Blog Entry

Hard cap could mean hard times for small markets

Posted on: July 4, 2011 12:05 pm
Edited on: July 5, 2011 9:37 am
Posted by Royce Young

NBA owners want a hard cap. It's probably one of the three biggest reasons we're stuck in a lockout right now. Owners want a hard cap, or at least one they're trying to disguise by calling it a "flex cap," and the union has basically said they will never, ever accept a hard cap.

And when the hard cap topic is brought up, people always wonder how a $55 million hard cap would affect a team like the Miami Heat. Between Dwyane Wade, LeBron James and Chris Bosh, those three soak up about $47 million on the Heat payroll. And that's just for 2011-12. In 2013-14, that number will be about $58 million, so even the suggested $62 million "flex cap" the league talked about would leave the Heat only $4 million to fill out their roster.

The super-together, we're-a-real-team Mavericks? Yeah, their total payroll added up to nearly $90 million last season, third highest in the league. That's about $30 million over the current salary cap but because it's a soft cap, it was fine. (Fine in the sense it didn't break any rules, but still, pretty outrageous.)

The feeling though with this hard-cap business is how much it'll affect teams like the Lakers, Heat, Bulls and Knicks. Now their greatest assets -- money and market -- don't mean as much because in a hard-cap system, signing multiple big contract stars just isn't an option. Victory for the small markets, right?

I'm not so sure about that.

I wonder about a team like the Oklahoma City Thunder, one of the smallest-market teams in the league. The feeling is that a hard cap would help smaller markets compete because talent would get distributed a bit more evenly throughout the league. With teams unable to pay a bunch of guys on the roster $15 million or go $30 million over the cap line, either players would have to take a serious pay cut or go somewhere else.

Except in the case of the Thunder, a straight hard cap would destroy them.

Kevin Durant just signed a five-year extension that will pay him around $16 million a year. Russell Westbrook, an All-Star point guard at the age of 22, is eligible for an extension and would probably have it if there weren't a lockout. He's probably a max player or close to it. So that would be another major mark on the cap for the Thunder. Then the other guys -- Serge Ibaka, James Harden, Eric Maynor -- are all eligible for extensions next summer.

If the league has a stiff cap of even $60 million, how can the Thunder dream of re-signing these guys and keeping the core intact?

Answer: They can't.

That has been Thunder GM Sam Presti's plan since Day 1, though. He wanted to draft a bunch of young guys and let them grow together. Let them progress, develop and become a team all together. And when they did, lock them all up long-term and have yourself a contender for the next decade. It has worked. The Thunder just went to the Western Conference finals with one of the youngest teams in the league and should be in the mix for at least the next five.

Unless of course they have to let a couple of their big pieces walk.

Last season the cap was set at $58.04 million and the Thunder were one of only five teams under that number. While a lot of smaller markets prefer not to bust into luxury tax territory, most likely OKC would be there after those key pieces were extended. So while they're under now, that probably wouldn't be the case in the future.

Reality is, a hard cap might have more of an affect on the little guys, which is who the league wants you to think it desperately wants to protect. But basically, with a hard salary cap system, building through the draft and letting a core grow together is no longer the way to go. Put together a roster with five good players that need extensions and you're out of room after three. Maybe you can get four, but how do you add another nine guys to fill out a 13-man roster?

What we might see is the Maverick Plan instituted as the way to win in the NBA. Now again, they totaled nearly $90 million, but I just mean the idea. Grab one star player and fill in the rest with a couple rookie-level contracts and a bunch of aging veterans willing to take $5 million or less. The Mavs had one star and everyone praised them for it. But in a hard-cap world, that might be best philosophy.

Because a team of Durant, Westbrook, Harden and Ibaka probably can't exist just as one of LeBron, Wade and Bosh can't. Doesn't exactly seem right, does it? The idea is a hard cap would help restore some competitive balance and the bigger markets wouldn't be able to just dwarf the small ones by going $30 million over the cap like the Mavericks did. The Thunder would never do that.

At the same time, while the playing field might be leveled in terms of payroll, it could come at the cost of breaking up the band and redefining how a small-market team must build.

