Author Archives: lcoon

What is Motiejunas doing?

As reported by Yahoo! Sports, Donatas Motiejunas has refused to report to the Rockets for a physical exam.

Motiejunas is the Rockets’ restricted free agent. He signed an offer sheet with the Nets on December 2, which starts a 72-hour clock for the Rockets to match. If the Rockets match, they keep Motiejunas on the same principal terms as Brooklyn’s offer sheet. If the Rockets don’t match, the offer sheet becomes a contract with the Nets.

The Rockets chose to match on December 5, by issuing a First Refusal Exercise Notice. A team is allowed to condition its exercise of first refusal rights on the player passing a physical exam, and apparently the Rockets did just that. The player is required to report for his physical within two days, and must comply with the process.

However, Motiejunas and his agent, B.J. Armstrong, apparently have other ideas. As reported by Yahoo!, Motiejunas is refusing to report for his physical. And here’s where it gets weird:

I’m not entirely sure what “rights” Armstrong is referring to. The rules for restricted free agency are laid out pretty clearly in the CBA, and the players (collectively) agreed to those rules. Trying to get out of that arrangement goes against the spirit, intent and letter of restricted free agency, to which the players agreed.

Here’s the rule I’m referring to. I’m assuming that Houston’s qualifying offer was properly executed, Brooklyn’s offer sheet was properly executed, Houston’s first refusal exercise notice was properly executed, and that Houston conditioned its first refusal exercise notice on Motiejunas passing a physical:

(h) Any Team may condition its First Refusal Exercise Notice on the player reporting for and passing, in the sole discretion of the Team, a physical examination to be conducted by a physician designated by the Team within two (2) days from its exercise of the Right of First Refusal. In connection with the physical examination, the player must supply all information reasonably requested of him, provide complete and truthful answers to all questions posed to him, and submit to all examinations and tests requested of him. In the event the player does not pass the physical examination: (i) the ROFR Team may withdraw its First Refusal Exercise Notice within two (2) days following the date upon which such physical examination is conducted; and (ii) if the First Refusal Exercise Notice is withdrawn, the player and the New Team shall be deemed to have entered into a Player Contract in accordance with the provisions of Section 5(f) above. In the event the player does not submit to the requested physical examination within two (2) days of the exercise of the Right of First Refusal then, until such time as the player submits to the requested physical examination and is notified of the results, the ROFR Team’s conditional First Refusal Exercise Notice shall remain in effect, except that the ROFR Team may elect at any time to withdraw its First Refusal Exercise Notice, which shall have the effect of invalidating the Offer Sheet and causing the Team that issued the Offer Sheet to be prohibited from signing or acquiring the player for a period of one (1) year from the date the First Refusal Exercise Notice was withdrawn. If the player does not submit to the requested physical examination on or before March 1, the Offer Sheet shall be deemed invalid and the Team that issued the Offer Sheet shall be prohibited from signing or acquiring the player for a period of one (1) year from such March 1.

So, summarizing what the rule says:

  1. Houston is allowed to make its first refusal exercise notice contingent on Motiejunas passing a physical.
  2. The player must submit to and cooperate with his physical, which is to take place within two days of the exercise of the first refusal exercise notice.
  3. If Motiejunas doesn’t report for his physical, Houston’s first refusal exercise notice remains in effect until he does.
  4. However, Motiejunas’ refusal to submit for his physical gives the Rockets the option of withdrawing its first refusal exercise notice.
  5. If the Rockets withdraw its first refusal exercise notice, it invalidates Brooklyn’s offer sheet as well, and Motiejunas returns to restricted free agency.
  6. If the first refusal exercise notice is withdrawn, Brooklyn’s offer sheet is invalidated and Motiejunas returns to restricted free agency, Brooklyn can’t sign or acquire him for one year.

So the Rockets have two options at this point. First, they can just sit tight. Their first refusal exercise notice remains in effect until Motiejunas decides to report. He can’t sign or play anywhere else, including Brooklyn, in the meantime.

Second, the Rockets could withdraw its first refusal exercise notice, putting Motiejunas right back where he started — except Brooklyn is no longer an option. And if he doesn’t sign with the Rockets directly, or sign an offer sheet with another team in the meantime, then the Rockets can issue another qualifying offer to make him a restricted free agent in 2017.

