SBJ/Jan. 13-19, 2014/Labor and Agents

Has MLB overrun NBA’s star-salary system?

Leagues swap places on list of biggest deals

The NBA has always been a star-driven league, from the days of Dr. J to Magic to Michael. This star power generally translated to salaries as well, as for years, NBA players topped the list of the highest-paid athletes in all of American sports.

But not anymore. Parents may want their kids to grab a bat or learn how to throw a curveball, because when it comes to landing the most lucrative playing contracts in sports, Major League Baseball players have taken over the top of the list.

SportsBusiness Journal research found that of the 10 highest-paid players in team sports in North America, based on average annual salary, eight are from MLB. Only two NBA players — Kobe Bryant and Carmelo Anthony — make the list. This is based on the recently completed 2013 MLB season and the current 2013-14 NBA season.

That is the opposite of 2000, when the eight richest deals in sports based on average annual value belonged to NBA players. That year, only two MLB players — the Dodgers’ Kevin Brown and Shawn Green — were in the top 10. (See charts below).

SportsBusiness Journal assembled the lists of highest-paid players based on the average annual values of overall playing contracts across the NBA, NFL, NHL and MLB. Some players make millions more in endorsements, but those deal terms are difficult to obtain and were not included in the analysis.

About two dozen Major League Baseball players earn a higher average annual salary than LeBron James.
Photo by: NBAE / GETTY IMAGES
Agents and observers say the shift can be traced to factors such as revenue growth across leagues and actions and philosophies of union leadership.

First, the MLB Players Association, long known as the strongest union in sports, has fought off a salary cap and other restraints on player compensation. The battles the MLBPA waged and won decades ago are seemingly paying off for baseball players today.

Meanwhile, the National Basketball Players Association took a different approach and agreed to a salary cap and a cap on the maximum amount any NBA player, including top stars, could earn. Many agents point to that philosophical decision, which was key in ending the 204-day NBA lockout in 1999, as representing a sea change to the system.

Two agents, Arn Tellem and David Falk, who have long been NBPA critics, blamed collective bargaining for the new market conditions.

“The NBA players union has failed to protect the rights of the top players in the league,” said Tellem, vice chairman of Wasserman Media Group, who has represented both NBA players and MLB players for 30 years. “Collective bargaining has proved totally ineffectual.”

Falk, who represents NBA players and who made his reputation negotiating record-setting player contracts in the 1990s, agreed that the MLBPA and the NBPA are responsible for the change. “It shows how powerful the baseball union has been and how out of touch the basketball union has been with the economic realities of the sport they are working for,” Falk said.

Photo by: AP IMAGES
NBPA acting Executive Director Ron Klempner wrote in an email to SportsBusiness Journal, “We are thrilled with the success of our brethren in the baseball union. Measuring our sports against each other, though, is somewhat of an apples-to-oranges comparison. There are different revenue levels, number of games, tickets sold, television deals, roster sizes, histories, cultures, and, of course, collective-bargaining agreements, one with a team salary cap and maximum individual player salary, and the other with neither.”

In addition to the different approach on collective bargaining, others note that the increase in MLB salaries is a reflection of the dramatic rise in overall MLB revenue. Fueled by new business efforts and media rights, MLB revenue increased from about $3.4 billion in 2000 to about $8 billion in 2013, a whopping 135 percent.

During the same time period, NBA revenue also saw a significant increase, up 120 percent, from about $2.5 billion to $5.5 billion.

MLB Chief Operating Officer Rob Manfred wrote in an email, “Our player salaries are reflective of the strong revenue growth that has occurred in Baseball under the leadership of Commissioner Selig.”

Powerful MLB agent Scott Boras doesn’t usually agree with Manfred, but he does on this point. He attributes the rise in baseball salaries to the increase in league revenue, as well as the rise in franchise values.

“When franchise prices and revenues are dramatically increasing, you would expect the quid pro quo of 50-50 to operate and that players would receive the rewards of the demand for the game,” Boras said. “You have to remember the franchise values in baseball far exceed those in basketball, the TV contracts and revenues far exceed that of basketball, so that is the reason that you would expect baseball players to be paid more: because the revenues and the franchise values are far greater. The value of the talent, the value of the performance, is far greater because it generates more revenues for the owners.”

                                                  

The reversal of fortune for some superstar players did not happen overnight, but progressed slowly and steadily over the last 13 years, since the beginning of this century.

SportsBusiness Journal examined the deals in all four major team sports during four seasons dating to 1999. Since the seasons for the sports are different, we looked at contracts in place for 2000, 2003, 2008 and 2013 MLB and NFL seasons and contracts in place for 1999-2000, 2002-03, 2007-08 and 2013-14 NBA and NHL seasons.

In 1999-2000, of the 20 players whose contracts had the highest average annual value, 11 were NBA players, led by Kevin Garnett at $21 million a year, based on his six-year, $126 million deal with the Minnesota Timberwolves. Nine of the top 20 were MLB players, led by Kevin Brown at $15 million a year, based on his seven-year, $105 million deal with the Los Angeles Dodgers.

