SBD/Issue 202/Leagues & Governing Bodies

NBA Defends Salary Cap Memo Following Billy Hunter's Criticism

Fegan, Agents Worry Memo
Having Chilling Effect On Market
The NBA last night said that a memo it issued to NBA teams Tuesday predicting steep declines in the salary cap and the luxury tax thresholds for the '10-11 season was based on the league's "best, good faith projections." NBPA Exec Dir Billy Hunter earlier yesterday warned that the union could potentially file a collusion case against the NBA if the league did not have "a good faith basis" for a memo to teams projecting a steep drop in the salary cap and luxury-tax threshold for the '10-11 season. NBA Senior VP/Marketing Communications Mike Bass said in a statement last night, "The memo speaks for itself and it was issued to give our teams our best, good faith projections." Top NBA player agents, meanwhile, said the memo was having a chilling effect on an already cold market for player deals. "If they are projecting a 5% decrease, and all these teams are gearing up for cap space next year, they are going to be reluctant to agree to a multi-year deal that would negatively impact their flexibility on a going forward basis," said Blue Equity Sports Television agent Dan Fegan, who represents Fs Shawn Marion and Anderson Varejao, who were free agents this offseason. "In addition a 5% decrease will have a similar effect on the luxury tax number -- which is a number all teams in the NBA are concerned about. Any contracts signed on a going-forward basis are going to be reviewed internally with a decreased luxury tax number in mind. My reaction is it just raises questions about the timing of the announcement and what the NBA is using to substantiate those projections." BDA Sports CEO Bill Duffy, who represents restricted free agents Hakim Warrick and Raymond Felton, added, "I think there is an absolute cutback as we speak. The M.O. of every team now is 90% fiscal and 10% team enhancement. All you do when you talk to teams now is talk about their incapabilities (to sign player deals) because of the rigidity of the system. Players don't understand why they have a vital role on the team and the team refuses to sign them strictly for fiscal reasons" (Liz Mullen, SportsBusiness Journal).

Current Economic Environment May Force
James To Reconsider Contract Opt Out Plans
A NEW WRINKLE: In N.Y., Jonathan Abrams writes the NBA's memo "added new dimensions to the landscape of next summer's potential galaxy of star free agents," as the shrinking salary cap could "affect the potential spending sprees of teams that have geared themselves for the expectant 2010 class." While teams have been "budget conscious this summer," Cavaliers F LeBron James, who can opt out of his current deal and become a free agent after the '09-10 season, "may reconsider his plans." James is due $15.78M for the '09-10 season and $17.15M "if he plays the final season of his contract." NBA Salary Cap FAQ's Larry Coon said the NBA's memo is a "warning to teams saying you're responsible for the decisions you make and don't say you haven't been warned" (N.Y. TIMES, 7/9). In Akron, Patrick McManamon writes the potential diminished salary cap puts James "in the interesting position of leaving money on the table if he does not sign the max extension that the Cavs will offer him this month." There is a "bit of a guessing game going on," but what is "certain is that James can earn more money by staying with the Cavs, and he would earn more staying with the Cavs if he signs this offseason" (AKRON BEACON JOURNAL, 7/9). ESPN's Mike Golic said, "Who should be happy are the Cavaliers, Toronto, Miami -- all the teams where your stars are right now." Golic: "The best position for those guys may be with their own teams because of what's going on" ("Mike & Mike in the Morning," ESPN2, 7/9). Meanwhile, the Knicks have long been rumored as a possible landing spot for James next summer, but SportsNet N.Y.'s Brandon Tierney said the lower cap "changes absolutely everything." Tierney: "LeBron has zero chance now. Dwyane Wade has zero chance now. This simply is not going to happen. What Donnie Walsh needs to do ... he's got to make 2010 start happening in 2009." Walsh, the Knicks' President of Basketball Operations, should "forget about the dream about these stars coming here, and you go out there and you creatively chase the next best things" ("The Wheelhouse," SNY, 7/8).

NOT BAD NEWS FOR EVERYONE: TRUEHOOP's Henry Abbott wrote the memo had "bad news for the basketball staffs, looking to spend more and more to acquire talent." But he added, "I expect the memo was borderline thrilling to some, including poor teams, many owners and the bean counters who worry about teams' balance sheets" (ESPN.com, 7/8). In Minneapolis, Michael Rand wrote while the decreased cap "appears, at first blush, to be bad news, it could actually be good news" for the T'Wolves. The team projects to be $12-14M under the revised salary cap, "enough to pay a couple role players and make a run at a big ticket free agent" (STARTRIBUNE.com, 7/8).

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