Season Preview and Other Thoughts

The NBA is back! At JPO, we have been watching the league’s doings with a half-dreamy and half-jaded eye since the Heat hoisted the O’Brien trophy last June. The coming season will be exhilarating, as the Heat try to repeat (which would constitute a ninth NBA championship ring for Pat Riley and a third for Dwyane Wade, quietly pushing the latter up the list of all-time great shooting guards); the Lakers try to unite four Hall of Famers for the second time in a decade; young players like Curry, Wall, Cousins, Irving, and Davis seek to fulfill their potential; and mid-tier teams like Chicago, New York, Indiana, Philadelphia, Memphis, Denver, and the Clippers aim to either leap to greatness or possibly dismantle their roster. For the record, I like Miami to win the title again in a rematch with Oklahoma City.

I want to address a distressing trend that continued this summer, however. For years several commentators have cried for the contraction of weak NBA teams that are generally terrible year after year, like Charlotte, Minnesota, or Golden State. The nature of basketball –- a 5-on-5 game potentially dominated by one side that fields the two best players -– makes it easy for a couple squads to collect most of the treasure year after year, and very hard to build a winning team, because the number of dominant studs (perhaps 10 or 15) is very small relative to the pool of all pro players (around 500 who are either rostered or hoping to regain a roster spot during a given season). Thus, the NBA sees the widest variance of results of any of the top North American sports leagues: the best two or three teams regularly win 75% or 80% of their games, while the worst teams win 20%. In baseball, say, the best team wins 60% of its games (winning 100 of 162 regular-season contests is a rare and historic achievement). Pro football often sees superlative (14-2) or putrid (2-14) records, but -– because (1) aggregate talent is more evenly matched in an 11-on-11 game, with separate platoons for offense and defense, and (2) non-guaranteed contracts make it easier for management to manipulate the roster each offseason -– the correlation of success from one season to the next is relatively weak. To consider the NFL’s NFC Central division, Green Bay finished 15-1 in the 2011 campaign and now is 4-3 in 2012. The Detroit Lions, which started last season 10-5, subsequently lost 6 of 8 games in calendar year 2012. The Chicago Bears were 8-8 in 2011 and now stand at 5-1; Minnesota was a lousy 3-13 last year but has started this season 5-2. (The low sample size that comprises the NFL regular season –- only 16 games –- contributes to the seemingly sharp swings of performance from one year to the next. Within a given NBA season, many teams might experience something like a 3-13 stretch and a 5-2 stretch.)

If a few NBA teams could be eliminated and their best players handed to middle-class squads like Utah, Milwaukee, or Atlanta , the league might have greater equity of talent distribution, which would make more games 50-50 affairs. This past summer saw several trades that amounted to the fruits of a putative dispersal draft: Orlando dealt Dwight Howard and Most Improved Player Ryan Anderson, Phoenix contributed Steve Nash, Atlanta shipped out Joe Johnson, and Houston gave away all their veterans. And lo, the Magic, Suns, and Rockets are poised to be terrible this season; few fans aside from locals in those metropolises would mind if the teams disappeared. This experiment might be worthwhile if it helped some fringe playoff teams rise above their past mediocrity. But the recipients of these players were mostly not playoff hopefuls or the near-contenders like Memphis and Indiana mentioned above; rather, it was championship-caliber squads who swelled their ranks with top guys. Boston picked up former Finals starter Courtney Lee in a one-sided trade, Los Angeles added likely Hall of Famers Howard and Nash for only the weak-kneed Andrew Bynum and future draft picks; Brooklyn (née New Jersey) added Joe Johnson to a roster that already included past All-Stars Deron Williams and Gerald Wallace; and, just yesterday, Oklahoma City took perennial 20-point scorer Kevin Martin and two future lottery picks off Houston’s hands. (To be fair, Houston picked up budding star James Harden in the trade, so the deal was fair, but the Rox will struggle for a couple years with a bevy of young players. 22-year-old Harden similarly struggled in the Finals last spring.)

Let us consider Las Vegas’s odds** on particular teams to win the 2013 NBA championship:

Miami – 9:4 (31% chance)

L.A. Lakers – 11:4 (27% chance)

Oklahoma City Thunder – 17:4 (19% chance)

Boston Celtics – 16:1 (6% chance)

Chicago Bulls – 16:1 (6% chance)

San Antonio Spurs – 16:1 (6% chance)

The Clippers have roughly a 4% chance in this scheme, and every other team has yet slimmer odds. If I am a typical parochially-oriented fan and my favorite team’s chance of a championship is consistently less than 5% (and the Lakers, Celtics, and Spurs have hogged those odds tables for the last five years, while the Thunder will likely receive generous odds for the rest of this decade), why should I care? It is clear that without at least two All-NBA-caliber talents on a squad, a team’s goose is headed straight for the roaster. The Detroit Pistons of 2004 are commonly presented as the rare starless team that won a championship and managed to sustain contendership for several seasons, but they featured Ben Wallace (four All-NBA selections), Rasheed Wallace (four All-Star selections), and Chauncey Billups (five All-Star selections and three All-NBA selections).

If a team cannot snag a Hall of Fame-level player via draft or free agency, it has little hope of winning. Consider, for example, the Toronto Raptors. They won the NBA’s top draft pick in 2006, when the best players available were Andrea Bargnani, Adam Morrison, Tyrus Thomas, LaMarcus Aldridge, Brandon Roy, and Randy Foye. Had they won that pick in 2003 (James, Wade), 2004 (Dwight Howard), 2005 (Paul, Bogut, Williams), 2007 (Durant or even Oden, who likely could have seen a promising career with better medical treatment), 2008 (Rose, Westbrook, Love), or 2009 (Griffin), the Raptors might be building a championship squad now. They have never been able to draft a superstar, instead choosing secondary stars like Vince Carter and Chris Bosh who could not alone lead the team to relevancy and left the cold climes of T.O, barren of basketball lucre, at the first opportunity. The Raptors’ poor draft timing was not the “fault” of the organization, but the result is just as maddening. But that’s basketball, right? It’s a five-on-five game and a couple top guys are necessary and nearly sufficient to win. That has been true since Russell and Cousy clambered across the parquet in Boston .

A few prescriptions have been thrown out to prevent too much clustering of talent: a “franchise” tag, as the NFL uses, to deny free agency to one star per team (but this seems arbitrary and mean); financial incentives like the “luxury tax” to discourage high aggregate team salary (but the threshold for punishment has been set high enough relative to individual salaries so that three great players can still comfortably sit on one team’s payroll); and removing the cap on individual salaries. It is this final step that I am beginning to favor. Without an individual cap (the “max” rule), LeBron James would command at least $30 million in an open bidding war instead of $16 million. Adding Dwyane Wade next to him would put aggregate salary close to $60 million just for those guys, and even if the luxury tax line were retained at its current level (around $70 million) rather than reduced, no team could field a profitable and effective squad around these two players. Stars like James and Wade (or Durant and Westbrook) might agree to take a small bit less than $30 MM for the organization’s benefit, but the haircut would not be enough to make the union of two of these guys feasible. 

So those are my thoughts on an owners' agenda for the next collective bargaining round in a few years. The union would likely oppose this, because with the total nominal dollars of league-wide player salary essentially fixed by the CBA (it is a linear function of revenue, which no clever agent can do much to change), increasing salaries for a few superstars would mean a reduction of salary for everyone else.

