The success of a team in the NBA is directly related to franchise executives’ money management with relation to juggling player contracts effectively. There are many contributing factors to a team’s success but the overall success of an NBA franchise generally comes down to how big the market is where the team is based. The problem is that not all teams are located in Los Angeles, New York, Boston or Chicago.
That’s one of the reasons why teams like the Memphis Grizzlies have had a difficult time. In Vancouver they weren’t making enough money and moved to Memphis where they must gain a following big enough to support the General Manager’s ability to bring in talented players. Memphis isn’t a big market though. That’s why expansion teams don’t just grow out of thin air and it is also why the NBA is worried about the financial market. NBA teams can’t just stop playing if they aren’t making enough money.
Getting Money
It’s also the reason why the Los Angeles Clippers moved to LA in 1984 and why they remain there. They might not be the most successful team because everybody will always love and support the Lakers but they seem to have been getting by these last 25 years. Though, they have only had 2 winning seasons since they moved (and one year at .500). It’s also why they must pay radio stations to broadcast their games.
So in order to remain competitive, the NBA has certain rules and limitations as far as building a team goes. These rules prevent teams such as the Lakers, Celtics, Bulls, and Knicks from winning titles every year. They are effective enough so that we don’t have a team like the New York Yankees in the NBA however, they are not perfect by any means. So lets go over the main rules, the salary cap and the luxury tax.
The Salary Cap
Salary Cap
The salary cap is a rule in the NBA that limits a team’s ability to make trades. The cap is set each year to a specific amount and is determined by taking the projected Basketball Related Income and subtracting projected benefits and include how far off they were from the previous year then divide by the number of teams that hit the cap, not including expansion teams, and whirl it all in a blender until David Stern is happy. The first day after the July Moratorium they release the data to the public.
There are two types of salary caps. The NBA has a soft salary cap which means that they are allowed to go over the cap. In a hard tax, a team simply would not be able to pay it’s players anything above the salary cap. All sales final. Because the NBA has a soft cap, certain rules and limitations are made and are designed to prohibit teams from going too far over the salary cap.
If a team would like to make a player trade with another team and is under the salary cap there are no limitations. If a team is above the salary cap, the player’s or players’ salary they acquire in return must not exceed 125% + $100,000 more than the players they are giving up. This prohibits a team from trading a draft pick for Michael Jordan. There are plenty of other exciting rules such as the Larry Bird Exception, Early-Bird Exception, Mid-Level Exception and plenty of others you are most likely very excited to read about but I will not get into them now.
The Luxury Tax
The NBA Luxury Tax is a way to penalize a team already over the salary cap and attempt to prohibit them from going any further over the cap. The Luxury Tax is determined by taking 61% of the projected Basketball Related Incoming and subtracting projected benefits and then they adjust for how much they screwed up by in the previous year and then divide by the number of teams, excluding expansion teams in their first two years, and then shake that with ice (not stirred) and pour themselves a nice tall glass of bankroll.
Any team that goes over the luxury tax must pay the league 100% of the amount they go over. This means that for every dollar they go over the luxury tax, they must pay a dollar to the league.
Money Management in the NBA
Money Management - Bankroll
This is the key to the success of an NBA franchise. Since the goal (of many teams) is to win a championship each team will make an attempt to acquire the best players. Since a team isn’t just able to go out and sign all the best players because of the league limitations such as the luxury tax and the salary cap, a teams money management and ability to juggle player contracts is critical.
Building a successful franchise in the NBA involves a combination of All-Star players, Role Players, Rookies and the Bench. Each type of player is critical and should be acquired thoughtfully.
All Stars
The All Stars you have on your team are some of the most critical and should be chosen carefully. These are the players you use to build your team around. Unfortunately, not all of these players teams build around are going to pan out as originally intended.
Unfortunately, some of them are going to put up good numbers but lack in other areas such as leadership. Zach Randolph is one such player. He will get 20 and 10 on any given night and is probably one of the best players to have on your fantasy team but he’s not exactly a good player to build your team around. The Blazers, Knicks, and Clippers all found that out pretty quickly.
If you are a team in a smaller market, the All Star player on your team is very important. Since you will not likely be very capable of going very far over the salary cap and want to avoid the luxury tax like the plague, this player must be very efficient. Unfortunately for Memphis, Zach Randolph isn’t going to be helping them win a championship any time soon.
