The superstars are maximizing their compensation under the NBA’s salary-cap rules and extracting leverage over their teams in the process. Risky? Somewhat. If either player gets hurt, he has no long-term security. But LeBron and Durant are so good, teams would still line up to pay them max money after a major injury. There’s a reason even the next class of stars hasn’t duplicated this strategy.
But, as limited as 1+1 contracts are, NBA commissioner Adam Silver doesn’t give them a ringing endorsement.
Silver, via Cleveland.com:
“One of the unintended consequences (of doing contracts like James) I feel on behalf of the players is the fact that they end up putting themselves in this position where they’re taking enormous financial risk,” NBA commissioner Adam Silver told cleveland.com. “The system is designed for guys to enter into long term contracts, so, and you can only get so much insurance. So one of the unintended consequences is they take risk beyond what we would like to see them take.
“The other thing is, the system is designed and incentivizes players to stay with the same teams,” Silver said. “At the same time I respect free agency so if they make those decisions to leave, that’s fine too. But as I said, I’d like to talk to the union about maybe modifying the system so there’s a little bit more of an incentive to stay with your existing team.”
Silver sounds like he might be overreacting to a narrow problem — something that might not even be a problem at all.
Not long ago, the NBA had a real problem: Contracts were too long, and raises were too high. Players signed long-term deals, declined over the life of them and became deadweight by the end. Teams were too often strapped with expensive unproductive players, and because those players ate up significant cap room, there wasn’t money left to sign upgrades.
So, the league has pushed to save teams from themselves. Two Collective Bargaining Agreements ago, the max contract length was seven years and max raises were 12.5%. In the previous CBA, it was six years and 10.5%. Now, it’s five years and 7.5%.
Simply, teams aren’t allowed to offer LeBron or Durant enough long-term security where that would trump a one-year deal — especially with the salary cap rising rapidly.
Last year, the salary cap rose 11.0%. This year, it was 34.5%.
The max 7.5% raises — which LeBron and Durant can’t even get yet, because without full Bird Rights, they’re limited to 4.5% — won’t cut it. Even if LeBron and Durant are totally committed to staying with their current teams, there’s more money in signing a new contract each year as the max skyrockets in line with the cap. However, that opens the door for a change of heart and leaving in free agency.
The max-salary tiers also encourage 1+1 deals. A player’s max depends on his experience, and it escalates among three tiers: 0-6 years, 7-9 years, 10+ years.
Imagine the typical max player. He was a first-round pick, so his rookie-scale deal covers his first four seasons. He might sign a five-year max contract extension or max deal as a restricted free agent — which gets him to unrestricted free agency with nine years of experience. If he locks into a long-term deal that summer, he’s stuck with the 7-9 max. Wait one more year, and he can get the 10+ rate.
With both factors — the skyrocketing salary cap and tier system — working together, players are more incentivized than ever to take 1+1 deals.
That won’t remain the case, though.
The salary cap will level off as the new national TV contracts become the norm. There will still be free agents with nine years of experience who could wait one more season to lock in long-term, but that had long been the case, and nobody took a 1+1. LeBron and Durant are as likely to be outliers as trendsetters.
But if other players follow their lead, that’s not so bad. If players sign a new contract annually or even biannually, they’re more likely to be paid in accordance with their production. That’s something owners want.
Owners also want to keep their top players, and 1+1 deals allow for greater player movement. So, I see the downside for teams.
The “solution” would be mandating unguaranteed contracts — players tied to their teams long-term while the team still has the ability to drop the player if he’s not living up to his salary. Of course, that’s almost certainly a non-starter for the union.
In a world of compromise, the current system isn’t as harmful as Silver insinuates.