At any rate, let's play ball! =========================================================
**These are not necessarily Vegas’s best guesses of probabilities, but rather the lines that bring in equal money on both sides of the respective bet. Perhaps bettors with parochial allegiances consistently over-rate their team’s chances, inflating the Vegas odds above the “true” value. I mention this largely to explain why the numbers sum to over 100%.

Linsanity Runnin' Wild at the USPTO

Jeremy Lin apparently is caught in a trademark battle with the U.S. Patent and Trademark Office over the term "Linsanity". Some enterprising lads (or "trademark trolls", depending on one's view of government-granted economic rents) already filed to own the term soon after Lin took a starting role for the Knicks several weeks ago.

A search of the United States Patent and Trademark Office's online database shows an entertaining set of hucksters who filed the term "Linsanity" in the month of February. (Some of the text below for Proposed Use includes my paraphrasing from the original.)

1. Owner: John S. Yuan, Lexington, MA. Filing date: 2/20/2012. Proposed use: Eyeglasses, spectacles

2. Owner: Parace, LLC (a New York company**). Filing date: 2/20/2012. Proposed use: Sports drinks, advertising services, action figures, head bands, wrist bands, watches, visors, sporting towels, back packs, duffel bags, thermal flasks, computer gaming software, social networking internet platforms, virtual goods, and more...

** A further internet search reveals that Parace, LLC was organized in 2004 and is based in Westchester County, New York. This company has filed, successfully and unsuccessfully, for several other trademarks over recent years, including Xopod (whatever that is), Achieve the Ultimate, Teeped, and Snoopermarket.

3. Owner: Parace, LLC again. Filing date: 2/19/2012. Proposed use: Computer game software, computer software platforms, downloadable electronic game programs, computer software to enable uploading for virtual communities, blah, blah, blah...

4. Owner: Empioneer Corp.** of California. Filing date: 2/19/2012. Proposed use: Cell phone backplates, cell phone cases, cell phone covers, cell phone faceplates.

**A further internet search shows that Empioneer Corp. was organized in 2006 and does business in Los Angeles as an importer of Chinese-manufactured sunglasses.

5. Owner: Empioneer Corp. again. Filing date: 2/19/2012. Proposed use: Sunglass cases, safety eyewear, sunglasses, spectacles, etc....

6. Owner: Roger Montgomery. Filing date: 2/14/2012. Proposed use: Business management of sports people.

Note that Roger Montgomery is Jeremy Lin's agent (and has been since the beginning of Lin's pro career). According to the USPTO, Montgomery filed an abandonment form soon after initially filing this application, so his claim is apparently null and void now.

7. Owner: Yoonsoo Stephen Kim of Duluth, GA and Wesley Kwong-Yew Tang of Los Angeles, CA. Filing date: 2/14/2012. Proposed use: Jewelry, namely, bracelets, wristbands and necklaces that also provides nitification to the wearer of a pending medical-related task; rubber or silicon wristbands in the nature of a bracelet.

8. Owner: Jeremy Lin himself, filed by his attorney from the Arent Fox LLP law firm in Washington, DC. Filing date: 2/13/2012. Proposed use: A bunch of stuff including duffel bags, knapsacks, cups, mugs, aluminum water bottles, plastic water bottles, insulating bottle sleeves, T-shirts, jackets, hooded jackets, coats, headbands, sweatbands, belts, shoes, slippers, sandals, toys, drinks, beverages, and so on and so forth...

9. Owner: Andrew W. Slayton of Los Altos, CA. Filing date: 2/9/2012. Proposed use: Athletic apparel.

Slayton was the men's basketball coach at Lin's Palo Alto high school after Lin left Palo to matriculate at Harvard. Apparently Slayton, likely without Lin's permission, has been operating a website at the domain name WWW.Linsanity.com (a solidly constructed site, actually) since 2010. While he might have the best basis for filing of any claimaint, as he is already commercially exploiting the term "Linsanity", his claim will fail (like all the other filings save Jeremy Lin's) due to the statutory principle that a trademark cannot refer to an actual person without that person's permission.

10. Owner: Yenchin Matthew Chang of Alhambra, CA. Filing date: 2/7/2012. Proposed use: This list is a doozy, including apparel for dancers, baseball caps, button-front aloha shirts, camouflage shirts, chef's hats, fishing shirts, golf pants, hunting shirts, leather hats, moisture-wicking sports shirts, paper hats, rugby shirts, toboggan hats, triathlon clothing, turtleneck shirts, woolly hats, yoga shirts, and much more.

As a side note, other recent trademark filings in the USPTO database include "Linning Is The Only Thing", "Linspiration" (also advanced by our friends Wesley Kwong-Yew Tang and Yoonsoo Stephen Kim), "I'm A Linner", "Be A Linner", and "Lin-credible".

Commitment-phobes Rule the League

In a normal offseason, contract extensions for 2008 draftees would have been completed by October 31st, 2011 and no later. However, thanks to the now-pummelled lockout, no transactions could be completed last summer, and the contract extension deadline has been moved to January 25th, i.e., tomorrow. Strangely, we have not heard much news of contract extensions lately: compare this to October of 2010, when Kevin Durant and Al Horford and Mike Conley, Jr. and Joakim Noah all extended their deals, or the fall of '09, when Rondo, Roy, Bargnani, Aldridge, and Rudy Gay all re-upped with their teams. Thus far, from among the 2008 draftees, only Derrick Rose and Russell Westbrook have signed contract extensions, both committing through the 2016-17 season. What of the un-extended players?

Let us consider every first-round draft pick from 2008 (different contract rules apply to second-rounders), ignoring Rose and Westbrook. I will ignore players who have not succeeded as regular rotation members: this set includes Joe Alexander, Anthony Randolph, Marreese Speights, Alexis Ajinca, Kosta Koufos, and J.R. Giddens. (Of late, Speights has earned some starting time in Memphis, but that is due to injuries to the Grizzlies' two other power forwards, Darrell Arthur and Zach Randolph. Speights earned no floor time in Philadelphia, a young team with no backup big men.)

Michael Beasley: This is an easy one. Beasley has proved personally and athletically mercurial. The Timberwolves have a power forward from the 2008 draft in Kevin Love (discussed below), a small forward from the 2010 draft in Wesley Johnson, and a "tweener" forward from the 2011 draft in Derrick Williams. With this array of talent, the Wolves need not keep Beasley beyond this season (recall that they obtained him in 2010 for merely a second-round draft pick, so they have little psychological investment in him). Perhaps they could try to trade him during this season, or next July in a sign-and-trade when he becomes a restricted free agent.

O.J. Mayo: Despite frequent trade rumors during the past 12 months, Mayo contributed to Memphis's surprising playoff run last spring and is sniping the ball with rare accuracy this season. The Grizzlies reportedly will not extend his contract this week, but they still hope he will stay around for a few more years. This is likely a wise move; Mayo will expect money worthy of the third pick in the draft, but with Tony Allen expertly manning the shooting guard position with "grit and grind" for Memphis, paying him that salary would be daft. Mayo will likely command more in the restricted-free-agent market than Grizzlies management wishes to pay him.

Kevin Love: Well, of course. If the insane scoring and rebounding are not persuasive, how about the unusually skilled passing and shooting for a big man? The Timberwolves reportedly will offer Kevin Love a four-year extension through 2015-16. SI.com's Zach Lowe assesses this potential deal and finds it fair. If the Wolves' refusal to include a fifth year deters Love from signing, general manager David Kahn should be fired. At any rate, NBA.com's Steve Aschburner has a good discussion, published here today, of the negotiating dynamics between Love and the team.

