Raising The Floor

Darius Soriano —  October 4, 2011

Competitive balance is the new buzzword of the lockout. It’s so important, it’s become a sticking point in the CBA negotiations. The owners want to limit team by team spending in order to preserve it. Whether through a hard cap or through a luxury tax system so punitive to curb spending, the thought is that if the highest spenders have a ceiling low enough to reduce league wide payrolls, competitive balance will be improved.

Thus the argument is laid out that if you simply put a system in place that makes teams like the Lakers, Mavericks, and Knicks spend less, the overall health of the league will improve.

But what of the teams that live at the other end of that spectrum? What of the teams that willfully spend as little as possible? Few people seem to discuss them very much when talking about the health of the league. At Sactown Royalty, Tom Ziller (in a larger – and very good - post about the correlation between spending and winning) makes the following point about teams that live near the spending floor in relation to teams that are willing to dish out more money on player contracts:

Teams that are rebuilding are going to mimic the Kings and spend as little as possible. Teams that can compete for the playoffs or a title will spend as much as they can. There will be teams spending as much as legally possible — to Hell with reasonable, look at how much Mark Cuban has spent over the past decade — and teams saving every dime in terms of future flexibility. There will be a substantial salary spread as large as is possible under salary floors and caps.

Under the recently expired CBA, the spending floor was 75% of the salary cap. This past season, the Kings actually found themselves below that threshhold and faced the prospect having to add players or pay the players they had more in order to get above the spending floor. The fact that the Kings reached such lows on the payroll level was a big story, especially within the context of their owners financial issues and the desire to move the team to Anaheim. But from a competitive balance standpoint, this story got little traction.

Tangent now to the NFL who in their most recent CBA agreement this past summer raised their salary floor to 90% of the salary cap. In past agreements that number was 84% but by raising it, they’ve essentially ensured that low spending teams will have to spend on par with every other franchise. Some of this was likely in response to the NFL’s uncapped year in which there was no spending floor and several teams greatly reduced spending, but I believe it’s more in response to claims that some teams habitually spend close to the mininum possible in order to maximize profits with little incentive to improve the team. (Note, this mindset doesn’t have to be limited to teams with little chance of winning. If you’re a contender that’s below the cap – as the Eagles and Patriots have historically been – you can still limit spending under the assumption that your team is good enough to win without further payroll commitments.)

Will the NBA take note? If competitive balance is going to be the canned phrase tossed around by ownership for the desire to harden the salary cap and limit spending, I hope they’re looking at the other end of the spectrum too.

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As an aside, I don’t believe spending more will necessarily lead to greater success on the court. Teams like the Lakers and Mavs don’t win more because they spend more, they win more because they’ve spent more on players that actually make a difference. The Isiah Thomas Knicks are the prime example of this. As I’ve said many times before, there are only a handful of truly great players that deserve max contracts yet many players have them; spending more isn’t always smart.

Not to mention some of the best players in the league, at least as of last season, were on their original rookie contracts that paid them pennies in comparison to their actual value. You think Kevin Durant and Derrick Rose are worth what they made last year? The presense of rookie scale deals and a cap on individual salaries means that market value will always be a relative term in compared to what players actually earn.

All that said, if spending – and it’s relationship to competitive balance – is going to take center stage in these negotiations I hope the other side of this story is reported as well. Because as teams cry poor and lament their inability to compete based solely on the fact that other teams spend through the roof, I’m hoping that the league recognizes that it can do something about that disparity in spending that has little to do with lowering the ceiling on the high payroll teams.

Darius Soriano

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15 responses to Raising The Floor

  1. How about we start calling out the owners of these low spending teams, Darius?

    At least on this blog, we have a fairly well founded reputation for intelligent comment and if knowledgeable bloggers were to add their information here we might make a difference.

    IMO this issue will not gain traction until we are able to name names and quote facts.

  2. Salary ceiling, higher salary floor, possibly some limits on guaranteed contracts, possibly contraction.

  3. The problem I have is we are starting out with a bogus premis. Competitive balance is and has always been bad for the NBA. To use the NFL model is great if you’re the NFL and bad if you are the NBA and vice versa. The league had a historically afluent season in 2011.

