Monthly Archives: July 2016

Change the cap rules to let teams keep aging stars

The Dwyane Wade Era is coming to an end in Miami, as Wade heads off to the Chicago Bulls for a 2-year, $47 million deal.  The most Miami was willing to offer was $40 million, after starting with an offer of $10 million, an offer that’s insulting in a world where role players and backups are getting multi-year deals worth more than that.

Many observers argued that Miami owed Wade, not merely as payback for his stellar play and the multiple championships he helped bring them over the years, but for all the salary sacrifices he’s made over the years to put the Heat in a position to win.  In 2010, Wade took less than the max so the Heat could add Lebron James and Chris Bosh. Then, at the end of the 2014 season, he opted out of the remaining 2 years of his contract, worth nearly $42 million, to give the Heat the cap space to re-sign LeBron James.  Famously, James bolted to Cleveland, and Wade ended up losing about $11 million, re-signing with the heat for $31.1 million.   In a great article entitled Pat Riley knew exactly what he was doing in letting Dwyane Wade leave the Heat, Tom Ziller argues that the reason the Heat first offered Wade an insulting $10 million a year and drew the line at $20 million a year for two years when Wade went out and got other offers, was that Riles didn’t want to soak up that much cap space in the twilight of Wade’s career.  He didn’t want Wade’s contract with the Heat to become the albatross that Kobe’s last contract with the Lakers became.  At the time Kobe got his, many commentators said it was important for the Lakers to show loyalty if they wanted to be able to attract other greats.  That loyalty may have earned them a meeting with LaMarcus Aldridge during his free agency last year, but it wasn’t enough to get them even that, never mind a signing, with Kevin Durant during his free agency this year.

Meanwhile, stars like Tim Duncan and Dirk Nowitzki are lauded for repeatedly taking less than they could get on the open market so their teams could add pieces around them to let them be competitive in the last years of their career.  Their team owners and fans get the benefit, while the stars pay the price.  Of course there is much talk that these stars will make it back via big cushy contracts with the teams after they retire, but such quid pro quo is illegal under the existing rules, so it must stay in the realm of wink-wink understandings.  Nonetheless, teams do seek to cultivate the reputation that they take care of those who were loyal to them during their playing career.

All of this is the result of a bad structure.  The collective bargaining agreement (CBA) protects owners from overspending for stars via a salary cap with steep fines for repeat violators of the cap, thereby protecting owners’ profits, at a cost to everyone else involved.  Given the structure, Riley’s decision not to reward Wade for all he’s done over the years makes perfect sense for the organization as a whole, even though it means a divorce with the face of the franchise and all that implies for the legion of fans who followed Wade throughout his illustrious career.  The alternative is the prospect of the misery that Lakers fans have endured the last few years, and will continue to endure for the foreseeable future.

It’s sad.  It sends the wrong messages about value and disposability.  It’s unnecessary.  And it could be easily fixed with the next CBA.

In order to fix it, all that needs to be done is to provide an exemption that would limit the cap hit for players who have been with their teams for some minimum number of years, say, 9 years or more.  Or maybe it’s an age limit, and only applies to guys over, say, 31 with 7 years of service.  Whatever.  The exact mechanics would take some careful thought to balance all the various interests, but it’s not rocket science.

For example, suppose the Heat could have signed Wade to a contract with at the existing max for the next three years of his career, but only, say, 70% of that would count against the cap this year.  If his max was around $25 million, then the cap hit to the team would be $17.5 million, or $2.5 million less than Miami’s final offer to Wade.  You could leave that same exemption in place each of the years of the contract, or it could increase as the player got older.

This would let teams keep their stars as they age.  It would improve continuity.  It would reward loyalty, and put an end to punishing guys who want to stay with the teams with whom they had their glory days.  It might even help teams keep their superstars earlier in their career, because players would know that that exemption would only be available to them at the end of their careers if they stayed with their existing team.  In fact, that lure might be the biggest lure of all for the owners to support the idea.  It could improve the chances that stars in the peak of their careers would do what Wade did, and take less to let the team pick up other players via trade or free agency.

Of course, there would be a downside potentially for stars who got traded early in their career, so there might need to be some tinkering.  For example, maybe a player who gets traded gets the same credit for years of service that a player who sticks with his team gets.  This might increase the odds of players agreeing to sign-and-trades rather than just walking in free agency, which would help teams reduce the threat of getting nothing for their stars when their contracts expire.  That would help with situations like Oklahoma City is facing now with Russell Westbrook.  KD’s leaving increases the chance that Westbrook might leave, and so OKC is having to look at whether to trade Westbrook now, while his contract still has some value, rather than having him leave next year for nothing.  And of course, KD might have worked with OKC this year to work out a sign-and-trade, for the same reason.  That would have put OKC in a better position to get something back of value.  Of course, the precise mechanics would be important, because you wouldn’t want a team to be able to prevent a player from going where he wanted by demanding too much of the receiving team in return.  Maybe the answer is that if the team the star is leaving rejects the sign-and-trade, then it costs the departing star two years before they are eligible for the exemption.  That would limit the loss and so wouldn’t choke off movement entirely.

Also, to keep these changes from keeping players trapped with the teams that hold their rights, maybe adjustments could be made that reduce the years of service requirement for players over a certain age who came to a team via free-agency.  There could easily be unintended consequences, so it would take some doing to get it just right, but the principle is clear.

So who pays the cost?  Who would object?  Well, on first blush it’s the owners.  This scheme “allows” owners to spend more money on players which, in a zero-sum world, means less money in their pockets.  And wasn’t the whole point of the last lockout and the CBA that resulted to let the owners keep more of the profit?  Well, there’s a counter argument which is that all these owners are incredibly wealthy – a number are billionaires – and if it’s a matter of allowing them to spend on the order of $8-10 million more per year to keep the faces of the franchise with the franchise, so be it.  That’s not going to break them.  And it might increase the value of the franchises themselves by amounts that dwarf that outlay.  After all, these teams are now worth billions.  And beyond that, the owners now get to pay their top stars less than an open labor market would bear for most of their careers, including their peak earning years.  So a provision that lets those stars get back some of that at the end of a storied career seems like the least a reasonable price to pay for that kind of labor constraint.

But the more important point is that it isn’t a zero-sum world.  The Lakers may have pancaked their future, but they made a lot of money off of the Kobe retirement tour.  They’ll keep selling Kobe jerseys for years to come. What’s the value of all the merchandise sales to fans that have followed their favorite players since childhood that ends when that player leaves.  How much money do you think Miami is going to lose in sales of Wade Heat jerseys – not just this year, but for years to come – never mind all the other effects the loss of him will have on fan interest and loyalty?  I don’t know, but I suspect it’s not a trivial amount.  There are other forms of value as well, such as the effects on continuity within the organization and the knowledge and experience vets can share with younger guys.  You keep guys around not as cast-offs or cut-rate former greats, but as honored old heads whose wisdom and experience is respected and, critically, compensated.  You don’t rely on under-the-table pseudo-agreements.  And you don’t make suckers of guys who exemplify values that we claim we hold in high regard.

I’m looking forward to seeing how Wade does in Chicago, but I would have loved to see him finish out his career with the Heat.  I’m glad Timmy and Dirk are sticking with the teams they spent their entire careers with, but I wish their owners, not they, were bearing the cost.

So let’s get this done.

Your thoughts?

 

 

Advertisements