And it could get worse for him. The CBA also says a player shall not receive credit for a year of service for any year in which he “…withholds playing services called for by a Player Contract or this Agreement for more than thirty (30) days after the Season begins.” It’s important to note here that the rules for restricted free agency say that when a team issues a first refusal exercise notice, the player and team “…shall be deemed to have entered into a Player Contract.” Motiejunas is, for all intents and purposes, under contract with the Rockets now, and the Rockets have all the rules related to player discipline for failure to report at their disposal (along with the right to kick him to the curb by withdrawing their first refusal exercise notice).

This all seems pretty clear to me, so I’m still not sure what “rights” Armstrong is referring to. Maybe his end game is to get the Rockets to withdraw its first refusal exercise notice, and then Armstrong and the Rockets negotiate a separate contract that is more favorable to Motiejunas. But why should the Rockets let a player leverage them into signing a different contract that’s less favorable to the team, when the team holds all the cards here?

Armstrong isn’t exercising a right. He’s trying to strong-arm a team.


Basketball Insiders Podcast with Eric Pincus, November 20, 2016

These graphics are for my podcast with Eric Pincus for November 20, 2016. You can find the podcast itself HERE. In one segment, we were talking about Eric’s recent article looking at the league’s current financial landscape. You can find this article HERE. In it, Eric looked at player salaries as a percentage of the total team payroll (i.e., a $25 million salary has a much different effect on, say, Cleveland’s books than Philly’s), and he broke out the money that went to each team’s healthy starters.

Before the podcast I did some quick visualizations of a couple different factors. During the podcast I brought these up and went through them. Here they are, in the order in which we talked about them. All data (including team winning percentages) is current as of today, November 20.

Visualization 1: Team Salary vs. winning percentage (size & color indicates average age). This is the baseline — does spending more money on players equate to more wins? This shows that it does (the trend line slopes upward) although there is a lot of variance (lots of teams outside the one-standard-deviation band). Teams above the band can be described as getting more bang for the buck (eg: Golden State, LA Clippers), while teams below the band aren’t getting their money’s worth (eg: Dallas, Washington). Cleveland and Brooklyn, despite being on opposite ends of the spectrum, and none the less consistent in that both teams are getting what they are paying for.


Visualization 2: Average Age vs. winning percentage (color & size indicates team salary). How much of a team’s success is simply a matter of the age of the team? Should we expect a team of older veterans to out-perform a team of young players? Here the team’s average age is on the X axis, and wins remains on the Y axis. Note the similarity between this visualization and the previous one. Even the slope of the trend line is about the same.


Visualization 3: Percentage of team salary to starters vs. average age of team (size & color indicates winning percentage). Here’s where we start to look at Eric’s premise. The first thing I wanted to figure out was whether the percentage of payroll that goes to starters is simply a factor of age — i.e., would you expect a lower percentage from a younger team (because more players are on rookie scale contracts), and a higher percentage from an older team (because they’re off their rookie contracts, they have higher maximums, etc.)? And sure enough, the trend is that the older the team is, the higher the percentage that goes to the starters. And look at where all the best teams are — Golden State, San Antonio, Cleveland and the LA Clippers are all around that 65-75 percent range.


Visualization 4: Percentage of team salary to starters vs. winning percentage (size & color indicates average age). How does the percentage of payroll that goes to starters compare to team success? Again, there’s a positive trend here, and despite a few outliers, the correlation is pretty strong — as teams pay a higher percentage to their starters, they win more. Note that we can’t confuse correlation with causation — we can’t say that teams win more BECAUSE they pay a higher percentage to their starters. But it does show the effect we were looking at — you find all the best teams in that sweet spot around 65-75 percent. The Warriors, Spurs, Cavs and Clippers are all clustered pretty closely together in this chart.

So what does it mean to be on the right-hand side of this chart? It isn’t that you’re paying your players more — remember, this is the PERCENTAGE of your total payroll. Philly (lowest payroll in the league) would still be on the far right of the graph if 80 percent of its payroll went to its starters. Rather, the effect seems to be that as teams mature and pick up top, veteran players (players who are off their rookie deals), those players (whose salaries are at or near the maximum) tend to drive the payroll. Remember, basketball is driven by the top of the roster, not by the average or the bottom (for those interested, there’s an interesting podcast from Malcolm Gladwell examining this phenomenon, which you can find HERE (this particular podcast episode is mostly about university philanthropy). Given that successful NBA teams typically have the best players (not just a lot of good players, or a few very good players, but one or two of the best players), the effect of these players on the team’s roster, coupled with the supporting casts needed to make their teams winners, tend to gravitate toward a 70-30 distribution of starter salaries to overall payroll.


