Economist Murphy takes us all to school on players stance

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Kevin Murphy is smarter than you.

And me. And David Stern and Billy Hunter and everyone else in the negotiating room. There’s no objective way to prove that, but do you have a MacArthur Foundation “genius grant?” Are you the guy the people who wrote “Freakanomics” think is the smartest person they know?

That’s Murphy. And he’s the players’ economist. Union head Hunter said that pretty much every projection Murphy made back in 2005 about how the labor deal hammered out then would play out was spot on. He may grasp all the moving parts of this negotiation better than everyone.

And he spoke at length with NBA.com’s Steve Aschburner. You need to read this. All of it.

Know that Murphy has a dog in this fight — the union pays him. But he is too insightful not to read.

And this goes back to the core arguments of the entire lockout — how much money are the owners really losing? And who should pay for it?

I would say the primary disagreement is not over the accounting numbers. It’s what you include and how you interpret the numbers. For example, the accounting picture of the NBA isn’t very different from what it was five years ago or 10 years ago in terms of ratio of revenues to costs and all the rest — it’s changed very little. Which immediately tells you, wait a minute, if the underlying financial picture is similar today to what it was five years ago or 10 years ago, and people are paying $400 million or whatever for franchises, and you’re telling me that these things lose money every year, something’s missing, right? These people aren’t stupid, right? These guys are worth billions of dollars. So why did they pay all this money for franchises that, it looks like, lose money?

Well, the answer is pretty clear. There are a couple of things that are really attractive. One is, historically, you’ve seen franchises appreciate in value and that appreciation has more than outstripped any cash-flow losses that you’ve had. And if you’re in the right tax position, it’s actually pretty good because you’ve got a tax loss annually on your operating and you’ve got a capital gain at the end that you accumulate untaxed until you sell it and then pay at a lower rate. So you get a deferred tax treatment on the gains and an immediate tax treatment on the losses, that’s not a bad deal.

I’ll be honest, the last couple sentences are hard to follow for me. My tax position does no require a lot of thought. But you get the idea that what is in the official books is not the entire picture.

To all of you people saying “name another industry where the workers would get half the revenue” (yes, we read the comments) Murphy has an answer:

In certain sectors, there’s a ton. You go to a law firm, most of its cost is labor. You’ve got to remember, labor is 60-something percent of the economy. In the service sector, it can be much higher than that. And these people really define the product. These are the ones people come to see.

What separates the NBA from a different basketball league? Well, it’s the players. The basketball’s’ the same, the court’s the same, it’s the players who really are the distinguishing feature. That’s not to say that the league doesn’t have value. But the defining characteristic and the scarce resource, if you think about it from an economic point of view, is the talent. It’s not unlike Hollywood, the music business or any of the other ones where the thing that distinguishes one person from another is the talent.

Then there is the competitive balance issue. The idea from the owners that there needs to be more parity, something Murphy says clashes with the NBA’s star-driven league. Like another report yesterday, Murphy says that what you spend really only has about a 5 percent to 10 percent impact on wins on the court.

NBA.com: (The owners) want Milwaukee fans, for example, to not only root for the Bucks but to have most seasons with hope that their team can compete with bigger-revenue markets.

KM: There’s an element of that. But also, be careful what you wish for. When you get a Sacramento-Charlotte NBA Finals, guys will be crying over the TV ratings. We know that even with baseball — it’s an exciting World Series but the ratings aren’t there because it’s the Texas Rangers and St. Louis [Cardinals]. Basketball is even more star-driven. You get to an NBA Finals that doesn’t have one of the premier players in the league in it, it becomes a lot less interesting. And with 30 teams, not everybody is going to have one of the premier players.

All the number crunching is nice. But let’s get to what really matters:

Can the two sides reach a deal soon so we can have basketball?

“I was very pessimistic last week after the Thursday blow-up but I’m beginning to come around and think we’ve got a shot,” Murphy said. “If there’s a deal here, it’s going to be a deal that nobody likes. That’s what deals are. Nobody walks out feeling like they got a complete victory. That’s initially. But then you get back to playing and you realize, geez, I can live with this.”

Report: Spurs hearing out Kawhi Leonard trade offers, including from Lakers

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The Spurs shot down Kawhi Leonard trade offers before the trade deadline. They brushed off Leonard trade offers earlier this offseason.

Then, the already strained situation got even worse.

Leonard put out word he wanted to leave San Antonio, ideally for the Lakers. He met with Gregg Popovich this week in San Diego, reportedly directly telling the president-coach he wants out.

What are the Spurs doing now?

Chris Mannix of Yahoo Sports:

The Lakers are in that mix.

The Spurs can try to mend their relationship with Leonard. They could even use a super-max contract – projected to be worth $219 million over five years – to aid that process. They don’t have to trade him.

