You’re going to hear it a lot this summer. How did THIS player get paid THAT much money? But free agency, capitalism and the particular confluence of events make it an inevitability that compared to what we’re seeing from a salary standpoint in the past, there’s just a lot of people who are going to be making serious bank this summer. Don’t confuse “overpaid” with market value.
Awhile back, before the housing bubble popped, I started looking to buy a house. I was looking to move to the Glen Ellyn area of Chicago. Eventually, due to a career change I started looking in Texas at an area outside of Austin. Working from home, I was able to live in the middle of nowhere with no commute consequences. I ended up buying a three-bedroom, three-bath house with a den (from where I type now) and a third of an acre.
Suffice to say that the cost of the house in Texas was significantly less than I would’ve paid for similar accommodations in a nice Chicago suburb.
The point being, what a thing provides and what a thing costs aren’t constants. The player who provides the same things this year as last or four years ago isn’t going to cost the same because market value isn’t just dictated by “quality.”
As it pertains to this conversation there are two factors which come into play: supply and demand. Both of those things will have a big role in this summer’s free agency signing and increasing player contracts.
It’s called “capitalism” for a reason. For those who aren’t history buffs and don’t know, it was coined by Karl Marx and is derived from the Latin word kaput, which means head of cattle. Only instead of trading cattle, we’re now trading in dollars for goods and services — or capital. So the basis of all this is actually having capital to trade. How much “capitalism” there is depends on how much capital there is.
When there’s an influx of capital, that corresponds with an increase in demand. If people can buy more stuff, they will.
And that’s important because there’s about to be a whole bunch of capital injected into the NBA market because of the new television deal. How much money teams can spend is tied to “Basketball Related Income,” which is how much money the league as a whole makes. The NBA pays the players 44.74 percent of what it makes, minus projected player benefits.
Ergo, the more money the NBA makes the more money the players make. So when the CBA goes up by as much as $22 million next year, that’s going to be a lot of extra capital out there — about $660 million extra to spend. And bear in mind that’s not the total of free agency money that’ll be out there. It’s the extra money that’ll be out there.
And since there’s a salary floor now too, that means that teams will have to spend a certain amount of money, whether they want to or not. That injection of capital alone is going to force contracts to sky rocket.
The thing is, while the money to be spent has gone up, the number of players to spend it on is relativey stable. Spotrac lists 137 potential free agents this coming summer. Last year, there were 136 who signed new contracts (whether they stayed with their new team or left).
So, if all those 137 players signed new contracts and the teams spent the full extra $660 million available, that would be an average contract of $5 million more per player — not $5 million per player, but $5 million more.
Now granted, not every single team is actually going to have that much money, and not every team is going to spend every dime they can. But no matter how you slice it there’s going to be a whole heck of a lot of money spent.
And that’s specifically going to apply to certain positions that are even more in demand, even if they aren’t any more in supply. For instance, right now everyone wants a 3-and-D wing who can double as a stretch 4. It’s all the rage because Draymond Green and the Golden State Warriors are eating up the league.
The only thing is there aren’t a lot of Greens out there. There’s a Harrison Barnes and a Nicolas Batum. And there’s going to be multiple bidders on each of those guys and each is going to have a whole lot of money burning a hole in their pocket and wanting to outbid the other.
So when Barnes or Batum get paid deals starting at $20 million-plus, the world is going to freak out and say that they’re overpaid. But they were just paid market value because if someone else would’ve paid what you did pay, you didn’t overpay.
People are going to be looking at deals like that and comparing them to contracts like Jimmy Butler’s contract that he signed last summer starting at $15.2 million and they’re goig to wig out. But that’s like comparing the cost of my house in Elgin, Texas to a house in Glen Ellyn, Illinois.
What a player is and what a player is worth are two different things, and if you recognize that, it’ll help you understand why “overpaid” is largely a fictional understanding of how the NBA works.