Rookies and Sophomores
Rookie Motivational
The rookies are not just important for the future of the team. Rookies are important because if you can draft a good enough rookie, you can get a solid role player for cheaper than if you paid an NBA Veteran. Since rookie contracts are often limited, rarely will you ever have to pay much. Not only does this provide you a player that can effectively play a role in your team, but this gives a team more room to acquire talent. Fortunately, rookie contracts are dirt cheap. Many teams have players they don’t even play and earn nearly as much as your rookie or sophomore.
Furthermore, if your team is lucky enough to draft a franchise player, not only will they play a vital role in the future of your franchise, but they will be able to impact your team right away and for cheap.
Role Players
These guys are critical. Not only will they play a major part of your starting line up, but they need to be acquired with much thought and care. It’s easy to look at a player and say he’s talented.
The role players on your team must be able to execute their given role with efficiency. If you have a role player that’s a shooting guard, they must be able to efficiently drain a 3 or pass the ball to somebody that can score. If your role player’s job is to defend like Bruce Bowen, they must be an absolute pest to anybody around them. If they are going to do the dirty work down low, they must be able to grab rebounds that weren’t just given to them because of a lucky bounce. They should also be able to block shots and defend as well score if needed.
The point of these players though is to do a certain job and do it well. There are plenty of types of role players and there are plenty of overlooked and underlooked role players as well.
Market Size
The size of the market the team is in help determine the success of the franchise especially in troubled economic times.
Small Market Teams
small market teams still have dancers with big market talent
These teams usually have a harder time building a successful franchise because of their limited budget. Unfortunately, this hurts their overall ability for success.
If a player like LeBron James is a free agent and has a chance to play for the Memphis Grizzlies or the New York Knicks and the Knicks are offering a contract that would pay him slightly less, my guess is that he would still go to the Knicks. Not only because the market is huge but because smaller market teams have less of an ability to surround that player with talented role players or even another star.
Small market teams have a very difficult task ahead of them and as a business, they must run excruciatingly efficient. Not only is it difficult to convince free agents to sign with their team, especially if they are franchise players, they must realize their impact by the market is much greater than other teams. Much of the time, as is the case with the Grizzlies, they must settle for obtaining a player that puts up good numbers that don’t always translate into a win.
Until these teams are capable of gaining enough fan support and enough financial success to go over the salary cap and dare I say luxury tax, they won’t be able to achieve success in the long term.
Big Market Teams
Shaq helping the Lakers win yet another title
These are the teams with a lot of money and history of success. The Lakers and Celtics own half of all NBA Championships.
Not only is that because those two teams have a history for hiring great coaches and players, they have a ridiculous amount of fan support. These teams will always make money and know that if they have a successful team they will be financially successful.
This is probably what gained the interest of Robert Sarver (owner of the Phoenix Suns). The Phoenix Suns are often called the most successful franchise without a championship. Phoenix is a huge city surrounded by smaller cities that comprise of what is referred to as the valley.
The Phoenix franchise will always have a group of loyal supporters and Sarver knows that as long as the team can remain under the luxury tax and win enough games, he will effectively be running a successful business. Though, often criticized, he may not be giving his team the best chance at winning a championship. Steve Nash once criticized Sarver’s methods saying that he doesn’t allow the team to be as successful as it could be but he understands why he runs the team as he does.
Overall
While many would not consider the current method the best at providing a level playing field, it’s certainly better than other professional American sports such as Major League Baseball. Sure, there could be improvements and changes to allow for smaller market teams to gain success but the National Basketball Association is a business and is ran as such.
If every team in the NBA truly had an equal opportunity for success, the fans would drop because their team wouldn’t be able to compete year after year. The business aspect of allowing a team’s market the ability to determine the overall success of their franchise, believe it or not, makes the most money and draws the most fans. In a perfect world, that would not be the case.
NBA is a Business
Related posts:
- David Stern Says Luxury Tax Will Remain
- New Salary Cap Set to $57.7 Million and Tax Level Set at $69.92 Million
- Houston Rockets Save Money With Yao Ming on Disabled List, Sign Trevor Ariza
- Madison Square Garden Renovations – More Time and Money Needed
- Cleveland Cavaliers Anderson Varejao Declines Player Option
