Whenever a pro athlete gets a big contract, plenty of absurd hot takes start flying about how they don’t deserve that much for “playing a game.” This gets especially silly in the NBA, where the salary cap means players only receive some of their true market value (the rest of the leagues’ revenues go to the owners, who clearly deserve it for all their hard work of sitting back and watching the money roll in), and where the max salary in particular means that the league’s top players cannot be paid what teams would offer them in a true open market. Those takes started raining down Saturday about Steph Curry’s five-year, $201 million contract (the richest deal in NBA history), with some hot-take columnists even doing idiotic things like comparing Curry’s salary to what teachers make (yes, if Curry didn’t get paid, the Warriors’ owners would surely just be donating that money to fund public education), and some former sports CEOs who should know much better saying Curry’s “hardly underpaid.” However, Curry received an excellent and eloquent defense from an unexpected corner; Finals’ adversary LeBron James.
How valuable is Stephen Curry? In 2010 Lacob bought Warriors for $450 million. Now worth $2.6 billion.
— Ann Killion (@annkillion) July 1, 2017
— LeBron James (@KingJames) July 1, 2017
Yes, that increase in the Warriors’ value isn’t just about Curry (it’s about their other players, and their upcoming move to San Francisco), but he certainly did a lot to contribute to their two titles so far and to their increase in franchise value. And arguably did more than owner Joe Lacob, who deserves credit for hiring the right people, including GM Bob Myers and head coach Steve Kerr, but isn’t out there hitting threes. But those claiming “athletes don’t deserve this!” are essentially saying that even more of that money (which comes from the NBA’s giant TV contracts, plus its ticket sales and merchandise) should go to owners like Lacob instead. It’s certainly not coming back to the fans; no one’s going to start charging below what the market will bear for tickets just because they’re paying players less.
This is especially funny when you look at how little of the NBA’s vast revenues go to players in general and superstars like Curry in particular. Under the CBA extension signed in December 2016, players receive between 49 and 51 per cent of “basketball-related income.” The BRI definition excludes some revenue sources entirely (especially when teams take ownership in regional networks in lieu of straight payment for broadcast rights, but also including things like concerts at NBA arenas) and only includes percentages of others (40 per cent of luxury suite revenue, 40 per cent of in-arena signage, 50 per cent of naming rights revenue, to name a few), so NBA players are really getting less than half of the total the owners bring in. And yes, the owners have to pay costs unrelated to players, but most are still walking away with hefty chunks of change on an annual basis, to say nothing of the overwhelming increase in franchise worth.
Even if you view what players in general are receiving as fair, it’s hard to say the same about what the NBA’s best players get. In fact, the existence of max contracts proves that they’re not getting market value. Curry’s contract is a lot of money, to be sure, but it’s nowhere near what he might be able to get in an unrestricted system. The same can be said for James and every other superstar out there; artificial limits on what an individual player can make mean that the NBA’s best will never get what teams would be willing to offer them. It’s a system that particularly rewards good-but-not-great players, guys who one team might think is worth a max deal but others don’t, and particularly punishes the NBA’s best, who would be offered much more if the system was open. Consider this 2013 NPR piece on James, one of many that discusses how max contracts hold the NBA’s top players below their market value:
LeBron James is arguably the best player in the NBA. His salary is $17.5 million a year. He’s worth much, much more.
“He’s getting hosed,” says Kevin Grier, an economist from the University of Oklahoma.
James used to play for the Cleveland Cavaliers. When he left, the value of the team fell by tens of millions of dollars — and the value of his new team, the Miami Heat, rose by tens of millions. The economists I talked to said James should be making closer to $40 million a year.
James is profoundly underpaid because there is nothing resembling a free market for NBA players.
It’s a pretty darn anti-capitalist setup, and it’s interesting that it’s not applied anywhere else in the NBA. There’s no hard limit on what teams can offer presidents, general managers or coaches, and no hard cap on what you can sell a franchise for. There, the market is allowed to dictate the price. But not with superstars, whose maximum prices are imposed at a level far below what the market would bear.
Are there reasons in favor of salary caps ? Sure. The idea is “competitive balance,” and it makes sense to some extent (even if the NBA doesn’t have much of that at the moment). Franchises don’t make the same amount in local revenues, and the best teams still need opponents. It’s the same argument that’s often dropped in favor of the draft, which is completely against the free market and something that wouldn’t be tolerated in most fields of work.
Funnily enough, though, having max contracts actually works against that competitive balance, as it allows for superteams. If you were actually allowed to pay James or Curry half your salary cap (which someone might well do in a true open market), you’d have to surround them with cheaper players rather than other stars, and teams could probably have one or two at most megastars. Of course, players can always take less to play where they want(which the Warriors’ Kevin Durant might do), but with no max contracts, they’d be taking a whole lot less.