Anyway, I did this entire thing, from having the idea to entering the data to completing the visualizations to throwing them up into this blog, in about 45 minutes before we recorded, so apologies if I missed any other interesting things to look at.

Feedback on Sports Business Classroom

I just returned from leading Sports Business Classroom at the NBA Summer League in Las Vegas, followed by a quick trip to see my brother, followed by some long-awaited time with my own family. I’m now doing some SBC follow-up. Here’s some feedback we received on Twitter from both speakers and students:

The Adam Silver experience at Sports Business Classroom

img_5045For the past week I’ve been at the Las Vegas Summer League, running a program called Sports Business Classroom. This is a six-day experience for people who are interested in learning what they need in order to find jobs in sports. We broke the curriculum into “GE” (everyone gets a little bit of everything), and “Major” (deep dive for people interested in a specific subject) content. The majors this year are the Salary Cap; Broadcast; Social & Branding; and Scouting, Video & Analytics. I developed & taught the Salary Cap curriculum, in addition to serving as General Manager for the full program.

The guest list was impressive, if I do say so myself, including Scott Brooks, Rob Pelinka, Adrian Wojnarowski, Mike D’Antoni, Masai Ujiri, Kirk Goldsberry, Rick Carlisle, Daryl Morey, and literally dozens of other industry pros. We had analytics pros teaching analytics, scouts teaching scouting, broadcasters teaching broadcasting, etc.

The Salary Cap GE content literally was called “Salary Cap 101,” through “Salary Cap 401.” The 401 class was an interactive exercise where I put the students to work rather than lecturing to them or having them listen to panels. I broke the students into groups, assigned each group an NBA team, and gave each an expert to help them (Bobby Marks, Aaron Barzilai, Nate Duncan, Danny Leroux, Eric Pincus, Steve Kyler, and Dan Woike, who was there covering SBC for the OC Register and whom I immersed into the program by pressing him into service).

Each group had to analyze their team (strengths & weaknesses, where they are on the competitive cycle, the implications of their market size, etc.), develop a goal (go for it, gather assets, tear it all down, etc.), and give me a plan — a set of moves to achieve their goal — that had to make sense from a cap, financial and basketball standpoint.

I was hoping they would start to get competitive while doing this, and sure enough that’s exactly what happened. Trade discussions broke out between teams, and they really drove hard for the upper hand in any deal. When we had to cut it off at the end of our allotted time (which I dubbed the “trade deadline”), I told them all how awesome it was, and how they did exactly what I was hoping they’d do. I asked Bobby Marks to compare it to what they actually did in team from offices, and he told the class, “This was better.”

I told then, “I promise you, the next time I talk to Adam Silver, I’m going to tell him about this session and what you did here. I’m going to tell him that he’s missing a golden opportunity by not running the real trade deadline this way,” which got an expected laugh.

Cut to about 5:00 that evening. Due to scheduling, my class was now gathered in a different meeting room, right inside the tunnel from the Thomas & Mack floor. Our next presenter was Daryl Morey, delivering “Analytics 201” (Kirk Goldsberrry had delivered Analytics 101). We were waiting for Daryl, because the Rockets had a game that was ending in the Cox Pavilion. I strolled out into the arena to see if I could at least eyeball him coming….and Adam Silver was right there, off to my left.

The Commissioner was talking to someone else, I went over and waited for him to finish. Mike Bass, the league’s Executive Vice President of Communications, came over and greeted me. I pointed in the direction of my classroom, and said, “Mike, I have a room full of students right on the other side of that wall. Any chance I could get Adam for a few minutes?” He said, “Absolutely.” There were a few things Adam had to do first, but he’d be along right afterward. Just then Summer League founder Warren LeGarie walked by. I waived Warren over and told him what had just happened, and ten seconds later Warren literally had Adam walking with me to address my class. (I gestured an “I’m sorry” to Mike for breaking protocol, and he just smiled & nodded that he understood.)

So I’m now walking Adam down the corridor to my classroom, and on the way there I’m telling him about the 401 session that morning, how my students did, and that he was missing a golden opportunity by not running the real trade deadline that way.

I finished right as we reached the door, walked in, and said to my students, “WHAT DID I PROMISE YOU THIS MORNING? SAY HELLO TO ADAM SILVER!” Jaws dropped and they let out a collective gasp. Our brilliant staffer Nicki ran out to the arena to grab every photographer she could find, as Adam addressed my group for a good 10 minutes, then took several questions. When he was done, Daryl (who had arrived by the time Adam & I walked in) finished setting up and then delivered a great presentation on basketball analytics. Just another day at Sports Business Classroom.

