5 Reasons why 2010 is more important than 2011
? It's not all about this free-agent class. All we've been hearing about is the importance of the coming summer, when LeBron James, Dwyane Wade, Chris Bosh and Joe Johnson will be on the market.
But a more ominous date is 2011, as owners and players look ahead to a new collective bargaining agreement that will take effect in 2011-12. Four team executives have told me they're anticipating a hard cap on payrolls, which will clamp down on player salaries and prevent big franchises like the Lakers, Knicks and Celtics from outspending teams from smaller markets.
A hard cap would transform the way teams are assembled. Look at the Lakers, whose payroll of $91.4 million has vaulted them a league-leading $33.7 million above the cap. Try this perspective: If the soft-cap system of today was instantly replaced by a hard cap, the Lakers would no longer be able to afford the salaries of Pau Gasol and Andrew Bynum, who are their second- and third-most-expensive players with current salaries of $16.5 million and $12.5 million, respectively. And even their disposal wouldn't be enough: The Lakers would need to slash another $4.8 million to climb under the hard cap. (Goodbye, Luke Walton.)
If, in fact, a hard cap is installed after next season, then it will likely be preceded by a transitional system over a short number of years that will enable contenders like the Lakers to keep the likes of Gasol and Bynum without destroying their roster. After all, it would be self-defeating for the NBA to instantly deconstruct the most popular -- and expensive -- payrolls. Maybe some kind of amnesty will enable a few salaries to be grandfathered in until those preexisting contracts expire.
No one knows for sure what kind of system will result from extended negotiations and a potential lockout of the players in July 2011. Some believe (as you'll see below) that the players will avoid a hard cap, or that other more creative solutions will be applied. But let me repeat this much: I asked executives from four teams what they think they'll be dealing with after next season, and all four predicted a hard cap.
"I really think worst case it will be a hard cap that gets phased in over three years," a GM said.
By "worst case," he's implying that the players shouldn't hope for anything better than a three-year transition. Another senior executive predicts an even more draconian transformation, especially if a failure of negotiations results in a lockout. "Our players don't save money," he said, and so he predicts that a few months without income will force the players to cave in and accept the owners' demands, including an instantaneous reduction in salaries similar to the harsh transformation of the NHL, which was able to get its players to concede to a 24 percent pay cut following the season-long lockout of 2004-05.
"If there's going to be a lockout," he said, "then there's a 99 percent chance there is going to be a hard cap."
? The conversion is already beginning. GMs have been outspoken about the impact of declining league revenues, which have shrunk the salary cap and left teams like the Knicks with less room under the cap to offer free agents such as James or Wade this summer.
But that's only part of the story. As owners look ahead to the new realities of 2011-12, many may no longer be willing to use their cap space on free agents this summer. A contract that appears reasonable today may turn out to be an albatross in the new era of a hard cap.
"Teams might say, 'I don't want to give $15 million to $20 million to one guy because that might lock me out of a hard cap,' " a team executive said. "It could change everything."
James and Wade will get everything they want this summer, because each is clearly an elite player capable of leading a team to the championship. Bosh and Johnson (who are viewed on a level just below James and Wade) are likely to receive max, or near-max, contracts.
But what about the next tier of free agents, which includes Amar'e Stoudemire, Carlos Boozer and Rudy Gay? If you're a team owner who views a hard cap in 2011 as your salvation, are you going to risk an eight-figure salary on a player who isn't likely to carry your team to the championship? If a hard cap is the new reality, then everyone in the league will be taking a new view of player salaries.
"I want to be careful about calling this collusion, because that's illegal," said agent David Bauman, who represents Ron Artest and other players. "But I do think it's being strongly suggested to teams that they should not give out long-term deals because the next CBA is going to look drastically different.''
A prominent example is offered by the case of Jermaine O'Neal, who, in 2003, signed a seven-year, $127 million contract to remain with the Pacers. At that time, the 6-foot-11 O'Neal was a 25-year-old who had played in two All-Star Games and had averaged 20.8 points, 10.3 rebounds and 2.3 blocks in 2002-03. Signing him to that contract was a no-brainer at the time.
But then a new collective bargaining agreement was negotiated, and the economics changed. Now you look at O'Neal's salary -- $23 million in the final season of that contract -- and you wonder what the Pacers were thinking, especially since injuries have robbed him of his big statistical numbers.
If a team signs a player to a five-year contract this summer, four of those years will be paid under the rules of a new CBA starting in 2011-12. That's why owners will be taking the new realities into consideration as they make offers.
Predicted one GM: "In the new deal, $8 million is going to be star-player money."