Danilo Gallinari: After the trade of Carmelo Anthony, Gallo has emerged as Denver's best player. He scored 37 points in a double-OT win over Anthony and the Knicks last Saturday -- "out-Meloing Melo", as the Denver Post termed it. Denver has a strong young core with Ty Lawson, Nene Hilario, Corey Brewer, and Arron Afflalo already under contract (and Wilson Chandler likely returning soon). Extend Gallinari and continue developing a roster of swift young colts.

Eric Gordon: Gordon has been injured with a bad knee for most of this young season, and he missed 20 games in 2009-2010 and 26 games in 2010-11. His fragility can't help his case. Still, in his third season with the Clippers, he averaged 22 points and over 4 assists, dueling with James Harden for the honor of best young shooting guard in the league. He is the Hornets' best player, though he was unhappy about being pushed out of Los Angeles and reportedly felt in December like leaving New Orleans as soon as possible. More recently, with big money about to slip through his fingers and wash over the deadline cliff, Gordon has expressed interest in signing an extension. With the Hornets co-owned by the other 29 owners, however, and the joint owners trying to minimize long-term financial obligations for the next owner, team GM Demps has a difficult time negotiating and executing big transactions like this one, as we saw in the Chris Paul trade talks. If I were Demps and I had any kind of authority, I would ink Gordon to a contract extension. The injuries are worrisome, but it has been a different body part in each season (groin, wrist, knee) and he can really go when healthy.

D.J. Augustin: Augustin has played decently this season (check his numbers) but the Bobcats' drafting of NCAA champion Kemba Walker does not evince much confidence in Augustin at the point guard position. The Bobcats hardly know if their team can win more than ten games this season or next. Extending Augustin would be a mistake.

Brook Lopez: This one perplexes me. Why hasn't NJ signed Lopez to a speedy re-up? New Jersey wants to trade Lopez for Dwight Howard. But Lopez is of little value to Orlando if not signed beyond 2011-12. If Lopez wanted to leave Orlando, then under the CBA rules, Lopez could accept Orlando's qualifying offer for 2012-13, then sign anywhere as an unrestricted free agent in July of '13. Sure, Lopez would be leaving some money on the table in 2012-13 and risking that injury during the 2012-13 campaign might ruin his long-term value. But under league rules, a determined player can leave his team fairly readily. So again, why would Orlando trade for a player whose contract will soon end? New Jersey should extend Lopez's contract if it is at all serious about building a winning squad. He is the best player on the team save Deron Williams, and Williams looks set to leave later this summer as an unrestricted free agent if the team cannot land Howard. So if the Nets can trade for Howard, an extended Lopez is valuable; and if the Nets cannot trade for Howard, an extended Lopez is still valuable. Do this deal. Lopez's broken foot is worrisome, but this injury should not dog him beyond this season.

Jerryd Bayless: No. Amazing to think that Bayless and Westbrook were considered interchangeable options leading up to the '08 draft.

Jason Thompson: Thompson has drifted in and out of the Kings' starting lineup during the past four years. Sacramento now fields two power forwards from the 2008 draft, in Thompson and J.J. Hickson (mentioned below). They surely cannot extend both-- but could they extend one and not the other? That sounds disastrous for team chemistry, and probably not justified on basketball grounds, as neither player has consistently excelled. Put it this way: Could Thompson or Hickson be a starter on a championship-level team? Well, Hickson actually did start for a title contender in Cleveland in 2010, so I suppose anything is possible, but neither man has impressed much in Sacramento. I would wait to see how Thompson and Hickson perform with DeMarcus Cousins in new coach Keith Smart's system before making long-term decisions on their contracts.

Brandon Rush: Rush, the 13th pick in the 2008 draft, is a middling bench player for Golden State, having been recently traded from Indiana for "energy guy" Louis Amundson, who brings little more than defensive disruption. Rush is performing well this year, shooting the ball at 50% from the field and over 50% from 3-point range, but he looks at Monta Ellis manning his position during player introductions every night. Nor is Rush a handy sixth starter like Jason Terry or James Harden: Rush hardly rebounds or assists, and he failed to impress while starting for Indiana last season. So long as the Warriors remain committed to Ellis, extending Rush would be a mistake.

Roy Hibbert: The local paper in Indy reports that the Pacers will not offer Hibbert an extension. Odd decision, as the Georgetown product is killing it this season, most recently helping his team edge out the Lakers by 2 points on Sunday in Staples Center. Hibbert averages 14 points, 10 rebounds, 1.5 blocks, and a number of defensive intimidations every night. The Pacers have a solid young roster with Darren Collison, Tyler Hansbrough, George Hill, Paul George, and Hibbert. (Other starters Danny Granger and David West are still solidly in their prime, but could not be reasonably deemed "young".) I can't understand why the Pacers would not want to lock up Hibbert, unless they are seeking to retain salary-cap room for a significant free-agent signing (Eric Gordon? Heck, Dwight Howard?) later this summer.

Robin Lopez: With Marcin Gortat excelling as their starting center, Lopez is not a vital cog to the Suns. And team president Lon Babby told a reporter yesterday that he does not intend to extend Lopez.

JaVale McGee: McGee is the Wizards' only young big man with promise (I exclude Andray Blatche from that category). Though his defense positioning is sometimes wanting, he averages 11 points, 9 rebounds, and 3 blocks in this young season, making him statistically an apparent top-10 center. (For the curious, the others would include Dwight Howard, Andrew Bynum, DeAndre Jordan, Marc Gasol, Andrew Bogut, Samuel Dalembert, Marcin Gortat, Al Jefferson, and Roy Hibbert, with Tyson Chandler just excluded.) The Wizards fired their coach, Flip Saunders, earlier today after a 2-15 start. With a new helmsman taking over in DC today, perhaps McGee will further develop his offensive game. However, I don't believe McGee should be rewarded at this time for contributing to such a wretched squad. The Wizards can likely retain McGee by matching any offer sheet he signs as a restricted free agent this July.

J.J. Hickson: See Thompson discussion above.

Ryan Anderson: Another writer has already considered the question of Anderson's extension: Oh hell, yes. With Dwight Howard, Anderson is a terror on the perimeter and a solid rebounder. Extending him could help persuade Howard to stay past this season. Without Dwight Howard, Anderson's role could shrink, as he has not yet developed much of a post-up or face-up game. Anderson is a good man to have on your roster with Dwight Howard in the middle, but I cannot determine his value in the counterfactual world without Howard. (As a Net rookie in 2008-09, his numbers were poor in 20 MPG, but [A] he was a rookie, and [B] it was the Nets.) Strangely, I have not read any reports of a looming contract extension for him. The case is close, but given the uncertainty over Howard's tenure, I would not extend Anderson. Likely, the team can match a RFA offer for him next summer.

Courtney Lee: Lee started on Orlando's 2009 Finals team (and nearly won Game 2 against the Lakers with a spectacular inbound oop-to-layup play that tragically failed) before he was deemed expendable the following summer, traded for Vince Carter. Since then, Lee was a reliable starter for the 2009-10 Nets, but got traded again in the fall of 2010 as part of the four-team, five-man Hornets-Pacers-Nets-Rockets trade. In Houston, Lee has struggled to find playing time behind wing players such as Kevin Martin, Shane Battier, Chase Budinger, and now Chandler Parsons. If you can't beat out a Chase and a Chandler, you may not be that good. And Lee, who played four years in college, is already 26 and may not have much more improvement in him. Needless to say, an extension would be foolish. Here, though, is perhaps the highlight of Lee's career:

Serge Ibaka: On a team with two offensive powerhouses, Ibaka plays his role very well: he cleans up missed shots and defends opposing forwards when the slender Kevin Durant cannot. He also produces about 2 blocks per game. Ibaka likely will develop his offensive game further in coming seasons (he is still only 22) but the Thunder seem to win quite well with him right now. Ibaka's contract should be extended... but actually, he will not be eligible for a contract extension until the 2012 offseason, because he did not actually debut in the NBA until November of 2009. Basketball common sense says that the Thunder should certainly extend both Ibaka and Harden later this year, but a P&L statement (with limited revenue in a relatively small market, the Thunder owners simply may not want to add so much salary and luxury tax to their payroll) may decide the team's move.

