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gotoHcarolina52
01-25-2013, 04:57 AM
LeBron James is arguably the best player in the NBA. His salary is $17.5 million a year. He's worth much, much more.

"He's getting hosed," says Kevin Grier, an economist from the University of Oklahoma.

LeBron used to play for the Cleveland Cavaliers. When he left, the value of the team fell by tens of millions of dollars — and the value of his new team, the Miami Heat, rose by tens of millions. The economists I talked to said LeBron should be making closer to $40 million a year.

James is profoundly underpaid because there is nothing resembling a free market for NBA players. And, weirdly, this is good for LeBron. (It's also good for weaker players, and for team owners.)

There's a "salary cap" in the NBA, which limits the total amount each team can pay in salaries. This reduces the amount top players make, and boosts the salaries of mediocre players.

On top of that, the NBA draft means that rookies have to play for whatever team drafts them (or not play in the NBA at all). And there's a limit on what rookies can be paid.

Imagine if other fields were set up this way. You're the best young software engineer at MIT, and instead of getting hired for an insane starting salary by Google, you just put your name in a pool with other engineers. The worst companies in America draw random numbers and you get a letter saying you've been hired to work in the IT department at Best Buy.

Now all these rules are all laid out in the collective bargaining agreement between the owners and the players. Why would the players want this system? Because most players are not LeBron James.

"The union votes on the contract by majority rule," Grier says. "The guy in the middle is the crucial voter."

The salary cap means that some of the money that would otherwise go to LeBron goes to the guy in the middle.

Another reason LeBron's teammates vote to hose him: They want the league to be competitive.

The salary cap makes it impossible for rich teams to hire all the superstars. That means even teams in smaller markets have a shot at greatness, which draws more fans to support those teams. More fans means more revenue for the league as a whole — and that means bigger paychecks for the players.

And this, Grier says, is why Lebron James has a reason to support the system. Playing in a more competitive league helps him make more money in other ways.

"If he was a three-time Olympic decathlon champion, he would in no way be making nearly the amount of endorsement money that he's making," Grier says.

To earn those tens of millions of endorsement dollars, Lebron needs passionate fans of professional basketball. For that to happen, Lebron needs good teams to play against, even if it's costing him over $20 million a year.
http://www.npr.org/blogs/money/2013/01/25/170176590/at-17-5-million-a-year-lebron-james-is-underpaid

The endorsement angle is interesting. According to Forbes, for instance, baseball's "ten top-earning players will make nearly $250 million total during 2012 from salaries and endorsements. On-field pay makes up 90% of the pie." [Source (http://www.forbes.com/pictures/mli45hifm/baseballs-highest-paid-players/#gallerycontent)].

But is the difference in sources of compensation between baseball players and basketball players really that closely linked to their respective sports's divergent approaches to salary cap/revenue sharing? In other words, is basketball's parity (or apparent parity) and baseball's lack thereof really what's driving this? Would the lack of a cap hurt players more than it would hurt owners?

LakersIn5
01-25-2013, 05:07 AM
i agree. nba should have no salary cap and have free market. so players can play with the players they want and to play for the franchise they want without having to worry about salary restrictions. FREEDOM

gotoHcarolina52
01-25-2013, 05:12 AM
i agree. nba should have no salary cap and have free market. so players can play with the players they want and to play for the franchise they want without having to worry about salary restrictions. FREEDOM

Ironically, the salary cap system has in many ways facilitated the formation of super teams. Remove the cap and install a pure free market or quasi-free market (e.g., remove the cap on individual player salaries but leave the punitive team luxury tax thresholds in place) and I doubt Micky Arison (or any other owner) would be able/willing to afford a team of LeBron, Wade, Bosh, etc. (absent, of course, substantial financial sacrifices by the players).

canzano55
01-25-2013, 05:13 AM
As a Raptors fan I'd obviously be for a free market system with no cap. I'm tired of these small market teams getting lucky all the time especially when I pay a fortune for tickets and they pay the 'soft' prices.

ztilzer31
01-25-2013, 05:44 AM
Salary cap needs to say. Every league should run like the NFL.

Sssmush
01-25-2013, 06:55 AM
Lebron is clearly underpaid. That is a paradox not easily explainable.

Anyway you slice it, Lebron is giving 2x to 3x the value to the league than he gets back. It's true he does need the league, but in a less safe league where foolish owners could go busto and where some teams were more dominant, Lebron would likely be even MORE valuable, not less.

tmacsc2
01-25-2013, 07:21 AM
Obviously he is underpaid, just for the fact of how much money he brings in with fans loving him and companies trying to market him.

A lot of CEOs are "underpaid" its the way of business. Because if someone really loved their job and cares about what they do and try everything in their power to improve that business and then succeed that person will always be underpaid.

