Friday, July 01, 2016

NBA Free Agency Spending Run Amok -- Looking For Analogies

Not that anyone actually reads my stuff, but it is out on the Internet, so I had to scrap my "guy walks into a strip bar and is handed $600" analogy or my "there are 15 available hookers" analogy and move on to one that won't get me labeled as a less attractive and poorer Donald Trump.

So - we will go with something I know

NBA owners are flush with cash due to the new TV contract.  By agreement, they must give the players roughly 50% of league revenues (revenues subject to this split are defined in the Collective Bargaining Agreement).  Therefore, to simplify matters greatly, let's say that the league gets $6 billion and must give $3B of that to the players. Dividing by 30 teams - $100 million spent per team.

The league rules also require you to pay 90% of that money no matter what.  If you don't, you pay it to the league who distributes it to the other players.  You need to pay $90M.

If every team were 41-41 and played in the same city, and were run equally well, and every player was a free agent every year, than you'd have no issue.  The talent would be roughly equally divided.  But that is not the case, there are a lot of places that talent does not want to go.

Some places (Miami, Dallas, San Antonio, New York) will attract talent, others (Minnesota, Milwaukee, OKC, Sacramento) will not attract talent.  Some organizations are viewed as horribly run (Philly).  So, what is our analogy here for NBA owners?

NBA owners are like guys who are sitting in one of 30 restaurants.  One guy might be in a Taco Bell in Sacramento or a Applebee's in Minnesota while another guy might be in a 5-star steakhouse in Miami.  Each has been given $100 to spend.  He can spend as little as $90.  He can spend all $100, and if he reads the rules, he can actually spend $150 (but he'd have to give another $50 that will be split between the guys who don't spend $100). 

If you are the guy in a 5-star steakhouse, you won't have any trouble spending $100.  You will probably want to find a way to spend $150, even if it costs you an extra $50.  You have great options.  If you are at a Ruby Tuesday's in Charlotte, it ain't gonna be pretty to try to spend that $100.  A couple steaks, salad bar, dessert, liquor.  You can do it, but you won't feel good about it (Nic Batum 5 years $120M). 

Now imagine the poor guys in the Taco Bell.  You have $100 and you have only spent $30.  $70 worth of Taco Bell food?  Yikes.  Well, maybe that Gordita Crunchwrap Supreme Dos Locos whatever is worth $8?  (Dion Waiters demanding $28M per year) or I know Nachos Grande are good.  Maybe I will just give the guy behind the counter $100 and say "keep it" (Harrison Barnes seeking $28M per year)?    I mean, you have to spend $90.  Do you really want to order like 80 bean burritos?  75 chips and cheese?  You'd really like to order that ribeye steak and Caesar salad combo the guy in Miami is buying, but you are in a Taco Bell.  WTF are you going to do?

Now, since everyone has stopped reading, let's return to the stripper analogy.  You happen to have wandered into a club in some city and because it is National Customer Appreciation Day they hand you $600 and say "spend between $540 and $750 and we won't let you leave until you have."  If you are in a crappy town, you are going to make some really really awful decisions with that money.  If you are in an OK town, you just need to use some common sense.  If you are in the best town, you will have so many options that your head will spin.  You just have to be not an idiot (for example, $72M for Joakim Noah coming off a skein of injuries may not be the best idea).

Anyway -- enjoy NBA free agency.  And if you feel bad for the NBA owners, don't.  They have been handed their money by the new TV deal.  Whatever decisions they make with it, you can be impressed or laugh heartily, but never feel sorry for billionaires handed money. 

1 comment:

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