Nicolas Batum: A January 13th report in The Oregonian mentioned negotiations on Batum's extension, but nothing has been concluded yet (a report yesterday indicated that talks continue). Still just 23, Batum has been a sometime starter during his career; this season, Gerald Wallace has supplanted him as the Blazers' starting small forward, though the limited availability of Marcus Camby and the non-availability of Greg Oden has created starter-level minutes for Batum. (It helps that LaMarcus Aldridge can shift to center and Wallace to PF when needed.) While not a dominant scorer like other small forwards (see Gallinari, above), Batum is deadly from 3-point land and shoots free throws at a very high percentage. His long arms also make him a plus defender. With the Portland future of Camby and Oden highly questionable, Aldridge's future may be as a center-- and thus Batum should be pencilled in as the Blazers' small forward of the present and future. With Ray Felton's contract expiring this June, Portland has salary-cap flexibility. Extend quick Nic!

George Hill: Reports indicate that the Pacers are discussing the sketches of an extension with Hill's agent. While Hill, who shoots a stellar percentage for a guard, has outperformed Brandon Rush (whom Hill basically replaced as the first guard off the bench in Indiana), I would not extend Hill at this time; budding star Paul George already plays his position. With George's height, he appears bound for a SF role, which would mean the expulsion of Danny Granger-- perhaps for a true shooting guard. At any rate, the Pacers have been very financially careful in recent years since breaking up the Artest-Tinsley-Jackson-O'Neal team, and George Hill, while a very good player, is not worth the obligation it would cost them. They can probably lock up Hill at a reasonable price as a restricted free agent next July, after carefully considering what to do with their current roster.

Darrell Arthur: Arthur was a very good first big man off the bench last season for Memphis. However, he unfortunately tore his Achilles tendon last month and will miss the whole season. Were he healthy and still producing, I might advocate an extension, but his injury makes this decision clear.

Donte Greene: Greene has shown little excellence in any skill during his four years in Sacramento; he could not beat out Omri Casspi or Travis Outlaw as the team's small forward, and he consistently shoots over two 3-pointers nightly despite a 30% (or less) success rate. Not a chance.

D.J. White: White, formerly a benchwarmer in Oklahoma City, has received stepped-up exposure this season for the woeful Bobcats. White can ball (10 points and 5 rebounds in 25 MPG) but with Tyrus Thomas also on the roster, an extension for White seems ill-advised at this time, especially with only a dozen games to judge him on.

So to review, I am recommending extensions for six players in addition to Rose and Westbrook: Love, Gallinari, Gordon, Brook Lopez, Hibbert, & Batum. While eight extensions is more than previous draft classes enjoyed, the '08 draft was unusually deep. Why not?

Robber Barons Up In The Frozen Tundra

Last year I expressed dismay that Mike Ilitch, owner of the Detroit Red Wings and Detroit Tigers, was seeking to get his hands on the Pistons as well. In the event, a different buyer bought the Pistons from Karen Davidson and I was pleased.

Today comes news that Rogers Communications and Bell Canada are buying Maple Leaf Sports and Entertainment from the Ontario Teachers Pension Plan. Rogers and Bell will each have a 37.5% stake. Though MLSE, Rogers now is the effective co-controlling owner of the Raptors, Maple Leafs, Air Canada Centre, and (not mentioned in the Reuters article) Toronto FC of Major League Soccer. And Rogers already owns a controlling share of the Blue Jays and Skydome (er, excuse me, "Rogers Centre"). The only independently owned pro club in Toronto is now the Argonauts.

This cannot be good news for Toronto sports fans or cable TV subscribers. Rogers and Bell each own a cable TV channel (Sportsnet and TSN) and collectively they hope to corner the market on Leafs and Raptors broadcasts. Ticket prices and sports apparel will likely spike as well. Canada's Competition Bureau must stop this purchase.

More Changes In The Association This Season

Today the NBA announced two important sets of changes for the 2011-12 season: one impacting on-court play, and one impacting off-court business matters. Both developments are positive, in my view.

The CBA
The new Collective Bargaining Agreement contains tweaks to numerous league protocols. Notably, the new CBA allows a player to renegotiate an existing contract for lower annual money but more years, if the annual salary reduction is no more than 40%. This provision would allow, say, Amare Stoudemire and Carmelo Anthony to take a bit less money in 2012-13 and beyond in order to create more salary-cap room for the Knicks to sign Chris Paul or another top free agent. [Reports Thursday indicate that the Knicks intend to sign Tyson Chandler to a large long-term contract that would cover 2012-13 and beyond. The contracts of those three guys would eat up most of the $58 MM salary cap. Theoretically, all three of Chandler, Stoudemire, and Anthony could agree to reduce their salaries sufficiently to make room for Paul at a large number; perhaps each of them could earn $13 MM annually, say.]

The new deal also sets the minimum team salary at (after a couple years of transition) 90 percent of the salary cap, rather than 75 percent. This provision will help further the goal of competitive balance; cheap owners such as Donald Sterling or Glen Taylor will be forced to hire at least a few middling (as opposed to terrible or very young) players to fill out their roster.

The contentious minimum age for draftees was not changed, but apparently punted to be decided by a future union-league committee. I have previously advocated in this space for the age limit to be raised to two years post-college.

GAME RULE CHANGES
The previously over-generous shooting fouls granted in "rip-through" or "and-one" situations, wherein the shooter was clearly not in a shooting motion before the foul, will be curtailed. Travelling rules will be enforced more strictly (LeBron James's "crab dribble", which we reviewed in this post in 2009, will no longer be legal) and timeouts will be made to conform to the billed 20-second or 60-second lengths. Here at JPO, we have long criticized inconsistent rule enforcement, and this news begets great happification in our hearts.

Worry Not, Flyover Fans

I was on a long trip abroad and somewhat physically infirm for the past couple weeks, but a lot happened in NBA circles. The remnants of the players' union finally agreed with the owners on the framework of a new Collective Bargaining Agreement, and the lockout is more-or-less now over. Immediately thereafter, rumors began flying about potential trade destinations for Chris Paul and Dwight Howard, who will be free agents next summer and don't seem inclined to re-sign with their respective current teams.

Fans of teams in smaller burgs tend to lament the inevitable loss of star players. But, first, the loss is not inevitable: Tim Duncan stayed in San Antonio, Kevin Durant seems bound to remain in OKC, and Isiah Thomas spent a whole career in Detroit. And consider that Kevin Garnett stayed in Minnesota for 12 years; save for one year when Sam Cassell played like an All-Star, the team could not assemble quality talent around him. 12 seasons was more than Garnett owed to the team.

Secondly, if your team loses a star, another will come soon enough. Orlando lost Shaq and Penny; Hill and McGrady soon replaced them. When they proved too brittle for the job, Dwight Howard and Rashard Lewis rolled into town. Minnesota lost Garnett and now has Love. The Kings of Sacramento once had a robust Webber; now they have a rambunctious Cousins. The annual draft that assigns the best talent to the worst teams tends to do that. Toronto lost Vince Carter but found themselves nurturing a college-aged Bosh. Bosh left, but now Jonas Valanciunas seems poised to shine in T.O. [Toronto is hardly a small market, but its relative unattractiveness for American players makes it comparable to Detroit or Orlando.]