Every team that's using the draft to build -- which is the sound and socially blessed way to structure a team -- would have to reconsider. The Cavaliers might've just committed 80 percent of their future cap to Kyrie Irving and Tristan Thompson if those two pan out. Same for the Jazz with Enes Kanter and Alec Burks. The future for those teams might be just enjoying the four years you get with them on their rookie contracts and then choose one to keep. I don't really think that's what the NBA has in mind, but that's going to be what happens. Small markets probably will take the brunt of a hard cap much harder than the big ones. Or at least the good small-market franchises that understand how to build.

Who knows what the NBA landscape will look like when the dust clears in this lockout mess. The players have taken a hard line on a hard cap and supposedly will refuse to back down. The owners though are committed in their efforts to get one. Yeah, it'll reduce salaries. Maybe the system will stay the same but just instead of Harden getting a $10 million-a-year extension, he would get $6 million. That's possible.

But this is the NBA and just because a new salary system is in place doesn't mean the league doesn't have impulsive general managers that are ready to snatch away a player like Harden and give him that $10 million a year simply because they know the Thunder can't go that high. That'll be the world teams operate in. One where the Thunder Way is no longer the blueprint for small-market building success.

Maybe the players have a point, huh?

Since: Aug 17, 2006
Posted on: July 12, 2011 11:33 am

Hard cap could mean hard times for small markets

This is a perfect example of someone taking an outlier and trying to use it as an example. Yes, the hard cap would hurt the Oklahoma City Thunder. That does not mean, in any way, shape or form, that a hard cap hurts small market teams in general. It wouldn't. It takes a billionaire owner or a large market for a team to go way over the cap now, and in a related story those are the teams that are the most successful. The well managed Thunder would have complications from a hard cap, but the fact that they have Sam Presti, one of the best gms in basketball, puts them at an advantage. In a hard cap league what matters is the skill of the front office rather than the size of the market. Take a look at the NFL.

Since: Sep 7, 2009
Posted on: July 10, 2011 4:12 am

Hard cap could mean hard times for small markets

Judging from the comments, most people (including professional sports commentators apparently) have a distorted view of who the big market and small market teams actually are. So, here are the Nielsen top 30 TV markets:

At the top of the heap, you have New York, then Los Angeles a distant 2nd, and Chicago a distant 3rd. Then Philadelphia, Dallas-Ft Worth, San Francisco-Oakland-San Jose, Boston, Atlanta, Washington DC, and Houston rounding out the top 10.

11-20: Detroit, Phoenix-Prescott, Tampa-St Pete, Seattle-Tacoma, Minneapolis-St Paul, Miami-Ft. Lauderdale, Cleveland-Akron-Canton, Denver, Orlando-Daytona Bch-Melbrn, and Sacramnto-Stkton-Modesto.

21-30: St Louis, Portland (Ore), Pittsburgh, Charlotte, Indianapolis, Baltimore, Raleigh-Durham-Fayetvlle, San Diego, Nashville, and Hartford-New Haven.

And then, Salt Lake City (31), Milwaukee (33), San Antonio (35), Oklahoma City (45), Memphis (48), and New Orleans (53).

First, compare that list with which teams have been successful and/or profitable. So what are the 76ers and Warriors less successful and less profitable than the Jazz and Spurs? Small market, deep pocket owner, or bad management?

Second, notice that the TWolves, Heat, Cavaliers, Nuggets, Magic and Kings all play in similar size markets. So, what exactly is the real beef here? Again, small market, deep pocket owner, or bad management?

Third, NY, LA, and Chicago could probably support 2 teams each, maybe 3 for NY and LA if properly managed. Laugh all you want, but he Clippers make money. 8 cities in the top 30 (2 in the top 20) markets have no teams.

Fourth, as outliers, the Thunder, Grizzlies, and Hornets have very little margin of error. Recognizing that, the Thunder has a number-crunching GM who hasn't overpaid for talent -- so far. The Hornets, sadly, need to relocate -- maybe to one of those 8 cities without a NBA or NHL team. Or Anaheim. But, as we discovered with the OKC move, sometimes a better arena, more favorable terms, lower costs, entertainment exclusivity, and better management can trump market size.