The serendipity of all this was amazing. I’ve seen Adam in the arena exactly one time this week, and it was at the exact moment I needed him, standing right where he was accessible to me, and right as Warren was also walking by to help expedite getting him there. My students originally were supposed to be in a different room, but the original room was needed for a different function, and we had to move downstairs — right by the court. And I was only out there looking for Daryl because his game was running late.

I was serious when I said I’d tell Adam about the class the next time I talked to him. I just didn’t imagine I’d be able to fulfill that promise on the very same day.

So what did Adam say to Sports Business Classroom? That’s for my students to know.

Combatant Gentlemen

CG 08.19.2015-263I’m proud to say I’m partnering with Combatant Gentlemen, a men’s clothing brand located in Irvine, CA.

As many of you know, my day job is at UC Irvine. I first found out about Combatant Gentlemen through the campus’ daily “UCI in the News” newsletter. The founder of the company is a UCI grad, and had just been featured in Entrepreneur Magazine.

I checked them out, and their story — and business model — is pretty cool. They own their entire supply chain — all the way from their own sheep in Italy to the point of shipping out their finished product, including designing their own supply chain software. By controlling the entire supply chain, reducing their margins and selling online, they are able to offer great quality clothing at fantastic prices. Their suits start at $140. Dress shirts start at $30. Dress slacks $25. Ties $16. They also sell chinos, shorts, coats and accessories, all at similar outstanding value — everything from tuxedos to travel bags.

They also offer fully custom, made-to-measure suits. You go to their headquarters in Irvine (conveniently, just a couple miles from my office), and get to choose among a couple dozen features — the fabric (from at least 50 choices), cut, buttons, pockets, etc., etc. They spend about an hour measuring you up and working through all the options, and then send everything off. About five or six weeks later, your custom suit arrives. At that point you come in for a second fitting, and they’ll change anything that needs to be adjusted. In my case, everything was perfect. Prices for these fully custom suits start at $350. Compare anything they offer to what Nordstrom’s would set you back for similar or lower quality items.CG Label

So how did I get mixed up with these guys?

I started out as a customer. I bought some stuff from their web site, liked it a lot, and reached out. As it turns out, they’re NBA fans, knew who I was, and were interested in increasing their awareness and working on new content. They know their typical customer is a huge sports and NBA fan — and I happen to know something about the NBA.

They publish a magazine — both print and online — called Unhemmed, and are featuring me in their Fall edition. I went in for a long interview with Scott Wicken, their Head of Creative Content, and then did a photo shoot in their studio — it was a really cool experience, although repeated attempts at spinning a basketball on my fingertip were met with nothing but dismal failure. In addition to the magazine feature, I’ll be using my own visibility to help spread the word, and we’ll be doing more stuff together in the future.

I’m really excited to be working with Combatant Gentlemen — I was already a customer, I totally believe in what they’re doing and how they’re doing it, and I’m really impressed with everyone I met there. I’m sure you’ll feel the same way.

When is an agreement not an agreement?

As Marc Stein wrote today,the Clippers are trying to convince DeAndre Jordan to change his mind about signing with Dallas, and instead return to Los Angeles. Can they do that?

The answer is yes, because the league is in a dilemma here. They want to have their cake and eat it too.

Normally, verbal agreements get applied to the cap. So, for example, when the Spurs and Kawhi Leonard verbally agreed to a max contract, the dollars from that max contract should have gone on the team’s cap — and as a result, they wouldn’t have room to sign LaMarcus Aldridge.

But the CBA makes clear that but for a few exceptions (like signing first round draft picks), there shall be no agreements, written or verbal, during the July Moratorium. This is how the league gets away with not applying Leonard’s salary to the Spurs’ cap — there’s no agreement in place, and therefore nothing on which to base a cap change.

Free agent agreements made during the moratorium are ephemeral — they’re ghosts, illusions — agreements that aren’t really agreements.

Thus the dilemma — if there’s no agreement, then what is a player like Jordan from reneging if he changes his mind?


The league likes to treat agreements made during the moratorium like they’re commitments, but they’re not. In other words, the league wants to have their cake and eat it too — there’s no agreement in place, but you can’t back out of this non-agreement either.

