Tag:David Stern
Posted on: July 8, 2009 2:48 pm

Shocking NBA news: Cap to drop by 9 mil for 2010?

This is a total game changer for the NBA as a whole, and I still can't fully believe the full scope of what this news really means. I'm literally stunned. Let me try to break it down to give everyone the complete picture...

First off, as anyone who has read my work on the recent NBA free agents has seen me mention many times, the salary cap is derived from something called BRI, or Basketball Related Income. The general idea is to take the total basketball revenue of the NBA, divide it by almost half (51% to be exact, the share that should go to the players), and then divide that by 30 for the 30 teams. I expected the 2009 cap to come in at 59 million dollars or so, I was thinking there would be a 1% increase in the BRI. This was a bad thing for teams targeting 2010 free agents, because the cap has grown from 3-5% every year for the last 4 years or so. Less cap growth means less cap overhead to spend on max deals for the big time class of 2010.

Well, the 2009 cap is in now. And it's DOWN 1%. Last year, the salary cap was 58.7 million (roughly). This year, it's 57.7 million.

All those free agents that expected to get 5.9 million on the mid level exception contracts they signed, they are only going to get about 5.7. Trevor Ariza, Ron Artest, they both just watched about 3 million dollars vanish. Hedo Turkoglu probably just lost 10 million dollars over the life of his long term deal unless the Raptors get creative and make more cap room for him (or I am missing something, but I feel good about being right about this). Anyone who wanted to make a run at the restricted free agents like David Lee, Paul Millsap, or Ramon Sessions, they just lost about 2 million dollars in cap space between what they thought they would have to offer and what they really do. This is a game changer on a level I can't overhype, it's big time news.

I could write all day about how this changes things for David Lee alone. Nobody has the cash to offer him an under the cap deal he would accept. And nobody now has the money to throw him an offer the Knicks won't be really tempted to match. The Knicks are rumored to want to keep Lee at a price like 7 million dollars. Lee wanted 10 million. Lee is very unlikely to get what he wants now, 10 million is a lot more today then it was tomorrow, not just because of the drop in the cap, but the predicted drop in the cap going forward (the huge news I will get to soon). The unfathomable might just have happened, David Lee might stay in New York for a number of years. But as much as I love the Knicks, this news goes far beyond the situation in New York.

Let's go with a direct quote from tWWL for this one:

In a memo announcing next season's salary cap and luxury-tax threshold, sent out shortly before the league's annual July moratorium on signings and trades was lifted at 12:01 a.m. ET Wednesday, NBA teams also received tentative projections from the league warning that the cap is estimated to drop to somewhere between $50.4 million and $53.6 million for the 2010-11 season.
This floors me. The economy for the NBA is worse then I ever thought, on a scale of like 4 fold. And I have been on record as being VERY gloomy about the future of the NBA on the economic side. I expected a 2010 cap of 63 million, which is far less then the numbers like 68 that have been thrown out by a multitude of sources, both large and small. I can't believe this! Let's take the number 53.1 million dollars for a 2010 cap and let me show you how huge this is for the NBA (I have previous data for a cap number of 53.1 million dollars that I can use to give you accurate information).

Let's take LeBron James, the poster child of the 2010 offseason. He had a 17.1 million dollar team option that he was expected to decline. It was thought that he would be able to get an offer on the level of 17.5 million from other teams on a cap of 63 million. But now the cap is going to be (let's say) 53.1 million.

LeBron's max salary in 2010, if he opts out, is 25% of the cap, and that is the 48.04% BRI cap rate (called the Alternative Cap), not the 51% BRI cap rate that me and you know as the cap. At 53.1 million, LeBron's new MAX deal would be just under 15 million dollars! The Knicks, the Nets, the Pistons, anyone you think would want to offer LeBron a deal, they can't even offer The King 15 million if this doom and gloom prediction comes true. Cleveland, however, still has LeBron's bird rights, and now they can offer LeBron way more money then any other team. Advantage Cleveland?

Yes and no.

It's true that Cleveland can offer LeBron a 6 year deal starting at 17.2 (roughly) in 2010 if LeBron does opt out, while the Knicks can only offer 5 years starting at 14.9, but the real question now is, do you want to offer LeBron that much money? Think about this, 17.2 million is roughly 33% of the total cap! If the Cavs add Chris Bosh at 15, that's just under 20 million to field a team! In theory, you can build a team with 20 million, but unfortunatly for the Cavs:

2010 salary:
Mo Williams - 9 million
Delonte West - 4.5 million with a 500k buyout (non-guarenteed deal)
Daniel Gibson - 4 million
J.J. Hickson - 1.5 million

Total, roughly 20 million.

The Cavs literally would have to sign another 6 players for the league minimum (does not count against the cap) to field this team. It would be Mo, LeBron, Bosh, West, Gibson, Hickson, and a bunch of D-League players. How can that team compete with Kobe and Gasol and Bynum and Artest and maybe Odom (very likely Odom now, the Lakers are probably dying to lock Odom up and his market just went down the tubes with this news)? I don't think they can.

There is next to no good way to play 2010 now. The NBA might literally find themselves in a state of anarchy. All these free agents are going to get FAR less money then they ever thought (remember, when the cap goes down, the MAX on new deals goes down!), and if they stay where they are for the Bird Rights to get more money, then their team will have next to nothing to find new pieces to help them.

I could go on all day about how this changes things, but I can happily report that Knicks GM Donnie Walsh is ALREADY making moves to adjust. How? He just offered Grant Hill a huge deal, 5 million for 1 year or 10 million for 3. That is 250% more then the Knicks were offering before this news.

Why? It's because of the new biggest name in the NBA trade/free agent market, a cost controlled player who can help your team win without a big cap hit. All of a sudden, the most coveted player for any team that is trying to win in 2010 and knows it needs cheap players to do so.

Try to follow this. Grant Hill makes Wilson Chandler expendable. Wilson Chandler makes the Timberwolves ears perk up.

And Ricky Rubio might just be the biggest player a team that wants to sign anyone big in 2010 can get. A cost controlled starting PG that loves to pass and make teammates better. He's got star power. He's got a low cap number. He could be the best player in the 2009 draft.

And his upside just got about 5 times more desirable, for a number of factors, most of all the cap.

I'll be here all day to field questions, I'm only stopping here because I have so many different thoughts, I'd like to save the rest of them to share with people who have specific questions, and I could use the break to get a better grasp of how expansive this news truly is. Feel free to stop in and ask anything, I'm very happy to answer to the best of my ability anything you want to know or me to make more clear!
The views expressed in this blog are solely those of the author and do not reflect the views of CBS Sports or CBSSports.com