LakersIn5
01-25-2013, 07:32 AM
Salary cap needs to say. Every league should run like the NFL.

no. stars wont be able to team up with many stars

chrism8188
01-25-2013, 08:01 AM
he knows hes underpaid, i thought everyone knew he took less money so him bosh and wade could play together??? besides he makes millions in endorsements.

Kashmir13579
01-25-2013, 08:28 AM
Ironically, the salary cap system has in many ways facilitated the formation of super teams. Remove the cap and install a pure free market or quasi-free market (e.g., remove the cap on individual player salaries but leave the punitive team luxury tax thresholds in place) and I doubt Micky Arison (or any other owner) would be able/willing to afford a team of LeBron, Wade, Bosh, etc. (absent, of course, substantial financial sacrifices by the players).
ya right

JiffyMix88
01-25-2013, 08:46 AM
yeah ok lets have more inflation on player salaries

ATX
01-25-2013, 11:28 AM
he knows hes underpaid, i thought everyone knew he took less money so him bosh and wade could play together??? besides he makes millions in endorsements.

Did you read the article or any of what the economist said? We're talking about way more than a relatively small pay cut to make room for other signings. Regardless of the pay cut he accepted, he is worth considerably more to his team/owner and league than he's getting paid. Kevin Grier (The economist) featured on NPR, argues his market value is closer to 40 million rather than the 17.5 million he curently makes.

chicagocubsfan
01-25-2013, 11:35 AM
Including endorsements, LeBron makes $57.6 million a year. So I think he'll be OK.

Deception
01-25-2013, 11:47 AM
Including endorsements, LeBron makes $57.6 million a year. So I think he'll be OK.

Poor guy, I wonder how he's going to feed his family with that?

Sly Guy
01-25-2013, 11:56 AM
Salary cap needs to say. Every league should run like the NFL.

yep, no cap means you've got the lakers/knicks finals every year.

Pierzynski4Prez
01-25-2013, 12:01 PM
If Lebron feels he's underpaid (I know this is just the writer's opinion), maybe he should find another career then, or go play in Europe.

conway429
01-25-2013, 12:03 PM
Economist sort of contradicts himself... he's "getting hosed" by making less money, but getting less money via salary actually means he makes more money in the end. So the system is working for him, not "hosing" him.

While I agree he definitely generates a huge amount of revenue, far more than his salary reflects, that doesn't mean everything. There's plenty of players who essentially bring in zero revenue themselves, and they deserve more than a $0 salary. (ie Aaron Gray on the Raptors)

Generating more money for a company than your salary just makes you a particularly valuable employee, which I would say LeBron definitely is.

MILLERHIGHLIFE
01-25-2013, 12:37 PM
Ironically, the salary cap system has in many ways facilitated the formation of super teams. Remove the cap and install a pure free market or quasi-free market (e.g., remove the cap on individual player salaries but leave the punitive team luxury tax thresholds in place) and I doubt Micky Arison (or any other owner) would be able/willing to afford a team of LeBron, Wade, Bosh, etc. (absent, of course, substantial financial sacrifices by the players).

Miami wont keep big 3 to much longer. Repeat offenders will be hit hard with new luxury tax rules. Reason why a smaller market like the Grizzlies trying to get under the cap. Reason they did the Leuer trade earlier in the week to shed some salary. Even if Howard stays with Lakers and get a huge deal. They will be repeat offenders as well next season. Even though they have that huge cable deal.

Shmontaine
01-25-2013, 12:58 PM
it's called life... most employees in America who generate revenue for their companies could be considered "underpaid".. the fact is, as with everyone in America, he agreed to do a job (or play a game) for a specific amount of money... he's being paid exactly what he should be paid..

Chill_Will_24
01-25-2013, 01:24 PM
Ironically, the salary cap system has in many ways facilitated the formation of super teams. Remove the cap and install a pure free market or quasi-free market (e.g., remove the cap on individual player salaries but leave the punitive team luxury tax thresholds in place) and I doubt Micky Arison (or any other owner) would be able/willing to afford a team of LeBron, Wade, Bosh, etc. (absent, of course, substantial financial sacrifices by the players).

Mikhail Prokhorov laughs at your presumption

Raps08-09 Champ
01-25-2013, 01:31 PM
You need a hard cap.

ghettosean
01-25-2013, 02:08 PM
I feel really bad for Lebron since he makes the amount of money in 1 year that most would dream of making in there entire lives :facepalm:

GTFO with this ****!

