn millions in endorsements regardless of his decision. But these figures also reveal that the former scoring champion would be guaranteed $11.4 million to $12.8 million more in take-home pay if he re-signs with the Knicks. Put differently, Anthony, as a "max player," would be paid substantially different amounts of money to perform the same employment services merely because he already plays for New York. Anthony could sign with the Bulls, Heat or Rockets and then, as a free agent in 2018, try to recoup what he would have been paid by the Knicks in the '18-19 season, but chances are low he'd attract a base salary anywhere near $29 million.
Should star players receive more to re-sign with their team and, conversely, less to sign with new teams? The NBA and its owners generally favor that stars stay put. From a marketing perspective, it is easier to build fan loyalty when franchises have long-term and stable associations with their best players. During the 1980s, the Celtics and Lakers attracted diehard fans by winning titles and persuading superstars Larry Bird and Magic Johnson to start and finish their careers with the same team. These type of players became associated with their franchises; to think of Johnson as anything but a Laker is impossible.
For many years the law also made it easier for teams to retain their stars. Until the rise of free agency and accompanying antitrust litigation in the 1970s, stars were generally obligated to remain with their teams. Players' contracts contained the infamous "reserve clause," which allowed teams to renew them on a year-by-year basis at modest increases. This effectively denied free agency unless a team cut a player loose. It is therefore not surprising that stars of the '50s and '60s like Bob Pettit, Elgin Baylor, Jack Twyman and Jerry West played their entire careers with the same team. They may have been loyal, but they were also contractually barred from being disloyal.
Bird rights are clearly not as onerous as the reserve clause, but they similarly place a restraint on the marketplace of stars. The restriction is simple: If you play for another team, you will earn much less money. Yet the message hasn't dissuaded some stars from relocating. Howard, for one, rejected the Lakers' five-year, $118 million offer in favor of a four-year, $87.6 million deal from the Rockets last year.
It will be interesting to watch if the players' association seeks changes to Bird rights. Either the NBA or union can opt out of the CBA in 2017, four years before it expires. Any changes to compensation must be collectively bargained. If higher salaries fail to motivate stars to stay with their teams, then why pay stars who leave less?
Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law. He is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.
Robert Raiola, who co-authored this story, is a senior manager in the Sports & Entertainment Group of the accounting firm O'Connor Davies, LLP.