Since: Jul 8, 2011
Posted on: July 8, 2011 4:17 pm

Hard cap could mean hard times for small markets

If the Mavericks are 30 million over the "salary cap", what's the point of having a salary cap then? The author of this article is saying that teams like the Thunder wouldn't make it if the current system stays intact but who says Westbrook bolts in the new system? Not every player is greedy, look at Mike Bibby, he took less to play in Miami. 

And if teams are losing money and would rather lock players out than do another season than obviously the cap needs to change.

Another thing, Unguarunteed contracts.Kenny Thomas, Eddy Curry,, Erick Dampier are all examples of players, that had they been in the NFL, would be making the veterans minimum just to stay in the league.

The bottom line is nobody wants to see the Heat and Lakers in the Finals every year anyways, unless your a fan of those two teams. 

Since: Sep 15, 2006
Posted on: July 8, 2011 11:25 am

Hard cap could mean hard times for small markets

I was not talking about superstars but it still applies.  I was talking about players like Eddy Curry and Dampier.  Scrubs that show they have no work ethic or integrity.  Why pay that much for them?  
The answer is that there is a limited amount of championship-capable talent in the NBA. Because the NBA is a superstar-driven league, it's basically impossible to win a title without at least one superstar. Starting in 1991, the past 20 NBA champs have featured, in order: Jordan, Jordan, Jordan, Hakeem, Hakeem, Jordan, Jordan, Jordan, Duncan, Shaq, Shaq, Shaq, Duncan, Billups, Duncan, Wade, Duncan, Garnett, Kobe, Kobe, and Dirk. The only exception to the superstar rule was the 2004 Pistons, and a lot of those teams had more than one superstar.

However, there aren't nearly enough franchise-level superstars to go around. Which means that a lot of owners are stuck with a choice: Pay to sign the next tier of players (guys like Joe Johnson or Elton Brand, for example) and try to convince fans that they're a contender, or settle for a high draft pick year after year and suffer declining attendance over time.

Let's say, for the sake of argument, that we've got eight players who could legitimately be the best player on a championship team: LeBron, Wade, Kobe, Dirk, Howard, Durant, Melo, and Rose (honestly, I'm not sure there's anyone else). Assuming all of those players are on different teams (not even true at this point), you've got 21 other teams facing the decision I described above. And if even half of those teams decide to put together a competitive roster, you have ten teams trying to sign players to be the alpha dog. The market value of a player like that--the best player on a given team--is set by the guys I listed above, and even though it's not fair value for second-tier players, those players are finding themselves is comparable situations. That's how Joe Johnson gets a max contract, because there's basically a premium on second- and third-level talent.

Teams that don't bother to sign players from that second tier end up like the Timberwolves or the Cavs this past year. And if all the owners band together, as you suggest they do, and collectively decide to bring salaries down to what they believe is fair value, that's called collusion and would absolutely result in a meritorious lawsuit from the players' association. That's why lower salaries need to be legally codified in a new collective bargaining agreement.

Of course, none of this excuses owners with teams who are, or almost are fiscally insolvent, continuing to take on salary. That's financially irresponsible. There is no right side to this quandary.

Since: Jan 15, 2007
Posted on: July 8, 2011 12:46 am

Hard cap could mean hard times for small markets

The point of this article is that the small market teams are better off in the current system than they would be with a hard cap? That's a ridiculous statement for so many reasons.

Firstly, the article itself provides the numbers on the Dallas total salary vs OKC. Dallas is out spending them by over 30 million dollars and there are other teams spending more than the Mavs. The article does nothing to explain how closing a 40 million dollar gap is somehow going to be a disadvantage.

Secondly, as another poster said, the players have to go somewhere. If I want a max deal and NY, LA, and Mia are out of money Minnesota might start to look a little better. Instantly players like Bosh, Pau Gasol, Westbrook, etc would be available to the teams that are currently under the cap. It would definitely spread out the talent.

Thirdly, if fans in Milwaukee or Toronto or Utah think they actually have a chance to win or can have superstar players that might actually stay in town, it will help their ability to build a fan base. A major problem in the NBA is that only a few teams have a chance so why bother rooting for another team? 