So if Jordan ends up returning to the Clippers, it will have interesting consequences. The July Moratorium will become more of a free-for-all. You think you have a player locked-up, but he’s not really yours until after the moratorium ends, and you have what can officially be termed a verbal agreement. Or better yet, pen to paper. It will become par for the course for teams to try to poach players after they’ve decided to go elsewhere.

“On prospect of DJ back to Clippers, triggering other deals to change, “This could [F] up the whole league” – off record NBA exec,” tweeted Eric Pincus.

I wouldn’t quite go that far, even though I agree that the assumption of security in agreements that aren’t really agreements will be shattered.

Can the Lakers snag LaMarcus Aldridge AND DeAndre Jordan?

UPDATE: This is version 2 of this post, revised to fix some problems with the first version and the omission of the sign & trade scenario (thanks Eric Pincus).

I’ve gotten several questions about whether the Lakers could clear enough cap room to sign both LaMarcus Aldridge and DeAndre Jordan. Assuming neither is willing to compromise on his salary for 2015-16, I don’t see how that is realistic.

Just to use round numbers. here is what the Lakers roster will look like after July 1:

Player Salary Notes
Tarik Black $0.8M Non-guaranteed
Jabari Brown $0.8M Non-guaranteed
Kobe Bryant $25.0M No-trade clause
Jordan Clarkson $0.9M Non-guaranteed
Ryan Kelly $1.7M
Julius Randle $3.1M
Robert Sacre $1.0M Non-guaranteed
Nick Young $5.2M
D’Angelo Russell $4.3M Cap hold for draft rights
Larry Nance Jr. $1.0M Cap hold for draft rights

I’m not including any of the Lakers’ pending free agents — Carlos Boozer, Jeremy Lin, etc. Let’s assume they wave goodbye to every free agent in order to maximize their cap room (which is not to say they wouldn’t be able to re-sign any of them later — they just wouldn’t have Bird rights, and would instead have to re-sign them with any remaining cap room or an exception).

I’m going to assume that Bryant, Clarkson, Randle and Russell are their core — the rest are fungible (including Larry Nance, Jr.). Those guys add up to $33.3 million (in Russell’s case, I’m counting his cap hold. He’s eligible for 20 percent above this amount, but he would not be signed until after the Lakers have done their free agent shopping.

For the sake of argument, let’s also assume the Lakers are able to unload every other salary — Black, Brown, Kelly, Sacre and Young — through trade (with no salary coming back) or through releasing non-guaranteed contracts. This is the extreme case where they cull away everyone who isn’t a part of their core.

With only four players on the roster, we have to account for eight empty spaces with cap holds of approximately $0.5 million each — or $4.0 million total. That brings our total to about $37.3 million.

The cap is expected to be around $67.1 million next season, which leaves us with about $29.8 million in cap room.

Jordan and Aldridge will both have starting salaries of around $18.8 million. We can fit one easily. But once we sign one of them, that brings our total to $55.6 million (one of the cap holds goes away), and reduces our cap room to about $11.5 million.

That’s about $7.3 million away from signing another player who will command an $18.8 million starting salary. I already think we’re at the minimum roster the Lakers would have, and even if they dump everyone else but Kobe, they’re still short.

Even if the roster consists of just Kobe and no one else, the Lakers could not afford both Jordan and Aldridge at their market value.

So if the Lakers want to sign both Jordan and Aldridge, they need to do one of the following:

SCENARIO 1: Get rid of Kobe. They can’t trade him unless he agrees, because of his no-trade clause. They could waive him and stretch his salary, however. The cap hit for this season would reduce to about $8.3 million, clearing about $16.2 million off their cap. This would give them enough cap room to sign both Aldridge and Jordan, and they’d even be able to hang onto Black, Brown, Kelly, Sacre and Young, and still have room to spare.

SCENARIO 2: Convince either Jordan, or Aldridge, or both to take less money. This scenario probably isn’t very likely — not when several teams will be competing for both players’ services.

SCENARIO 3: Sign-and-trade. If the Lakers kept some of their free agents, they potentially could sign Jordan with their cap room, and then compile enough salary (about $13.8 million) to instrument a sign-and-trade with the Blazers for Aldridge.

Here’s how something like that might work:

1. The Lakers keep all their players under contract, and do not waive anyone.

2. The Lakers could also keep their draft rights to Nance, and their Bird rights to Wes Johnson (Early-Bird), and Ronnie Price (non-Bird). They’d have 13 players spoken for (including Russell & Nance), so no additional cap holds. Their total would be about $47.6 million. (Since Ed Davis is asking for a pretty hefty salary, retaining his Bird rights would likely be of no benefit. They could also choose to hang onto the rights to Wayne Ellington rather than Ronnie Price.)