Consider the recent plight of the Grizzlies, a 1995 expansion team. Originally based in Vancouver, the team held Top-6 draft positions every year from 1995 through 2003*, drafting Bryant Reeves, Shareef Abdur-Rahim, Antonio Daniels, Mike Bibby, and Stromile Swift along the way. Steve Francis, drafted at #2 in 1999, actually refused to play for the team, exhibiting the same Canuckophobia discussed above. Despite the repeated lottery picks, Vancouver could not build a winning team, mostly due to a poor overall talent level in the draft in those years. (None of Vancouver's draft picks could be derided as obviously terrible. They missed Kevin Garnett by just one draft position; nobody thought Kobe Bryant would be a superstar in '96; the '97 draft pool was terrible; and Mike Bibby had won a college championship while Paul Pierce had not. The 2000 draft was possibly the worst ever.) Owner Michael Heisley could not make the economics of pro hoops work in Vancouver, so he moved the team to another relatively small market, Memphis.

*Memphis's 2003 first-round pick, which obtained as #2 in the lottery, was traded to Detroit.

Heisley and his management were determined to start freshly in their new home. The '01 draft night served up a bounty for the Grizzlies, as they acquired rookie Shane Battier with their lottery pick and rookie Pau Gasol via a trade of Abdur-Rahim. Later that summer, they swapped Bibby for Sacramento's flashy disher, Jason Williams. Gasol won Rookie of the Year that season, and this core of players (plus the aforementioned Swift) was able to reach the playoffs in three consecutive springs from 2004 through '06. Unfortunately, the Grizzlies got swept each time, out-talented by Tim Duncan, Steve Nash, and Dirk Nowitzki. After three straight playoff failures, Gasol wanted out; the team had no apparent intention of improving the roster, and Gasol wanted to win. Memphis sought his exit, also: he was clearly not good enough to captain a championship team, and Memphis had no obvious means of acquiring a better superstar with Gasol on the roster.

Thus, starting in '06, the Grizzlies jettisoned their playoff roster and began rebuilding the team. They traded Battier for a draft pick that became one-and-done college prospect Rudy Gay; they acquired Mike Conley in the '07 draft; they traded Paul Gasol for the draft rights of his brother, Marc Gasol; they drafted O.J. Mayo and Darrell Arthur in the talent-laden 2008 draft; and they later drafted Sam Young, Greivis Vazquez, and Xavier Henry. Those are eight players who began their careers with Memphis and are still part of the team. Combined with veteran Zach Randolph, acquired in a 2009 trade, and defensive ace Tony Allen, signed as a free agent last year, the Grizzlies now have a deadly core that can contend for championships for the next few years. Taken seriously by no one, they rolled over the 4-time champion Spurs and nearly made the Western finals last spring.

Twice now, the Grizzlies have restocked their roster with new stars. Fans in Memphis were despondent one year ago, fearing their team might be contracted, but now they have reason for glee. Even fans in Vancouver need not mope; their city might one day get a new or existing NBA team, notwithstanding the earlier divorce.

The lesson here is that smart roster management can sustain a great team in a small market. Dumb roster management, such as the Timberwolves under Kevin McHale, will lead to naught.

A Tidy Model of Team Salaries

I attempted to illustrate the problem of salary inequality in my September 26th post, but my explanation was a bit clumsy; let me try again in clearer language this time. The percentage of Basketball-Related Income that players in aggregate receive (currently pegged at 50% in the latest negotiations, and formerly 57% in the 2005 labor agreement) determines total salaries, but does not determine the inter-player distribution of salaries. Let us take a simple example. Say total BRI is projected at $100. Say there are only two teams in the league, each with six players-- five starters and a sixth man. Let us use the 57% number from the '05 deal. Under such terms, all players combined will receive $57. The top two stars (LeBron James and Kobe Bryant, say) might receive $16 each. (Assume player salaries are capped at $16.) If the "mid-level exception" is capped at $5.33 per year, then some team will likely sign a secondary free-agent player (Jamal Crawford, David West) at $5.33. [Why wouldn't a team sign free agents for less? Is Jamal Crawford really 1/3 as good as James or Bryant? In a competitive bidding scenario, with limited quality free agents, teams are forced to overbid up to the individual cap, lest they wind up with nothing, which would guarantee that their roster will remain stagnant.] Each team then pays a total of ~$7.2 (averaging $1.79 per player) to its remaining four players, so each team's payroll is $28.5 and aggregate league spending is $57. So to recap, here are the salaries:

Team King
LeBron James - $16
Jamal Crawford - $5.33
King Scrub 1 - $1.79
King Scrub 2 - $1.79
King Scrub 3 - $1.79
King Scrub 4 - $1.79

Team Mamba
Kobe Bryant - $16
David West - $5.33
Mamba Scrub A - $1.79
Mamba Scrub B - $1.79
Mamba Scrub C - $1.79
Mamba Scrub D - $1.79

Now imagine the season's Basketball-Related Income is tallied up and it is not actually $100, but really $90, which is 10% under $100. Every salary thus will be rolled back by 10% to maintain the 57% of BRI ratio. The new salaries will be:

Team King
LeBron James - $14.4
Jamal Crawford - $4.8
King Scrub 1 - $1.61
King Scrub 2 - $1.61
King Scrub 3 - $1.61
King Scrub 4 - $1.61

Team Mamba
Kobe Bryant - $14.4
David West - $4.8
Mamba Scrub A - $1.61
Mamba Scrub B - $1.61
Mamba Scrub C - $1.61
Mamba Scrub D - $1.61

Now total salaries are $51.3 (57% of $90). However, notice that regardless of how the total dollar amount of BRI comes out, if we fix aggregate salaries at 57% of BRI and assume certain other individual salary caps, then the best player on the team will always earn three times what the second-best player makes, and about 9x the salary of each role player.

Now, let us assume again that total BRI is $100, but, after some bitter labor negotiations, let us tweak two features of the system: first, player share of BRI falls to 50% (so each team has a payroll of $25), and the mid-level exception salary for free agents falls to $3. Assume the maximum salary remains at $16. What now?

Team King
LeBron James - $16
Jamal Crawford - $3
King Scrub 1 - $1.5
King Scrub 2 - $1.5
King Scrub 3 - $1.5
King Scrub 4 - $1.5

Team Mamba
Kobe Bryant - $16
David West - $3
Mamba Scrub A - $1.5
Mamba Scrub B - $1.5
Mamba Scrub C - $1.5
Mamba Scrub D - $1.5

Notice, now, that James and Bryant make more than five times the salary of their respective running mates, and nearly 11x the salary of their scrubs. [Now imagine again that BRI falls to $90 instead of $100. The numbers immediately above will all be reduced by 10%, but the ratios of salaries between different players will remain the same. I will omit that presentation so as not to bore you too much.]

Who suffers here? Obviously, mid-level-exception-caliber players suffer a lot, seeing their salary reduced by 44%, from $5.33 to $3. Scrub players also see their salary reduced by 16%, which is more than the percentage reduction, 12%, in the players' aggregate BRI share. Mid-level players are asked to bear much of the player suffering, and scrubs get hurt as well, disproportionately to the union's overall hit. Superstars like James and Bryant don't suffer one bit, at least in my example (and, I believe, in the owners' actual proposal).

