Thursday, July 21, 2016

The NBA takes a Stand, and takes away Charlotte's All-Star Game

More often than not, sports leagues talk the talk when it comes to taking important stands on political issues and advocacy, but never truly walks the walk. Adam Silver's NBA has walked the walked since he took over for David Stern. While the episode with Donald Sterling certainly forced his hand, his response to it showed the gumption of a man that would be willing to take bold stances when not only required, but when he could put his league at the cutting edge of a discussion more leagues should be having: with their enormous financial muscle, they can influence key political decisions.

Taking away Charlotte's NBA All-Star Game next February, and the $100 million that would have gone to the state of North Carolina with it, is a stance that no sports commissioner in this country has taken voluntarily before. It is a public sign that the NBA doesn't stand for discrimination against a group of vulnerable individuals, and they won't just say they don't stand for it, they'll prove it. Most every league and team pays lip service to the LGBT community by having pride nights, working with organizations like You Can Play, etc. and those are good first steps. But, having realized that his league is in a position of power, not acquiescence, he made his move and subsequently set a precedent that other leagues will have to follow.

In today's climate of outrageous partisan division and little respect for those with different beliefs, some would say that it makes sense for a sports league, an entertainment product first and foremost, to stay just that to be the escape mechanism that many need to get away from all of the poisonous news there is. But with these leagues making the money that they do, much of that coming from public subsidies for the arenas/stadiums the league's teams play in, they have as much of a right to make a political stand as actors, musicians and other artists have had for years. Sports, in that they are entertainment and an escape, are no different to any of the other forms of entertainment and art that have existed for centuries, and therefore they have a right to take a political stand on issues they deem important.

Usually, these leagues only make decisions like this under immense external pressure. The NFL took Super Bowl 27 out of Arizona for not recognizing Martin Luther King day, under forceful pressure from the watching world. AFL players attending the 1965 AFL All-Star Game in New Orleans, after being ruthlessly discriminated against in the lead up to the game, decided to boycott the game and forced it to be moved to Houston. Athletes and sports leagues sometimes forget to realize the immense power they wield to influence change, but in 2016 that seems to be changing.

Whatever your beliefs on North Carolina's NC2 law are (it's pretty easy to tell what this writer thinks), what the NBA is doing here is unprecedented. Bands can take their concerts out of cities, states, etc. for political reasons, but they are just one band of many. All-star week in every sport is a major financial and perception boon for these cities, and attract all kinds of tourists, businesses, etc. to these towns that may not otherwise come. The NBA has decided that it is bad for its business (and the many businesses that rely on them) to have a showcase for itself played in a state that has a discriminatory law on its books. Paying lip service to the idea of taking away Charlotte's All-Star Game is one thing, and many would accuse those statements of being a leverage play, but Adam Silver wasn't bluffing.

Cities looking to pick up the relocated festivities include Chicago, New York and New Orleans. Louisiana recently passed laws against LGBT discrimination in public workplaces, a stark contrast to what North Carolina has been doing, and the states aren't all that dissimilar politically. Under pressure from other businesses and groups, the governors of Indiana and Georgia either changed or rejected similar to ones that North Carolina's governor Pat McCrory is steadfastly behind. Sports leagues, as incredibly powerful businesses themselves, have immense power to influence change where they want to but often times they play coy or put themselves in the middle so as to not alienate anyone, which now seems out of date and out of touch.

Gary Bettman, Roger Goodell, Rob Manfred, Don Garber and many other men have a tough act to follow and a tough precedent to meet that has now been set by Adam Silver. They, like Silver, run immensely profitable and powerful businesses that have the ability to impact meaningful change for the states and country they do business in. For their many missteps with regards to issues like this(as the WNBA has fined teams for wearing shirts with protest messages on them during warm-ups, a decidedly more nuanced issue than this one), these leagues can earn good will and good press by taking these stands. Many have clamored for them to do so for years.

In a year in which there has been too much negativity, Adam Silver's NBA answered that long waiting bell. He should be applauded and celebrated for it.

Saturday, July 2, 2016

Mike Conley making $153 million: New Normal or New Lunacy?

Part of the insanity that is the NBA's free agency is watching the world react as middling players cash in as if they just won the Mega Millions jackpot. Mike Conley is making $153 million over five years (now the most lucrative in NBA history, which will last another week, maybe), Timofey Mozgov is making $64 million over four years, and Solomon Hill will now make $52 million over four years; all of those deals were agreed to yesterday. The NBA's salary cap went from around $70 million to $94 million thanks to the new and gigantic TV deals from ESPN/ABC/TNT, and the cap is going up even more next summer when even bigger free agents are going to be on the market. Naturally, athletes from other sports took notice:

So it is now true that middle-of-the-road, average NBA players are now getting massive, fully guaranteed contracts that perception would tell you they aren't "worth" and they don't "deserve". How did the middle class in the NBA start raking in the dough that the rookies can't touch and the big players somehow don't receive either. But, unlike what DeAngelo Williams and Emmanuel Sanders believe, this has become the new normal not just in the sport they're commenting on, but their's, as well as hockey, soccer and baseball. As fans, observers, and wannabee economists, we must all re-set what our expectations of "fair value" are, even in the era of moneyball and advanced analytics which have tried desperately to re-set those expectations in the other direction. How did sports leagues get to this point, and how can we as fans adjust our expectations?