3. The Lakers would then sign DeAndre Jordan for $18.8 million, bringing their total to $66.4 million ($700,000 under the cap).

4. The Blazers then sign-and-trade LaMarcus Aldridge to the Lakers for a package that has at least $13.8 million going out. One such package might be Julius Randle (probably necessary in order for the Blazers to bite), Nick Young, Ryan Kelly, Tarik Black, and Wes Johnson, who is signed for close to the average salary as an Early-Bird free agent in a sign-and trade. Since this would trigger the base year compensation rule, Johnson’s salary would count only 50 percent in the trade. The teams could also choose to negotiate whether to include the rights to Nance and/or future draft considerations and/or cash.

So in summary, the Lakers would be signing Jordan using cap room, and trading for Aldridge as a cap team and ensuring the trade conforms to the league’s salary matching requirements.

Also a pretty unlikely scenario, but a possible one.

So while it’s possible for the Lakers (perhaps with the Blazers’ cooperation) to construct a deal that brings both Jordan and Aldridge to the Lakers, the few possible scenarios are all pretty unlikely.

Perhaps one or both decide they’re okay with signing for a lower salary for one year, knowing they’ll be able to cash in next summer when the cap increases substantially. Or perhaps if Aldridge indicates a clear preference for signing with the Lakers, the Blazers will be more amenable to discussing sign-and-trade possibilities.

But in any event, I wouldn’t consider any of these scenarios to be likely.





Some thoughts on the Sterling situation

I spend a fair amount of time around the Clippers. I’m friends with their president Andy Roeser, I know their GM Gary Sacks, I work with their excellent PR staff, I’ve talked to Doc and many of the players. I eat dinner with some of their game operations people when I’m there, and I even watched the last NBA draft at their practice facility. I attend a fair number of their games (not as many as I’d like, due to my personal schedule) — about the same number as Laker games.

I’ve also been around Donald Sterling, although I don’t know him personally. He was frequently in the Staples Center media room. In fact, I think you can tell a lot about the difference between the two LA franchises by observing the goings-on in the media room. For the Lakers, many of the front office and PR people are in there, but I rarely if ever have seen someone with the Buss surname. The Clippers are a different story — many of us in the media have nicknamed the media room “Club Sterling” on Clippers game nights.

It’s a whole different vibe in there when Donald Sterling is around, and I don’t mean that in a good way. Fortunately, it looks like that era has drawn to a close. I only hope that all of the good people I know in the Clippers organization can resume focusing on business without having to worry about Donald Sterling’s residual stink.

I was thrilled to see Adam Silver unload on Sterling with both barrels. The lifetime ban and $2.5 million fine were the harshest penalties over which he had discretion, and I’m sure the Board of Governors will support Silver’s recommendation to force Sterling to sell the team. I’m sure there will be a couple dissenters — Mark Cuban already commented that it was a slippery slope, but I’ll remind Mark that “slippery slope” is the name of a logical fallacy. This is an extraordinary circumstance, and I don’t think we’re opening the door to future owners being outed for arbitrary reasons. In the end, I think the Board will vote to force Sterling to sell.

But I don’t expect Sterling to go away quietly. He can drag his feet. He can sue the league to stop the proceedings — he can probably drag this on for a long time. And the longer this drags on, the longer this stink continues to hang over the team and the league. For that reason, I think the league will try to throw money at the problem — to try to find a price at which Sterling would be willing to sell and walk away.

What will that price be? The most recent Forbes valuation listed the Clippers at $575 million, but that valuation, while only a few months old, now seems hopelessly out of date. The Milwaukee Bucks — the lowest-valued team in the league — are selling for $550 million (although the price is being artificially inflated by including some of the arena costs in the purchase price) so the bar is now set even higher. The league will also want to avoid any potential claim on Sterling’s part that he is being forced to sell the team at below its value.

What will Sterling demand in return for selling the team without a fight? It’ll be at least a billion dollars. I only hope that someone like the Guggenheim Partners (which own the Dodgers and include Magic Johnson) is willing to step up with an offer Sterling will accept. Let that stick in your craw — after all this, it’s Sterling who will walk away with an enormous financial windfall.

I have one complaint with what Silver said at the news conference. When asked to compare the current situation with earlier ones involving Sterling, Silver pointed out that Sterling prevailed in the Elgin Baylor suit, and that the federal issue was settled without an admission of guilt. Therefore, the league had nothing to go on (I’m paraphrasing here).