Of course, if I scaled up the dollar value of BRI sufficiently (more and more eyeballs are watching the Association in China), I could construct a set of numbers where Crawford, West, and the scrubs are making an equal or better salary in dollars under the new regime, compared to the old regime. Say BRI blows up to $180 (so the players' share is $90 and each team has a payroll of $45), and the individual max salary, and the mid-level exception salary, are both increased by 80%.

Team King
LeBron James - $28.8
Jamal Crawford - $5.4
King Scrub 1 - $2.7
King Scrub 2 - $2.7
King Scrub 3 - $2.7
King Scrub 4 - $2.7

Team Mamba
Kobe Bryant - $28.8
David West - $5.4
Mamba Scrub A - $2.7
Mamba Scrub B - $2.7
Mamba Scrub C - $2.7
Mamba Scrub D - $2.7

This scenario is entirely possible with the projected growth in league revenues during the coming decade. The scrub salary (which is also the median player salary) is higher under such assumptions. And perhaps the inability of teams with one superstar to sign another very good player (due to the paltry mid-level-exception salary for tax-paying teams) will encourage parity among teams, thus juicing fan interest. Posit for a moment that the new system could actually contribute, by itself, to BRI growth, and my imagined 80% growth of revenues would not happen with the 2005-2011 rules. So why wouldn't players be happy with this deal? Well, note that now, as I mentioned above, the superstar makes over 5 times the salary of his best teammate, and over 10 times the salary of his worst teammates. Under the 2005-2011 regime, those values were 3 and 9.

So inter-player inequality is worse under the new system, even if the average player is earning more money. Is that enough to make the deal objectionable? Note that most of the NBPA could be charitably called "scrubs": only about 3 players on each real team are vital for amassing wins, and the rest are interchangeable. The composition of the NBPA's executive committee suggests this: 8 of the 9 guys are far from All-Stars. It is the scrubs whom union President Fisher and Executive Director Hunter toil for. How much do players mind inequality of income between them and their best teammate? Perhaps the knowledge of 11-fold inequality could lead to locker-room resentment, even if James, Bryant, Wade, Howard, Durant, and the like really do drive ticket and jersey sales to that degree. Looking beyond pro hoops at the broader political-economic system in our society, a majority of Americans don't seem to like the extent of income and wealth inequality that has developed during the past 30 years.

I am not sure whether the players are really resentful over the prospect of intra-union salary inequality, or whether they are just mad at losing their 57% and not inclined to give the owners a "win" just yet. However, judging from the rhetoric of some player representatives, there is a good argument that the players might rather be poorer and more equal, rather than richer and further apart.

It's About Time

What took so long for NBA players to make a serious push at decertification of their union? Pre-emptively taking your best negotiating threat off the table was a poor idea.

A Suggestion For NBA Owners

Would you rather not give away half of your revenue to your performers? Why settle for the NBPA's latest offer when you can improve your economics a hundredfold?

NBA Labor Talks Go Nowhere

Pro basketball labor negotiations concluded today without an agreement and with grim portents for the coming months: The entire October slate of pre-season games has been cancelled, and regular-season games will be cancelled next Monday if there is no agreement by that time.

Reading the quotes in this article, it seems that the NBA owners formally offered a revenue split of 47% to the players, but Commissioner Stern later strongly hinted that they are willing to come up to 50%. The players' union, however, remains unwilling to budge from its latest offer of 53%. (Whether the owners are sincere in suggesting that a 50-50 split would sate them is unclear, but it would be difficult to walk back from such a public statement.)

It seems, then, that the owners are more ready to compromise to reach a deal today and begin playing ball. I do not attach any moral opprobrium or admiration for a willingness to cave on one's initial position, or for a stubborn insistence on not losing face. I merely note that the players appear less willing to agree to the psychologically salient half-half division of revenues. (They may soften their resolve after a couple months of lost paychecks, of course. An entire missed season of salary is a greater loss, given the average player's 5-year career, than the aggregated annual differences between 50% and 53% of total revenues.)

Of course, a negotiating party can try to appear reasonable by throwing out an extreme initial bid and then "compromising" to something less provocative. And the owners have already won a dimension of these talks by carving out certain revenue streams from the definition of "Basketball-Related Income" that is subject to division. I am mindful that Stern and the NBA owners are trying to spin external observers and commenters. In these talks, the owners began with a proposal of 46% to the players, while the players would have been chuffed to continue the 57% dictated by the 2005 labor agreement. Perhaps the players feel that they should not have to move so much. But the old contract is now null and void; the players' new bargaining position is determined solely by economic factors and the wiles of their negotiating team.

NBA Is Rick Perry's Worst Nightmare

Economist Tyler Cowen warned us recently that labor productivity in the US has stagnated in the past few years, presaging an inevitable slowdown in our standards of living. When we can produce the same amount of stuff with fewer resources, we grow wealthier, and everyone can afford more stuff. When the productivity of a typical worker stays flat, we don't grow.

The NBA is fond of boasting its year-on-year growth, but this is growth in nominal revenues: the league is pulling in more dollars every year. For the most part, the league is not expanding its product: arenas are no larger, the number of teams is no greater, and games are no more frequent.

The NBA produces exactly the same product, in amount and character, every year. Since the league expanded to 30 teams in 1995, it produces 1,230 regular season games every year, plus four rounds of best-of-seven playoffs. (The change in 2003 from a best-of-five format to a best-of-seven format for the playoffs' first round has added, perhaps, three or four extra games to the playoff slate per spring. First-round series rarely go beyond five games.) Serious fans would likely object to a lengthening of the season, arguing that it makes historical comparisons, and the existence of "career records" by players, inapposite.

What would it mean, anyway, for productivity in the NBA to grow? How could one player give us more basketball goodness? Perhaps it might mean switching to 4-on-4 or 3-on-3 basketball, permitting more games with the existing stock of players. But then, of course, the game would not be the same: with more cavernous space on the floor, we would see less passing, less help defense, and more Allen Iversons. Another possibility for increased productivity in the NBA might be to carry fewer men on the roster: perhaps each team could employ only 10 players, say. Injuries could quickly sap a team's depth, though, reducing the quality of play, so again, the product would not be the same. It is true that defensive schemes and training methods have grown more sophisticated with time, so perhaps the quality of play is better than 20 or 30 years ago. But most casual fans are unable to appreciate the difference between a man zone versus a box-and-one.

Arguably, the increased popularity of the league in China and other developing countries could be seen as growth: with a nonrivalrous product, bringing televised images of the NBA to more eyeballs is easy and also better for global happiness. Slowly, the NBA's money and co-promotional efforts have begun to stimulate high-level professional basketball leagues in China and other countries. But the NBA's core business is the same as it always was.

Under the 2005-2011 collective bargaining agreement [see Article VII, Section 5(c)], contracted player salaries may grow by up to 10.5% per year. And the NBA's salary cap and average player salaries keep on growing. Corporate sponsorships, TV rights fees, ticket prices, jersey prices, and every other dollar amount associated with the NBA keep going up. Yet, again, there are no more teams and no more games. Productivity per worker is unchanged.

What we have in the NBA, and in other major sports leagues, is pure inflation, rivaling the ruinous inflation seen recently in residential real estate, health care, or university education in the US. Some universities have expanded their distance learning or evening programs, but for the most part, universities are not educating more students; they are actually hiring more faculty to reduce student-teacher ratios. Productivity has dropped and the price of a degree has spiked.