In 2002-03, of the top 21 (three NBA players tied at No. 19 averaging $15 million a season), 11 were NBA and 10 were MLB. The highest-paid NBA player was, again, Garnett in the final year of his huge deal. The MLB player with the biggest annual contract was the Texas Rangers’ Alex Rodriguez at $25.2 million a season, after having signed what was then baseball’s richest deal ever for $252 million over 10 years the year before.

Photo by: AP IMAGES
The trend of sharing the top 20 slots continued over the next five years, as in 2007-08, when nine of the top 20 highest-paid players were in the NBA and 11 were in MLB, including the two highest-paid players in sports, Rodriguez and Johan Santana, both of whom were making $22.92 million a year. During the 2007-08 NBA season, Garnett and Shaquille O’Neal were each benefiting from five-year deals that averaged $20 million a season, topping all other players in the league.

But years later, a shift became more apparent. In 2013, of the top 21 highest-paid athletes in America (two players were tied for 20th place), 13 are MLB
players. Six are NBA players and two are NFL quarterbacks — Baltimore Ravens quarterback Joe Flacco and New Orleans Saints quarterback Drew Brees each at $20.5 million a year. Drill down even further, and you see that eight of the top 10 are MLB players and two are in the NBA.

So the pendulum has swung over the last 10 years when it comes to the highest-paid players, and most agents cited the changes in the individual sports’ collective-bargaining agreements. Most specifically point to when the NBPA agreed to the maximum individual salary in 1999, which was easily one of the biggest deal points — some would argue concessions — by players in a deal that ended the 1998-99 NBA lockout under former Executive Director Billy Hunter.

That change has slowly altered the landscape as NBA players are, on average, the highest-paid players in sports but haven’t sat atop the list of the biggest contracts.

Tellem says of all the concessions made by the NBPA over the last 15 years, “the most devastating giveback” was the cap on individual salaries. Tellem and Falk were both adamantly against the concession at the time, but Hunter agreed to it under pressure of a possible cancellation of the entire NBA season. Individual salaries for NBA players were skyrocketing in the years before the lockout, and NBA owners made cost certainty a major point in negotiations in 1998 and 1999.

Since then, the NHL Players’ Association has agreed to a cap on individual players’ salaries, as well as its first salary cap in the collective-bargaining agreement, which ended the 2004-05 lockout. The individual cap is 20 percent of the applicable overall team cap in any given year, NHL Deputy Commissioner Bill Daly said. This year, the NHL team cap is $64.3 million and the individual salary cap for NHL players is $12.6 million, Daly said.

Although there is an overall salary cap in the NFL, there is no individual salary cap.

“Basketball was the first professional team sport to have an individual player salary cap,” said Tellem, who has never shied away from criticizing the union’s decision. And he finds it especially troublesome when he compares the high-profile stars to those of other leagues. “More than their counterparts in any other team sport, the stars of the NBA determine a team’s success, attendance and financial health. The union’s egregious concession allowing an individual salary cap prevents these players from achieving their maximum earnings potential.”

Photo by: ICON SMI
But Klempner noted that the NBPA has long focused on having and preserving a healthy middle class. “Our average salary is projected to be $5.6 million this year, and more than half of our players earn more than $2.6 million,” Klempner said. “At the same time, on average two players on each team are earning more than $10 million a year, and our 430 players collectively will earn about $2.3 billion this year in salaries and benefits. Our focus is on growing the pie and increasing our share.”

In defense of superstar NBA players, Falk says
no other player in any other team sport has as great an impact on league or team business. He cites Michael Jordan, who was his client when Jordan was a player, and LeBron James, based on what he did for the Cleveland Cavaliers and what he has done for the Miami Heat.

“You pay a movie star for his ability to bring people to the theater,” Falk says. “And you pay a basketball player for his ability to win games and create crowds. There is no sport, other than tennis or golf, which are individual sports — there is no [team] sport where an individual athlete has more of an impact than basketball.”

Superstar NBA players can bring teams a championship, which increases ticket sales, television ratings and, in turn, the overall franchise value of the team, he notes. “A superstar player has a much more disproportional impact in basketball than any other sport,” Falk says. “There are only five players on the floor. In football there are 11 and in baseball there are nine, so by sheer numbers [basketball players have a greater impact].”

Falk also believes that in addition to not allowing the biggest stars in the game to earn their market rate, the maximum cap is unfair because it allows very good players to be paid as much as the mega-stars.

“They are really stealing from LeBron,” he said. “The fact that LeBron and Chris Bosh make the same salary on the same team is absurd. Patently absurd. Chris Bosh is a very good player. But should Peyton Manning and his backup make the same?”

James has been vocal about how the NBA system does not compensate him for the value he brings to the court. Attempts to reach him for comment for this story were unsuccessful.