This is not even a debatable point, we have a perfect example. The NFL has increased competition and allowed every franchise to have a chance by going to a hard cap. Also they are enjoying unparallelled popularity and financial success. The NFL has it figured out. The NBA union will break because there is too much disparity between the superstars and the end of the bench. The hard cap is coming and it's good for owners and fans, it's only bad for players.    &nb

Since: Sep 4, 2007
Posted on: July 7, 2011 4:55 pm

Hard cap could mean hard times for small markets

As for your comment talking about how these uneducated people are going to make more in one year then I do in a lifetime, that's probably true.... but I highly doubt you're any different, regardless of how successful you say your business is.  I highly doubt you're going to make 10 or 20 million in your lifetime if you work until you're 80..... it isn't going to happen for many and you're probably not one of the very few exceptions.

I was not talking about superstars but it still applies.  I was talking about players like Eddy Curry and Dampier.  Scrubs that show they have no work ethic or integrity.  Why pay that much for them?  

Well its a free country so you are entitled to doubt. You may end up being correct but even if I do not personally get to the 20 million mark I will be in the neighborhood!  It will not happen for many because that is how it goes.  If you do what 95% of the population does then you definitely wont make it there.  Successful people do what unsuccessful people won't.

Since: Aug 30, 2006
Posted on: July 7, 2011 1:23 pm

Hard cap could mean hard times for small markets

I love how Royce Young says that because the Thunder cant resign their players and therefore the will never be winners. Ditto to all the small market teams. With a hard cap, Royce, where will all these players be going? Teams wont be getting 3 superstars per team. So its not like Westbrook will be leaving for the Knicks to team up with Lord knows who.

I dont care one way or the other what the league finds out. I think it would be nice to have a hard cap (As a football fan, I enjoy the fact that my team could be the worst in the league one year and top team within 2 years).

The  might've just committed 80 percent of their future cap to  and  if those two pan out.

If there is a hard cap, then that wont happen. True superstars will get max contracts. The key word being true. Baron Davis and Joe Johnson wont be making that kind of money. Teams like the Jazz, Bobcats, Cavs and Raptors will be able to have a superstar.

Since: Mar 15, 2011
Posted on: July 7, 2011 8:00 am

More Money

The players are the game and deserve a lot more money from all these billions the owners make.  The owners have plenty of money and need to drop this BS about losing money.

Since: Apr 22, 2009
Posted on: July 6, 2011 10:36 pm

Hard cap could mean hard times for small markets

I am sick of hearing "small market" teams cannot survive!  There are more small market teams in sports than there "large" markets.  You give a city a winner and fans will show up.  Why dont the small market teams get together and start their own leagues again?  Remember the NBA when it started small towns around the country.  Have three / four divisions (divide counrty into quarters and only play teams in your quarter until playoffs)  The small market teams can make a difference if they would only UNITE.

Since: Jun 25, 2009
Posted on: July 6, 2011 10:28 pm

Hard cap could mean hard times for small markets

 Just like a business owner does not pay more for an employee than he makes in profit, the same applies to the NBA player. If you dont like the salary demands you hire someone that will take the salary you offer.

Yeah.... because replacing a general labourer or a salesperson or an engineer or even an accountant or a lawyer is almost comparable to a small market team trying to replace a superstar instaneously.  There aren't many jobs in the real world on this planet where an owner can't find a decent replacement in a reasonable period of time... but a small market team replacing a superstar can take a lot longer then that... sometimes they never find a replacement as good. 

And just so you know in the NBA because there hasn't been a hard cap there are about 5 or 6 owners at most that set market value and all the other players make their demands according to what those teams are playing forcing small market teams into losses.... one year after another.  

By the way, I might follow the NBA online, watch the odd game and some of the playoffs but that's where it ends.  I haven't parted with my money for that league in many years and until they get their crap together it'll be many more before that changes.  As for your comment talking about how these uneducated people are going to make more in one year then I do in a lifetime, that's probably true.... but I highly doubt you're any different, regardless of how successful you say your business is.  I highly doubt you're going to make 10 or 20 million in your lifetime if you work until you're 80..... it isn't going to happen for many and you're probably not one of the very few exceptions.

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