WestCoastSportz
01-25-2013, 02:10 PM
The NBA has to implement a hard cap like the NFL. This would level the playing field considerably. No more stars teaming up to win championships like the Celtics, Heat or Lakers. The Spurs are one of the better teams in the league while being 12th in payroll at $70M. The Thunder are at $69M. Put a $70M hard cap with no luxury tax. That is more than enough for a team to put together a great team and the talent from the teams like the Lakers, Knicks and Heat would get filtered down to the 20 win teams with low salaries to even out the playing field. I'm sick of watching a team like the Heat blowing out a team like the Suns. Closer games will draw more tv time, ratings and excitement for fans.

jaydubb
01-25-2013, 02:21 PM
I make about 40k each year... :)

I feel bad for Lebron... :(

sixer04fan
01-25-2013, 02:32 PM
Yeah... Poor Lebron. He's not making nearly enough money.

abe_froman
01-25-2013, 02:33 PM
yeah ok lets have more inflation on player salaries
better the players have it than owners hording it

sep11ie
01-25-2013, 02:36 PM
Really, he should be getting paid more?

Also it's dumb to compare the NBA to an I.T. guy. Somebody is trying to get attention.

koberulesall
01-25-2013, 02:43 PM
dont worry the heat will still win the title the league is fixed and set up for them to thats all you should know who cares what they make

JiffyMix88
01-25-2013, 02:51 PM
better the players have it than owners hording it

Hording what they invested their millions of dollars in, in hopes of a profit? lol yeah ok

abe_froman
01-25-2013, 02:53 PM
Hording what they invested their millions of dollars in, in hopes of a profit? lol yeah ok
they're making a huge profit on investment,something that wouldnt exist without the players.nobody shows up to watch an old white guy sit in a chair

Shmontaine
01-25-2013, 03:20 PM
the lockout is over.

gasp, owners of companies are making money while their employees make money!! someone call the police..

shep33
01-25-2013, 03:32 PM
Good thing economists are trying to help those in need during these rough economic times.

desertlakeshow
01-25-2013, 03:33 PM
Salary cap has made football unwatchable.

It will do the same for NBA, the only teams that will be able to afford to go over the salary tax cap and thrive will be the teams that the new CBA was supposed to hurt the most.

I am sure that The thunder would still like to have James Harden on their team, but the CBA and the looming tax burden scared them away.

It will end up hurting the small market teams the most.

gotoHcarolina52
01-25-2013, 03:54 PM
Mikhail Prokhorov laughs at your presumption

~$40M for LeBron
~$35M for Dwight Howard
~$25M for Deron Williams
Round out the team with average salary players (~$5M per for 10 players = $50M)
------------------------------------------------------------
Payroll subtotal = ~$150M

The luxury tax threshold is set at $75M, which means this hypothetical team would be $75M above the tax threshold.

Tax penalty breakdown:
$1.50M for every million for the first $5M = $7.5M
$1.75M for every million for the next $5M = $8.75M
$2.50M for every million for the next $5M = $12.5M
$3.25M for every million for the next $5M = $16.25M
$3.75M for every million for the next $5M = $18.75M
$4.25M for every million for the next $5M = $21.25M
$4.75M for every million for the next $5M = $23.75M
$5.25M for every million for the next $5M = $26.25M
$5.75M for every million for the next $5M = $28.75M
$6.25M for every million for the next $5M = $31.25M
$6.75M for every million for the next $5M = $33.75M
$7.25M for every million for the next $5M = $36.25M
$7.75M for every million for the next $5M = $38.75M
$8.25M for every million for the next $5M = $41.25M
$8.75M for every million for the next $5M = $43.75M
------------------------------------------------------------
Total tax bill for year 1 = $388.75M

Total team payroll in year 1 ($150M payroll + $388.75M tax) = $538.75M

When the repeater tax kicks in in year two, their tax bill--even assuming salaries remain constant--would be ~$464M, so their total payroll would be ~$614M

That tax bill laughs at Mikhail Prokhorov's wallet.

Hawkeye15
01-25-2013, 04:41 PM
i agree. nba should have no salary cap and have free market. so players can play with the players they want and to play for the franchise they want without having to worry about salary restrictions. FREEDOM

if we did that, there would be 5 teams left in a few years. No thanks.

kozelkid
01-25-2013, 04:52 PM
Leave it to PSD to turn a nice discussion into bitter squalling about Lebron making bank.

This isn't a question of whether athletes deserve the money they make, which they do given how many of yall STILL pay big money to watch them play and for their products.

Regardless, I've been saying this for awhile: guys like Lebron, Durant, etc are vastly underpaid and it's a BIG reason why people mistakenly label the next tier of players "overpaid" (see: Chandler, Iguodala) when in reality, the superstars are underpaid leaving a very poor discrepancy in salary between the two groups relative to overall impact.

Shmontaine
01-25-2013, 05:12 PM
Leave it to PSD to turn a nice discussion into bitter squalling about Lebron making bank.

This isn't a question of whether athletes deserve the money they make, which they do given how many of yall STILL pay big money to watch them play and for their products.