Tellem noted that there are now about two dozen baseball players who have a higher annual average salary than James.

                                                  

The average salary for all players in the major team sports has increased during the time period that SportsBusiness Journal studied. The NBA still has the highest average salary for its members, but the league’s average salary has seen the slowest growth rate during that period. The MLB average salary is $3.6 million, up 110 percent since 1999; the NHL average salary is $2.5 million, up 84 percent. The NFL average is $2.1 million, up about 159 percent from $810,000 in 1999.

Meanwhile, the NBA’s average salary is $5.15 million, up 43 percent (see chart of four leagues salary growth). But the average salary for NBA players has actually dropped in recent years — from 2008-09 to 2012-13, the average salary dropped 3.8 percent. The NBA 2013-14 season is expected to reverse a slide of four consecutive years of decline in average NBA player salary.

Meanwhile, MLB salaries have risen every year for the last nine years. Tellem cites internal research that compares the salaries of the 400 highest-paid NBA players against the 400 top-paid MLB players.

The results showed that the top 400 MLB players averaged $7.352 million a year versus $5.066 million for the top 400 NBA players.

Some say that is an unfair comparison, as Tellem is looking at virtually all of the players in the NBA, versus the top half of the MLB players. But Tellem still feels the data tell what the trend lines are.

“Baseball salaries have surpassed basketball salaries, and it’s not just the stars,” Tellem said. “It goes way beyond the stars.”




Highest-paid players, based on average annual value

In 1999, the five major league players with the biggest annual paychecks each played in the NBA. Basketball players made up 11 of the top 20 that season. This season, 11 of the 13 highest-paid players are MLB players.

1999-2000

Rank Player Team Total Value (No. of years) AAV
1 Kevin Garnett Minnesota Timberwolves $126.00 (6) $21.00
2 Shaquille O’Neal Los Angeles Lakers $120.00 (7) $17.14
3 Karl Malone Utah Jazz $66.50 (4) $16.63
4 Scottie Pippen Portland Trail Blazers $66.37 (4) $16.59
5 Shawn Kemp Cleveland Cavaliers $107.00 (7) $15.29
6t Kevin Brown Los Angeles Dodgers $105.00 (7) $15.00
6t Juwan Howard Washington Bullets/Wizards $105.00 (7) $15.00
6t Alonzo Mourning Miami Heat $105.00 (7) $15.00
9 Jayson Williams New Jersey Nets $86.00 (6) $14.33
10 Shawn Green Los Angeles Dodgers $84.00 (6) $14.00
11t Mo Vaughn Los Angeles Angels $80.00 (6) $13.33
11t Rasheed Wallace Portland Trail Blazers $80.00 (6) $13.33
13 Randy Johnson Arizona Diamondbacks $52.40 (4) $13.10
14t Mike Piazza New York Mets $91.00 (7) $13.00
14t Albert Belle Baltimore Orioles $65.00 (5) $13.00
16t Bernie Williams New York Yankees $87.50 (7) $12.50
16t Pedro Martinez Boston Red Sox $75.00 (6) $12.50
16t Larry Walker Colorado Rockies $75.00 (6) $12.50
19t Vin Baker Seattle Supersonics $86.00 (7) $12.29
19t Penny Hardaway Phoenix Suns $86.00 (7) $12.29

2013-2014

Rank Player Team Total Value (No. of years) AAV
1 Kobe Bryant Los Angeles Lakers $83.50 (3) $27.83
2 Alex Rodriguez New York Yankees $275.00 (10) $27.50
3 Carmelo Anthony New York Knicks $129.00 (5) $25.80
4t Albert Pujols Los Angeles Angels $250.00 (10) $25.00
4t Felix Hernandez Seattle Mariners $175.00 (7) $25.00
4t Josh Hamilton Los Angeles Angels $125.00 (5) $25.00
4t Ryan Howard Philadelphia Phillies $125.00 (5) $25.00
8 Zack Greinke Los Angeles Dodgers $147.00 (6) $24.50
9t Cole Hamels Philadelphia Phillies $144.00 (6) $24.00
9t Cliff Lee Philadelphia Phillies $120.00 (5) $24.00
11 Prince Fielder Detroit Tigers $214.00 (9) $23.78
12t Joe Mauer Minnesota Twins $184.00 (8) $23.00
12t CC Sabathia New York Yankees $161.00 (7) $23.00
14 Dwight Howard Houston Rockets $87.59 (4) $21.90
15 Chris Paul Los Angeles Clippers $107.00 (5) $21.40
16 Joe Johnson Brooklyn Nets $123.66 (6) $20.61
17 Joe Flacco Baltimore Ravens $120.60 (6) $20.10
18t Drew Brees New Orleans Saints $100.00 (5) $20.00
18t Dirk Nowitzki Dallas Mavericks $80.00 (4) $20.00
20 Amar’e Stoudemire New York Knicks $99.74 (5) $19.95

Notes: All figures in millions. Does not include contracts that have been signed but have not begun.

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