Contrast this to the performance of, say, Chipotle Mexican Grill, a favorite of this blogger. Chipotle is wrapping more burritos today than in 2010, or 2005, but has barely touched its per-burrito prices. Chipotle's physical expansion has, in some cases, taken over the retail footprint of other stores that failed or didn't want to pay the rent anymore.

NBA inflation is the fault of every fan who agrees to pay ticket prices that escalate with each new season. With inflation in the real world hovering around 2% annually, the real price of attendance has jumped greatly over the past ten years. However, fans seem to be wising up in this terrible economy, as ticket prices dropped 2.5% for the 2010-11 season after falling 2.8% in 2009-10.

Under the previous CBA regime of 2005-2011, the maximum annual salary raise, as discussed above, was 10.5%. If superstars make 10.5% annual raises and scrubs earn a constant nominal salary each year, then, if the aggregate league-wide salary sum comes in over the targeted percentage of "basketball-related income" due to falling ticket prices, every player will see his salary adjusted down by an equal proportion-- which could mean that the scrub receives a nominal drop in pay. Middle-class players should be thinking very carefully about how much maximum annual salary increase they want to build in to the next labor agreement.

Meanwhile, the league, and particularly the players, must look for ways to legitimately expand the NBA's product to justify its relentless push for salaries growing faster than CPI inflation. Whether summer streetball tournaments, a robust minor league, youth training academies, lecture series by Ray Allen, or perhaps Italian lessons from Kobe Bryant, NBA players must look for ways to grow their productivity.

When Immature Billionaires Try Their Hand At Lawyering

Ross Perot Jr., former owner of the Dallas Mavericks (and still a 5% owner), sued Mark Cuban's investment entity in 2010, alleging that Cuban was financially mismanaging the team. Following the Mavericks' recent title win, Cuban's legal team filed the following motion for summary judgment today in Dallas County court (via Dallas Observer):

Funny stuff, but the 3-page legal filing is borderline legal malpractice by Cuban's lawyers. It may be worth a chuckle to show Nowitzki with the trophy, but one picture alone doesn't address the plaintiff's arguments. Is Cuban doing a good job of maximizing the entity's profits? As I noted in my most recent post, the billionaire Cuban is known for paying starters's money to backups like Brendan Haywood and Shawn Marion (who was supposed to be the team's backup SF/PF this season before Caron Butler's injury), and before them, guys like Antoine Walker, Antawn Jamison, Nick Van Exel, Juwan Howard, and several others. Cuban also fired head coach Avery Johnson in spring 2008 with three years and $12 MM of obligation remaining on his contract. Cuban may not mind losing money (or failing to maximize profits) on the Mavs, but Perot Jr. might. A lone championship does not necessarily imply fat operating profits. The championship itself will likely raise the franchise's financial value somewhat, but the defense attorneys still must address Cuban's 11 prior years of financial stewardship.

To Cuban's credit, the Mavs ranked first in the league in 2010-11 in home attendance as a percent of arena capacity. However, the summary judgment motion did not mention this, only listing, again, that photo of Nowitzki with the LOB.

Owning A Team Ain't All That

It appears today that the National Football League and its Players Association will be unable to conclude a new collective bargaining agreement, and an extended lockout will ensue. With the looming expiration of the NBA's collective bargaining agreement on July 1st, many pundits are predicting a similar work stoppage in pro hoops, and a possible cancellation or curtailment of the 2011-12 season, as happened in '98-99.

Without the players, what does assets a pro team owner "own"? Likely, you have an exclusive long-term lease with the best arena or stadium in town. You own all the intellectual property relating to your team's name, logo, colors, and so forth. You are party to various marketing deals with corporate sponsors. Finally, you are party to television and radio broadcast agreements. But without any players to populate your team and play games, all that will not get you much more than a cup of coffee. I suppose the team can still take revenue from jersey sales during a lockout/strike, but if a lockout were to drag on and the long-term viability of the league appeared questionable, merchandise sales would slow considerably, aside from sales of older vintage jerseys (aka "throwbacks", in the argot) to hipsters or serious fans.

What is to stop the NBA players from setting up their own league? Let us assume that star players like LeBron James and Dwight Howard were sufficiently charismatic that they could persuade at least a couple hundred NBA-caliber players to join them, and to find rich investors who could back the venture, and unbooked arenas that would associate with their venture. In other words, why shouldn't they form another ABA? Why shouldn't they own their own venture and draw all the residual profits?

[There are, of course, many minor-league professional hoops leagues in the United States right now, including one called the American Basketball Association with an unwieldy 60 teams. None of them has the world's best players, though; one organization has a monopoly on those guys.]

Basketball, with its flesh-baring uniforms and lack of helmets, naturally emphasizes individuals more than other team sports like baseball, hockey, or American football. Sure, soccer sets up the individual athlete for glory, particularly with the rarity of goals, but the television camera tends to take a bird's-eye view of the pitch, making each player's grimaces and bellows hard to discern. A basketball court, at 94' by 50', comprises about 7% of the surface area of a FIFA soccer field, the latter being about 100 meters by 64 meters. A roving cameraman can easily capture the blood, sweat, and tattoos of a hoopster, whereas soccer players just look small on television. Additionally, trends in cheap shoe manufacturing, easy communications technology, and favorable free-agent rules have helped to push individual basketball players into prominence relative to their team, much more so than baseball or gridiron players. So again, why shouldn't locked-out NBA players form their own league?

This recent SI.com article by law professor Michael McCann suggests, at Paragraph 10, suggests that locked-out NFL players could join other sports leagues, although he does not raise the possibility of the players starting their own league. In the NBA setting, it is important to note that under Section 9 of the NBA's Uniform Player Contract, each team effectively has the protection of a "non-compete clause": during the term of a player's contract, the team has the right to go to court and get an injunction prohibiting the player from playing "for any other person, firm, entity, or organization." However, it is unclear whether an NBA player contract would still be considered valid during a lockout. If the contracts are not in good standing during a lockout, then it seems that Section 9 would have no force. We should also note that many NBA players will become free agents on July 1st, though they are mostly middling players like Tyson Chandler and Nene Hilario. Those players certainly can escape the non-compete clause of Section 9, though, due to happenstance, the 2011 free-agent class would not be spectacular enough to support a financially sustainable new league.

It is unclear whether the non-compete clauses would be enforceable in court against Wade, James, Howard, Bryant, Paul, and the rest of the NBA's greatest stars, who would normally, without a lockout, be bound by valid contracts in 2011-12. [I welcome more advice from labor/employment law experts.] But why shouldn't they try? Should they fail, and should a new NBA labor agreement be concluded, it is unlikely that NBA owners would not welcome them back. The threat of a breakaway league is certainly a powerful negotiating position.

There would be other obstacles, too: Perhaps the existing TV networks with NBA coverage would refuse to do business with this new league, hoping to remain in good standing with the owners of the old "NBA" should the status quo ante return. But there are enough cable, satellite, and internet television channels these days that surely the new league could get distribution somewhere. The same arguments apply to the league's other business partners: corporate sponsors, apparel manufacturers, arenas. Surely some competitors might arise to fill the hollow if the old vendors and customers boycott the new league. The apparel manufacturers derive more oomph from their association with individual players, anyway.

Finally, would FIBA recognize the new league? This is not extremely important, as the new league could easily do business within the United States and Canada without dealing internationally. To orderly work with European (and, increasingly, Chinese) clubs for cross-oceanic movement of players, though, membership in FIBA would be vital. Likely, if the new league could prove viable for a couple seasons, FIBA would treat the old NBA as dead and buried.