Regardless, I've been saying this for awhile: guys like Lebron, Durant, etc are vastly underpaid and it's a BIG reason why people mistakenly label the next tier of players "overpaid" (see: Chandler, Iguodala) when in reality, the superstars are underpaid leaving a very poor discrepancy in salary between the two groups relative to overall impact.

Are you saying that second tier group of players is only overpaid by comparison?? because i would say that no matter how much money the best of the best make, those guys are still way overpaid...

kozelkid
01-25-2013, 05:13 PM
Are you saying that second tier group of players is only overpaid by comparison?? because i would say that no matter how much money the best of the best make, those guys are still way overpaid...

In terms of relativity. If we had no max contract, less people would complain about the likes of Iggy, Smith or Chandler as overpaid. The max contract keeps from there being a proper proportionality of salary relative to overall impact.

Again, people are bringing up the whole philosophical aspect of whether athletes actually give to society the same intrinsic value as doctors, teachers, policemen, etc. That to me is irrelevant here and probably the same goes for the economist(s) who calculated Lebron's true value. I'm speaking purely from a free-market/business standpoint.

Sssmush
01-25-2013, 05:33 PM
Economist sort of contradicts himself... he's "getting hosed" by making less money, but getting less money via salary actually means he makes more money in the end. So the system is working for him, not "hosing" him.


This is exactly the point that the economist shoots down. Because people are saying or have said that, "ok, he makes LESS money, but because the CBA is beneficial for the league overall, and because of endorsement money, he actually makes MORE, not less."

But nobody is able to connect the dots and demonstrate that this is true, or why it should be true. As the economist points out, he plainly makes LESS, period, end of story. If he made $20M more a year in salary that wouldn't hurt his endorsements, nor would it hurt the league.

If we assume that the owners in the NBA aren't insane or stupid, then we can also assume that whatever Lebron would get paid would be roughly what he's worth; that is, what the market is willing to pay for him. That should essentially match is value to the individual team, in terms of TV revenue, ticket sales, merchandise, prestige, playoff revenue, etc. Lebron's value to the league as a whole is something different, which he can't be compensated for; it's fair to say though that he is immensely more valuable than the average player to the league, but that is just the good fortune of the league.

kubernetes
01-25-2013, 06:20 PM
Leave it to PSD to turn a nice discussion into bitter squalling about Lebron making bank.

This isn't a question of whether athletes deserve the money they make, which they do given how many of yall STILL pay big money to watch them play and for their products.

Regardless, I've been saying this for awhile: guys like Lebron, Durant, etc are vastly underpaid and it's a BIG reason why people mistakenly label the next tier of players "overpaid" (see: Chandler, Iguodala) when in reality, the superstars are underpaid leaving a very poor discrepancy in salary between the two groups relative to overall impact.

This.

It's pretty sad that a discussion about economic value turns into a self-pitying envy-fest. ("LeBron already makes so much and I don't make crap! Screw him!")

The talent differential between a superstar and an average roster spot is something you see in every company. For instance, it's accepted wisdom in software engineering that a superstar megabrain can do in a week what ten of his lesser colleagues would take months to accomplish. But even that superstar needs all those lesser engineers around him to make his work valuable and viable.

Everymanalion
01-25-2013, 10:59 PM
He ADMITTED he took a cut so MIA could sign the big 3. WTF? simple

ghettosean
01-26-2013, 12:29 AM
He ADMITTED he took a cut so MIA could sign the big 3. WTF? simple

This pretty much sums it up!

Leave it to PSD to have a guy give the correct answer in one sentence ;)

OceanSpray
01-26-2013, 01:09 AM
Underpaid? Yes. 40 million? No.

texanmonstra011
01-26-2013, 02:28 AM
Underpaid? Yes. 40 million? No.

consider the endorsements and all the other stuff

OceanSpray
01-26-2013, 02:31 AM
consider the endorsements and all the other stuff

No player in sports history is worth $40,000,000 a year to play for a team.

STL Don
01-26-2013, 02:40 AM
I meant to click reply with quote.

STL Don
01-26-2013, 02:42 AM
If Lebron feels he's underpaid (I know this is just the writer's opinion), maybe he should find another career then, or go play in Europe.

And what career may that be? Cuz Europe sure as hell ain't paying him anything close to the dollars we're talking about.

VicTheWizard
01-26-2013, 06:41 PM
Of course it's the Lakers fans who don't want a salary cap

Quinnsanity
01-26-2013, 10:01 PM
I keep saying this, there should be a hard cap and no individual max. That way if LeBron wanted to get paid what he was really worth he could, but his team would suffer.

Sixerlover
01-26-2013, 10:57 PM
the lockout is over.

gasp, owners of companies are making money while their employees make money!! someone call the police..

:laugh2: Same thing I thought at first.. Ummm, this is life. The numbers are inflated in the NBA, but the same basic principles apply as they do at Goldman Sachs, or Ford, or Burger King.