But the clock is ticking toward tonight’s draft, teams using their cap space in other ways and Leonard’s 2019 free agency.

San Antonio has no choice but to get more aggressive in handling Leonard’s future. This is a small step in that direction.

Report: Nets to buy out Dwight Howard

AP Photo/Chuck Burton
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The Magic, Lakers, Rockets, Hawks and Hornets all grew tired of Dwight Howard.

The Nets did it in record time.

After acquiring Howard in a trade from Charlotte yesterday, Brooklyn is moving toward shedding him.

Shams Charania of Yahoo Sports:

In the trade, the Nets dumped Timofey Mozgov‘s $16.72 million salary for 2019-20. Now, they could get a reduction on Howard’s $23,819,725 expiring contract. Brooklyn is doing a great job of unloading bad money.

Next year, the Nets will have their own first-round pick for the first time in six years. Though he has declined considerably from his Hall of Fame peak, Howard can still play some. Brooklyn didn’t need him interfering with its tanking and culture.

Instead, the Nets can focus on developing Jarrett Allen and losing enough to secure the best draft position possible.

It’ll be interesting to see how much Howard surrenders and where he goes. Again, he can still play. But the league is moving away from traditional centers, and he’s high maintenance.

Report: Cavaliers not planning to trade Kevin Love, no matter what LeBron James does

AP Photo/Michael Dwyer
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The Cavaliers spent considerable time bemoaning a Kevin Love trade last summer falling through.

Will they deal him this offseason?

The No. 8 pick and Love are Cleveland’s best assets for upgrading their roster around LeBron James. If LeBron leaves, moving Love could jumpstart a rebuild.

But apparently the Cavs are now projecting attachment to Love, either way.

Dave McMenamin of ESPN:

The Cavaliers are not actively shopping All-Star forward Kevin Love heading into Thursday’s NBA draft, multiple sources told ESPN on Wednesday. Furthermore, regardless of what decision LeBron James makes about his future in Cleveland, the Cavs have interest in keeping Love next season, sources said.

File this under what else are they supposed to say? Even if the Cavaliers want to trade Love, insisting they won’t maximizes his trade value, forcing other teams to offer enough to pry him away.

But I also believe this accurately reflects the Cavs’ plans.

They just seem so determined to compete if LeBron leaves, and Love is their only other star. Love proved himself worthy of being the best player on a good team with the Timberwolves. (They were playoff quality when he played. They just completely fell apart whenever he sat.) In Cleveland, Love has fluctuated in his ability to bend his game around LeBron. If LeBron leaves, that’d no longer be a problem.

But Love will turn 30 before the season. He has declined out of his athletic peak, and I’d bet against him ever nearing his Minnesota levels again. And the other Cavs stink. It’s hard to see a LeBron-less Cavaliers team, even with Love, competing for the playoffs.

If LeBron stays, keeping Love makes some sense. With his $24,119,025 salary for next season and $25,595,700 player option for the following year, he probably doesn’t hold elite trade value. He doesn’t match up well with the Warriors, but good players who do come at a major cost.

Report: Lakers call meeting to warn employees about tampering

AP Photo/Charles Rex Arbogast
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Magic Johnson got the Lakers fined for tampering while still holding a ceremonial title. Once he actually took over the front office, he really got to work tampering. He got warned for blinking at Paul George on national television. Then – due to general manager Rob Pelinka’s communication with George’s agent and Johnson’s previous warning – the Lakers received one of the largest fines in NBA history. Johnson himself got the Lakers fined for praising Bucks star Giannis Antetokounmpo. The league investigated and cleared assistant coach Brian Shaw for tampering with George.

NBA commissioner Adam Silver has said the Lakers’ previous transgressions have put them under tighter scrutiny.

The Lakers just want this to end.

Ramona Shelburne of ESPN:

Lakers co-owner and governor Jeanie Buss called the meeting, which was led by president of basketball operations Magic Johnson.

Sources said Johnson and Lakers general manager Rob Pelinka spoke to a large group of team employees, warning them about tampering.

Other employees received written notices on the matter that referenced possible termination as punishment for anyone who does not adhere to NBA rules.

Tampering often takes much more benign forms than a president or general manager recruiting a star player before free agency. It could be an offhand comment by a coach, an overzealous ticket pitch or a speculative article on the team website.

If Johnson’s and Pelinka’s tampering increases the Lakers’ odds of landing a star, that’s just the cost of doing business. If a lower-level staffer tampers, that’s an avoidable mistake.

Really, it’s comical this meeting is even newsworthy, and that’s a product of the Lakers’ previous violations.

But, as they pursue stars, they don’t want to chance the league imposing any additional restrictions.

So, the Lakers, in some ways are right back where they started.