  4. 3) Aaron,
    What do you mean by “historically affluent”? Total income? Total net?

  5. 4)
    TV revenue, tv ratings, and attendance. So the age of the superteam is working and has worked in the 80′s and the Jordan Bulls. The last thing the NBA should do is aim for “competitive balance.”

  6. 6) If the league is structured in such a way that a number of teams are consistently losing money, then that structure will not survive long term.

    Not sure where you are getting your attendance figures; there was a slight increase from 2010 to 2011, but (according to the ESPN NBA site) 2006-9 all had higher total attendance than 2011.

  7. I’m not convinced teams are losing money, not if Franchise appreciation is included in the valuation, as it must be.

    I’ve also heard the League uses IRS depreciation formulas as part of their determination that teams are losing money. If true – that is total @#$%%^*#.

  8. A franchise like Sacramento Kings will never reach parity against the Lakers in revenues and profits until they learn from the Clippers. What do I mean by that? Well, the owner of Clipper has a strategy of staying in the game by being a perennial lottery pick team in July than extending its season in May. They make money by packaging games and becomes a rider than the main attraction. Hola, a consistent loser on the NBA standing but to Don Sterling, it’s a winning season as great promo with newspaper ad highlighting his successful season – for his other enterprises.

    My point here, don’t blame players’ high salaries or fans low patronage. NBA will never be able to solve these doldrums but the owner himself and his staff. This is his enterprise then make it work either by taking the low rider Clipper way (by being a tightwad) or playing high stakes (by competing with the high and mighty). If they can’t stand the heat of high money stakes, then sell the team to billionaires like Sterling, Cuban, Benet, Allen or to this Russian mafioso who are good in flipping fixer-upper teams.

  9. @10,

    Perfect like always, Edwin.

  10. it’s a club.

    rich men who can afford to lose money on their club every year and still be rich men are the kind who have such ball clubs, with a few exceptions like JB.

    these rich men pay for the honor of having these great athletes compete for the glory of their club.

    these men pretend that “it’s a business” to justify throwing money around or not throwing money around as they please. right now, they wish to pay the entertainment less. the entertainment is trying to resist that as much as possible.

    yes, it’s a business, but no it isn’t, because it’s a club, and clubs have other purposes besides raising money, even though fund raising is important. businesses are strictly involved with making money.

    we’ll all get whatever the guys in the club want to give us. all this talk involving figures and logic really doesn’t apply. it’s obvious, because if business sense were tpo be applied, it’s in the owners of the business’ best interest to get business flowing asap. if the owners are truly losing their shirts, they need to stop giving out big contracts to mediocre players. they need to stop giving stupid contracts to superstars. all they have to do is run their businesses more businesslike. if they are losing money, not playing games is losing money even further. how can you get ticket, merch, tv, radio and other endorsement money without games?

    owners, if you want profit sharing, that’s your business, go for it. you need to pay your players lavishly, because they’re bringing in a lot of revenue. you don’t have to pay them more than your pocketbooks can stand. unless you really want a championship…if you don’t care, you could have a team of perrenial losers like the Clippers, a team with an owner who has constantly been in court for not liking black people(what motivation for a basketball team), and still be profitable, because Mr. Sterling requires all of his holdings to be profitable. if he can do it, there’s no reason to feel bad for anyone else who’s unprofitable.

    players, the well is running dry. some of y’all will have to cut back. it’s not fair, but it’s his ball and if he doesn’t want to play you have to go home. that doesn’t mean that you should let him rape you just because you want to play and he’ll pay.

    what more is there? intelligent comments really can’t be made, because this isn’t a normal business.

  11. @#10 and your comment has absolutely nothing to do about competitive balance. No one is talking about the Kings having the same profit as the Lakers.

    Owners are saying they want profits for all, not necessarily the same profit.

  12. #13, what #10 is saying is that there’s no way to ensure that a poorly run franchise is profitable, and that whether a franchise is a winning or losing club has nothing to do with profits. the Clippers are the proof.

    i’ll add that the owner’s claims are bogus, but even still it’s in their rights to try to come up with a system where they pay less.

  13. 14 – No doubt its in their rights to do this, however ill advised it may be.

    And maybe its not ill advised at all.

    Sure smells bad, though.