In every major sport in this country, the wages that rookies can make are capped or slotted depending on where they are drafted, or in the NHL, playing as a rookie at all. The NBA has had a rookie scale since the 1998-99 lockout, the NFL's is new as of the recent CBA, MLB players are paid slot value based on where they are drafted, and NHL players entry-level contracts are bonus and incentive laden with little base money. So, as rookies are paid less and less in order to prevent madness like Matthew Stafford's initial NFL contract in which he nearly became the highest paid player on his team, or how Wayne Gretzky ended up becoming an Edmonton Oiler and escaping the Entry Draft, where else is the money going to go with established salary floors in the NBA, NHL and NFL? Combine this with the incentives teams have to re-sign their players in most leagues by being able to offer them longer term deals, very few high end players ever end up hitting free agency to begin with, and those that do end up being of lesser quality with the demand for their services increasing.

What also adds to the insanity is that in the NBA and NHL, contracts are artificially limited at the top end. A max contract is part of the NBA's furniture, as are contract lengths in the NHL to prevent what had become so prevalent in recent years before the 2012-13 to prevent backdiving the contracts to lower cap hits. Limits at the top and bottom ends of the scale have meant that those in the middle, in theory the largest group of players, get to reap the rewards that the big fish and rookies can't touch. This means that players like Mike Conley in the NBA and Milan Lucic in the NHL can strike it rich while better players sit out as they're tied down by restrictions that tether them when they're at the top of their game. Both leagues have a salary cap floor, or a minimum amount of money needed to be spent on payroll, which means that in order to make the floor as revenues spike for both leagues, who reaps the benefits of all that extra money in the system? The middle men. What is different about the NBA compared to its peers in the NFL and NHL is that those two leagues have prided themselves on parity and competitive balance that the NBA will never see, and because of the weird timing of free agency with this CBA and when the new TV contracts kicked in, the world has seen how average NBA players are making more than most NFL and NHL players will make in a lifetime.

The phenomenon of the "middle class" suddenly becoming unconscionably wealthy is not NBA exclusive. The NHL's supposed "middle class" is being paid out of proportion to even what the top players are worth, i.e. Andrew Ladd is making as much money next season as John Tavares is with the Islanders. While the NHL's hard cap and few exceptions to it mean that wages are more controlled than they are in the NBA, rising HRR and a new expansion team down the road means there is more money in the system for the Loui Eriksson's and Dave Bolland's of the world (he is the second highest paid forward on his team, even though he likely won't play a minute this season). And in the Premier League, as TV contracts massively inflate the coffers of every club thanks to largely equal distribution of those massive funds, as is the case in American sports, clubs like Crystal Palace are able to make 38 million Euro bids for players that should in theory be way out of their league, such as Michy Batshuayi, who is heading to Chelsea. There are no salary caps in the Premier League, and UEFA's Financial Fair Play is easily exploitable and practically worthless in practice.

What has now emerged from the NBA's Supermarket Sweep of spending on sub-standard second tier players is a crisis of perception, and potentially a labor crisis. Naturally, the owners in smaller markets are going to want to tamp down on these ridiculous contracts for the game's so called middle class, which the NBAPA is going to fight back on, hard. NHL owners are probably going to want to do the same, because there is no clean way to get out from under bad contracts in both leagues as the deals are almost fully guaranteed. NFL players are watching with earnest interest and wondering why they're not given fully guaranteed contracts considering the game they play and the dangers they face, and why their earning ceiling is so much lower than Mike Conley's, for instance.

Regardless of whether contract figures like what have been handed out in the NBA and NHL over the past few days are the new normal, and they are in many respects, there is a massive problem in creating not only equity within the system, but an effective tiered mechanism so players can be paid what they might be really worth, not what an inefficient and closed market believes they are worth. Thanks to the multiple and artificial limitations imposed on the closed markets for most leagues, including the NBA, the very few players who are not restricted in what they can earn and how long they can earn that for end up reaping the rewards, and fans and observers are left to scratch their head as to why.

CBA negotiations for all sports leagues are incredibly contentious, and will grow even more so as the money infused into these leagues continues to skyrocket, which makes the likelihood of any clear compromise that rectifies the inefficiencies and the madness unlikely. And as with every CBA negotiated in every league, a new and unforseen problem emerges every single time which ends up becoming easily exploited and renders most of the hard work from before practically moot.

Thanks to these inefficiencies, caps and the like, players like Evan Turner, Troy Brouwer and Mike Conley can cash in like they're on the Nickelodeon Super Toy Run while their respective leagues top and bottom feeders can do little if anything about it and onlookers peer on in shock, horror and amusement.

Mike Conley's $153 million record breaking contract is not the new normal. The future Mike Conley's getting similar if not bigger contracts is.