That’s a little bit misleading. The league doesn’t have a guilty verdict in the current situation either. Instead, they conducted their own fact-finding investigation this week. Why didn’t they do that previously? The stories about Sterling go back decades. He was no different last month, last year, or 30 years ago. They knew who he was back then. Yet players and coaches signed with the team, companies sponsored the team, the media covered the team, fans bought tickets for the team, and the league continued to endorse the team. Continued to endorse Sterling. And everyone who knew what kind of person Sterling is now has some of his stink on them, because everyone continued to look the other way.

Hopefully there won’t be a next time for situations like this. That said, if it ever does happen again, then hopefully the league has learned its lesson, and won’t let a situation like this continue to fester.

New cap, tax and lockout projections

The NBA issued new projections for the 2014-15 and 2015-16 salary cap and luxury tax thresholds. The 2014-15 salary cap is now projected to be $63.2 million and the tax level is projected to be $77.0 million. The numbers for 2015-16 are now projected to be $66.5 million and $81.0 million, respectively.

Note that these are only updated projections. The official numbers won’t come out until July, when the league conducts its audit. The cap and tax thresholds are based on revenues for the current season. When they count all the beans in July (that’s what the July Moratorium is for) they also project the revenues for the upcoming year. They then take 44.74% of that projected amount, subtract projected benefits (a little over $200 million) and divide by 30 (the number of teams in the league) to get the cap. The luxury tax uses a similar formula, but is based on 53.51% of projected revenues.

Both the cap and tax values can be adjusted from the above amounts. See Question 13 of my FAQ for full details on how the salary cap is set, and Question 21 for the luxury tax.

The salary cap and luxury tax values for the current season are $58.679 million and $71.748 million, respectively, which means the new cap projection for next season represents a 7.7% increase over this season. This is a pretty big jump — the league’s baseline assumption for year-to-year increases is 4.5%. It would indicate a projected BRI (Basketball Related Income, i.e., revenues) of about $4.75 billion for next season.

Remember that the players are guaranteed a percentage of the money that comes in. The guarantee is 50% of forecasted revenues (the forecasts were made in 2011), plus or minus 60.5% of the amount by which the actual revenues exceed (or fall short of) their original forecast, with hard limits of 49% and 51% of the actual revenues.

The original revenue forecast for 2014-15 was $4.66 billion, so with an actual revenue of $4.75 billion, the players would get 60.5% of the difference, or $54.45 million, on top of their 50% guarantee ($2,33 billion), for a total of about $2.384 billion. The hard limits (49% and 51% of actual revenues) would be $2.327 billion and $2.422 billion, so we’re fine — the players collectively would be guaranteed about $2.384 billion, which is about $79.4 million per team in salaries and benefits, or about $72 million per team in salaries alone.

Also noteworthy is that the projections themselves have increased over the course of this season. Last July the cap projection for 2014-15 was $62.5 million, which itself would have represented a 6.5% increase over this season. At the All-Star break the league revised its projection to $62.9 million, which would have represented a 7.19% increase over this season. And now they’re projecting a 7.7% increase, which indicates that not only is the league making a lot of money, it’s coming in even faster than they anticipated.

What’s the source of all this new money? I don’t have a firm answer on that one yet, but new local TV deals have kicked-in in several markets, and the Nets’ move to Brooklyn and the Barclays Center also have a lot to do with it.

What does all this have to do with another lockout? The current CBA extends through the 2020-21 season, but both sides have an opt-out in 2016-17 — which means either side can unilaterally decide at that time to end the agreement and re-open negotiations for a new one. The timing of the opt-out is not an accident — it’s set for right after the new national TV deals will be negotiated.

Let’s go back to the previous negotiation — the league opted-out of the last agreement because they felt the system was unsustainable. They said that most teams were losing money, and they couldn’t let things continue as they were. They sought a big give-back from the players, a more restrictive system, harsher penalties for high-spending teams (further keeping salaries down), and much greater revenue sharing. This led to a lockout and canceled games. In the end, the owners received most of the concessions they sought, because, frankly, the owners always win in situations like these. The owners were willing (or at least bluffing that they were willing) to cancel the season entirely rather than play another year under the existing system, and the players couldn’t afford for that to happen.