? We'll see the first influences of the new reality at the trading deadline. While some teams will stay away from making long-term player investments in these uncertain times, other owners will try to exploit it. "There are still two titles to be won [before 2011-12], and certain teams will throw caution to the wind to win them," a team executive said. "If you're the Celtics, are you going to worry about your future? What you're probably going to focus on is the here and now."
That's why the Celtics made a run last month at acquiring Kirk Hinrich, who has three years (including this season) and $26.5 million left on his contract, an outlandish amount for someone who would be Boston's third guard. But he would have resolved all of Boston's backcourt issues while extending its defense, and so the Celtics considered offering spare parts for Hinrich before the Bulls decided they needed a high-quality player or draft pick in the exchange.
Two contenders in particular can be expected to be aggressive while others are receding. "I see two guys who will play heavily in this market -- [Mavericks owner Mark] Cuban and [Cavaliers owner Dan] Gilbert," a GM said.
The Cavs face the possibility of losing LeBron to free agency this summer, which is why they are aggressively pursuing a trade for Wizards power forward Antawn Jamison, a complementary All-Star-level scorer and rebounder who would space the floor for Shaquille O'Neal and make Cleveland the prohibitive favorite in the East. A package of Zydrunas Ilgauskas' expiring contract, young power forward J.J. Hickson, draft picks and $3 million might get it done, but I'm told the Cavs have been reticent -- not so much because Jamison has $40 million over three years left, but more so because they don't want to lose Ilgauskas and his ability to match up with Pau Gasol in a potential NBA Finals against the Lakers.
As for Cuban, it goes without saying that he would approach the trade deadline as an opportunity to grow while other teams are cutting back.
The expiring contracts of Tracy McGrady, Stoudemire or even Bosh might be more valuable in the current market. If the underachieving Wizards are looking to slash payroll and start anew, then a simple move would be to package Jamison and Caron Butler to Houston for McGrady and other considerations -- which would provide the Rockets with two stars while netting Washington with $22.5 million in relief when McGrady's contract expires this summer.
With so many teams offering expiring deals or highly valuable players (like Jamison, Butler or Detroit's Richard Hamilton) who have multiple years on their contracts, it will be interesting to see if the Bulls will be forced to renew negotiations with Boston in order to unload Hinrich's money at the trade deadline.
? Other options. Agent Bill Duffy is among those who believes the NBA won't be able to install a hard cap in 2011-12. "I've heard all of that [speculation]," said Duffy, who represents Yao Ming, Steve Nash and other stars. "If the league tries to go too far with this, then my prediction is the union will disband. If the league is going to try to force a hard cap down the players' throat, then they'll disband the union and file antitrust [lawsuits] against the league."
There are a number of potential solutions to what ails the league. The most creative idea I've heard is to sign players to a percentage of revenues. Let's say not only that a hard cap is installed but also that players are signed not to an outright salary, but instead to a percentage of the team's cap figure.
For example: Instead of signing Stoudemire to $8 million per year, a team would pay him 15 percent of the hard cap each season. Because the cap is based on revenues, then Stoudemire and all other players would make money based on the league's success. I like this idea because the players would be encouraged to police themselves. And, more than ever, they would realize in a highly tangible way that when Gilbert Arenas brings guns into the locker room, he hurts all of them.
Paying each player a percentage of revenues would create a new partnership between NBA players and owners. But it will also be a very hard sell because players obviously won't want to surrender their current right to long-term contracts that are guaranteed, regardless of market conditions.
One GM hopes that the new CBA will do away with max contracts.
"If we do get to a hard cap, I want to get rid of all the stupid rules, like mid-level exceptions and max salaries," he said. "Say the new max is $12 million, which means some team is getting LeBron at $12 million when he is really worth $60 million to their franchise. All that will do is tilt the playing field toward losing more than ever."
In other words, a limit on max salaries will provide further incentive for teams to improve their lottery position in order to acquire a star like James.
"The only way to get a player like LeBron is to get a top-five pick, and the only way to get that kind of pick is by losing," the GM said. "The league is only going to increase the incentive to lose games if you're prevented from paying LeBron more than $10 to $12 million. It's too big of a competitive advantage to the teams that have a player like him."
? Buyouts. "This might be one of the greatest buyout seasons ever," another GM said. "Think about your savings: You have a $10 million player, and you save $800,000 by buying him out so he can go play for a contender. That $800,000 is going to mean a lot to teams these days, especially if you're paying a luxury tax on that guy."
All of this is very fluid, and when you put it together it becomes harder than ever for franchises to choose between trying to win now while planning for the future.