Some will argue that the stars' competitiveness, sense of their place in history, and "respect for the game" would discourage them from such a yawning step. But what would cement their stature in time better than putting the mighty NBA owners out of business? Basketball with the world's greatest players is the same game, regardless of who runs the show.

Finally, Revenge on Hollywood for "Juwanna Mann"

Did anyone else find it weird that ESPN featured two NBA games on Sunday night (Knicks vs. Heat and Blazers vs. Hawks), starting at 8:00 PM EST? ESPN is not normally in the habit of showing Sunday night games, and ESPN's corporate affiliate, ABC, was broadcasting the Academy Awards starting at 8:00. Why cannibalize your sister network's ratings?

To be fair, the overlap of fandom for NBA action and Hollywood glamour is probably not extensive, and basketball fans would be angered if the Knicks-Heat game, featuring four of the top five scorers in the league, were not nationally televised. Still, the decision was risky from the perspective of Disney's overall content strategy. And today came news that the TV audience for the Oscar show was down 10% from 2010's viewership (though, to be fair, still greater than 2008 and 2009 numbers). Ratings information for Sunday night's Knicks-Heat battle is not yet available, though I will post it once I can find it. ... UPDATE: The Knicks-Heat game drew 4.2 million viewers, the most popular show on cable television that night. Had those 4 million viewers been added to the 37 million Oscar viewers, the 2011 Oscars would have bested the roughly 41 million viewers of the 2010 Academy Awards.

Have A Holly, McConnelly Christmas

Today Henry Abbott of ESPN/Truehoop attempts to analyze the effect of this week's federal tax deal upon the NBA. To quickly review the proposed tax deal, the lower income tax rates (compared to Clinton-era rates from the 1990s) passed in 2001 will be extended for 2011 and 2012. Prior to this proposed deal between President Obama and Republicans, U.S. income tax rates were scheduled to rise to Clinton rates effective January 1st, 2011. Additionally, under this proposed deal, long-term capital gains tax rates will be extended.

In a couple posts and yesterday, Abbott suggests, citing some extremely crude analyses, that the tax savings for owners and players associated with this week's federal tax deal could amount to $160 million, one-fifth of the supposed $800 million aggregate deficit suffered by owners in 2009-10. (Some of that savings consists of reduced tax liability on player salaries, but presumably the equilibrium wage paid to players could thereby be lowered, because they could then take home more of their gross wage, and thus owners could realize those savings.)

However, the flaw in Abbott's analysis is that the $800 million deficit was incurred under the 2010 tax regime — which will also be the 2011 tax regime, under President Obama's proposals. The supposed $160 MM savings are not really "an infusion of cash from a third party", as Abbott frames it, but rather the avoidance of what would've been a withdrawal of cash from the NBA pot, had Bush tax rates been allowed to rise to Clinton tax rates in 2011. If economic conditions in 2009-10 are held constant for 2010-11, then the owners should still be running an $800 million deficit, because the federal tax liability will be the same.

The bottom line is that the Obama tax deal will be nice for owners, but only because it avoids a hit. It does not improve their economic position compared to the 2010 situation, and thus it does not bring the owners any closer to the NBPA in ongoing labor negotiations. And if you believe in Ricardian equivalence, the "savings" from the avoided tax hit is all funny money anyway.

Fattening Up The Pig In Hogtown

Remember when I said that Mike Illitch's possibly gaining control of the Detroit Pistons (in addition to the Tigers and Red Wings) would be a terrible idea?

Well, that goes double for the possible acquisition rumored today by Rogers Communications of the Leafs, Raptors, and Air Canada Centre (in addition to the Blue Jays and Skydome). Econ 101, my friends. If Raptors fans thought their ticket prices were bad enough...

Assessing the Pizza Man

Reports indicate that Mike Ilitch, owner of the Detroit Red Wings and Detroit Tigers (and founder of the Little Caesar's empire), may be interested in buying the Detroit Pistons from the Davidson family. As an ex-Detroiter, I am not sure how to take this. On one hand, Ilitch has a reputation as a "good" sports owner, one who treats his players and fans well and invests in the team. As we discussed last year, many owners take profits as the only input to their objective function, but Ilitch recognizes the role that major sports teams play in a community.

On the other hand, will it be healthy if Ilitch controls nearly all live entertainment in Detroit? Ilitch already owns two sports teams, MotorCity Casino, Cobo Arena, City Theatre, and the Fox Theater. Ilitch also operates the Joe Louis Arena and Comerica Park. If Ilitch grabs the Davidson holdings as well, he will control the Detroit Pistons, Palace of Auburn Hills, DTE Energy Music Theater, and Meadow Brook Music Festival (where my high school held its annual graduations). As all these entities and venues are potentially in mutual competition for entertainment seekers, the unification thereof under one umbrella cannot be good for consumers. It's bad enough that Live Nation and Ticketmaster want to merge.

Declare the Pennies

A lot of pundits apparently believe that Chris Bosh is the likeliest of the top free agents to switch teams this coming July. One under-commented issue is the discrepancy in personal income tax rates between the several jurisdictions where he might end up. We know from Article IX, Section I of the Collective Bargaining Agreement that a free agent can sign up to a six-year contract with his current team, but only five with a new team. We also know that the maximum annual salary, per Article II, Section 7 of the CBA, is 30% of the salary cap, which will probably be about $53 MM, so the maximum annual salary is about $16 MM. Bosh can earn $16 MM more in guaranteed money (if he wishes to tie himself down for six years) by staying with Toronto.

However, how would tax rates alter this calculation? Let us imagine that Bosh scores a contract worth $16 MM per season. Let us consider three jurisdictions given Bosh's top three likely free-agency destinations: Ontario, New York State, and Florida.

The top marginal tax rate in Ontario, considering both federal and provincial taxes, is 43%.

Meanwhile, the top federal marginal tax rate in the United States is 35%.

Florida has ZERO personal income tax.

In New York State, the top state marginal tax rate is 8.97% and the New York City marginal tax rate is 3.648%.

Of course, the top marginal tax rate is a smidge less than the average tax rate over all Bosh's income, so we need to calibrate our calculations carefully.

I will omit much detail of my calculations (I was considering making a Google Docs spreadsheet showing my calculations, but really, life is too short), but here is my estimate of Bosh's total annual tax liability (including federal taxation) in each of the three jurisdictions:

Ontario: $7.388 MM

New York: $7.594 MM

Florida: $5.575 MM

Note that all figures here are U.S. dollars. Presumably Bosh is paid in the Canadian equivalent of USD 16 MM, or perhaps directly in USD. U.S.-Canada exchange rates are presently near parity, but to be thorough, I converted USD 16 MM to Canadian dollars, calculated his Canadian tax liability, and converted that to USD. We cannot simply apply Canadian tax rates to his nominal USD 16 MM, because due to the progressive structure of marginal tax rates, the amount of dollars in the top bracket would be incorrect.

Other than standard deductions and 1 personal exemption, I am ignoring all special adjustments, credits, exemptions, and deductions (though if Bosh buys an expensive house in his imaginary new home, the comparative tax benefits from federal interest-and-property-tax deductions would be rather large in Florida or New York, versus nothing at all in Ontario).

So New York has the highest tax burden, with Ontario a close second. The Florida tax liability (entirely owed to the U.S. government) is significantly cheaper. Again, if Bosh wants to buy a home (although presumably he already has purchased a Toronto home; he would probably sell that upon moving back to the States), Ontario's tax burden would definitely become the dearest. I will refrain from attempting to estimate the magnitude of Bosh's tax deduction from mortgage payments and property tax paid in the U.S. — I will leave that an exercise for you, our dear readers.