So what’s going to happen in 2017? The circumstances are entirely different now. Most or all teams are now profitable, thanks to the changes they negotiated in the new agreement, Franchise values have skyrocketed (the Milwaukee Bucks, the least valuable team in the league, is about to sell for around $550 million, which Mark Cuban calls “a bargain”). And on top of that, the league is about to receive a windfall of new cash in the next TV deal.

So it’s no longer a matter of ceasing operations because they can’t afford to play another season under the existing system — now it’s a matter of figuring out how to split the pie equitably so they can all keep the money rolling in.

My prediction is that the players will opt-out of the agreement in 2017 because they will feel they gave back in 2011, the system is now fixed, there’s a lot of new money rolling in, the teams are now making money hand over fist, and they will want to regain some of their previous concessions as well as receive their fair share of the new money. Further, the league will be more obliged to give it to them.

So I expect the players to opt-out in 2017, and for the league to impose a lockout on July 1, 2017 (because they can’t do business without an agreement in place), However, negotiations will be quick and smooth (similar to 2005), and there will be a new CBA in place in time for the 2017-18 season to begin on time.


A quick update on Kobe’s extension and the Lakers’ cap space

Today the Lakers announced that they have extended Kobe Bryant for two seasons. Terms were not announced, but Ramona Shelburne reported that he will make $23.5 million and $25 million, respectively.

[UPDATE: I have since confirmed that the salary figures are exactly $23.5 million and $25 million. He continues to have an accelerated pay schedule, no incentives, and his contract is fully guaranteed for lack of skill, injury or illness, death, or mental disability.]

Two years is the longest extension he could have signed due to the Over-36 rule. This rule takes effect when a contract is for more than three seasons and ends after the player’s 36th birthday, effectively mooting the salary in the later seasons. For extensions they always count the remaining seasons on the current contract — so Kobe now effectively has a three-year contract, which is the maximum allowed before running into the Over-36 rule. See Question number 56 of my FAQ for more information on this rule.

So where does this leave the team with respect to the 2014 free agent market? The players on the team’s books next summer are as follows:

Player Salary Note
Kobe Bryant $23,500,000
Elias Harris $816,482 Non-guaranteed
Steve Nash $9,701,000
Robert Sacre $915,243
Nick Young $1,227,985 Player option

The salary cap next summer is projected to be $62.9 million. The Lakers will also have their own first round draft pick. Based on their current record, this pick would fall around #15, and would therefore count around $1.5 million against their cap.This would give them a total of about $37.66 million for six players. We need to add another six cap holds totaling $3,04 million, which brings the total to about $40,70 million.

With this team salary, the Lakers would have about $22.2 million in cap room next summer. This will be enough for one maximum-salary player — for example, Carmelo Anthony is eligible to receive up to $22,458,401. While this is slightly above the Lakers’ maximum, there are other things the team can do to create more cap room if Anthony doesn’t want to take slightly less than the amount for which he ls eligible.

The team can save a small amount if it waives Elias Harris’ non-guaranteed salary. A larger savings will come if they waive Steve Nash and utilize the Stretch provision on him. If this happens, only $3.23 million of Nash’s full $9.7 million salary will remain on their books.

If they remove both Harris and Nash, their team salary will drop to about $34.44 million, which would give them about $28.46 million in cap room. This would give them the opportunity to sign one maximum-salary player, and a second player at around the mid-level amount. They would also be eligible to utilize the Room Mid-Level exception for around $2.7 million.

However, this assumes they let all of their free agents walk, including Pau Gasol, Steve Blake, Jordan Farmar, Xavier Henry, Jordan Hill, Chris Kaman, and Jodie Meeks. If the wish to retain any of these players, they will remain on the team’s cap — in fact, Gasol’s cap hold alone will eat up most of the team’s cap room. To free up the potential cap room, these players will have to either:

a) Re-sign with the Lakers, in which case their new salary will count against the team’s cap, which will reduce their cap room for signing free agents.

b) Sign elsewhere, in which case they will be lost.

c) Be renounced by the Lakers, in which case the team loses the ability to sign them using Bird rights.

Let’s say the Lakers really wanted to keep Gasol.While he’s an unrenounced free agent he would count about $20.25 million against the team’s cap, reducing their cap room to about $8.75 million. If he re-signs and takes a one-third discount (similar to what Kobe took) he’d receive about $13 million, which would drop the team’s cap room to about $16 million. If they renounce him they can reclaim the entire $28+ million, but then he’d have to be willing to sign for whatever cap space remains after the team signs other free agents.

So if the Lakers are going to follow-through with their 2014 plan, keeping Gasol would likely require him to take a steep discount.