At first glance, the numbers are staggering. Four years and $61 million for Nets center Brook Lopez. Four years and $46 million for Blazers swingman Nicolas Batum. Three years and $25 million for backup center Omer Asik. After nearly scuttling last season because of what they said were crippling financial losses, why are NBA owners spending so freely?
They're not. While there have been a few eye-opening deals, the evidence shows that the new collective bargaining agreement is doing what it was intended to: putting the brakes on profligacy. One of the sticking points of the negotiations was the maximum length of contracts. Owners preferred shorter deals that would, in theory, keep players motivated. Under the new agreement players can sign or extend for up to five years (instead of six), and so far owners have been stingy handing out even those contracts. From 2005 through '10 there were an average of 25 deals of at least five years; this summer there have been just five.
With more punitive luxury tax penalties kicking in next summer, even big-market teams are more carefully eyeing the bottom line. The Bulls parted ways with three backups who held pricey options for next year: guard Kyle Korver ($5 million), swingman Ronnie Brewer ($4.37 million) and point guard C.J. Watson ($3.2 million). And the Knicks declined to match the Rockets' backloaded three-year, $25 million offer for Jeremy Lin. Says deputy commissioner Adam Silver, "Teams appear to be making economic decisions on the basis of the harsher tax."
Last season teams paid $32 million in tax penalties, the smallest amount since the system was instituted in 2001. This year once again projects to be very low compared with previous years. "Most teams," says Mavericks owner Mark Cuban, "spent little or nothing." And those that have opened their checkbooks—most notably the Nets, Trail Blazers, Rockets and Hornets—all had to. Current rules require teams to spend at least 85% of the salary cap, or $49.3 million; each of those four teams entered this off-season at least $10 million under that figure.
A second goal of the new CBA was to improve competition. And while it might seem that only a handful of teams are capable of winning a championship, be patient. Starting next summer, a team that is more than $4 million above the tax threshold cannot receive a player in a sign-and-trade. If that rule had been in place this summer, the Knicks would not have been able to acquire Lin's replacement, Raymond Felton, and the Lakers could not have traded for two-time MVP Steve Nash. And the escalating tax, which could triple payments, may ultimately force teams that have huge long-term deals on their books (such as the Heat) to gut rosters, particularly as revenue sharing—which could reach $200 million next season—drains some of their profits.
In short: Changes are coming. "Our teams are all lining up to compete for as many wins as they can, and they do it straining against whatever framework we have put in place," says commissioner David Stern. "We are going to see the continued leveling of the playing field."