Owners Had No Choice But to Pay Up in Free Agency

When the Bucks opened up the 2010 NBA free agent period by dropping $34 million on Drew Gooden, you knew we were in for a wild, woolly summer. Some eight teams had opened up enough space under the salary cap to sign a maximum-level free agent with a starting salary at around $17 million. A few teams, including the Heat, Knicks, Nets and Bulls, even had space for two top-tier players.

While LeBron James flirted with just about every team east of the Mississippi, other teams gobbled up lower-priority free agents at shocking prices. Gooden's $34 million dropped jaws, as did $20 million for Darko Milicic, $82 million for Rudy Gay, $55 million for Brendan Haywood, $123 million for Joe Johnson, $34 million for Amir Johnson, $33 million for Wesley Matthews, $35 million for Travis Outlaw, $39 million for John Salmons ... the staggering contracts go on and on.

But we shouldn't be surprised. Contracts like these are the price of competitiveness in the NBA.

In the immediate aftermath to the first few surprisingly large deals, a few players and myriad pundits suggested the players union -- locked in deep disagreement with team owners over the financial feasibility of the league -- could use these contracts to prove that cries of "uncle!" from the board room were based on personal greed, not actual concern for the future of the NBA. After all, how can the owners complain about losing money if they can afford to give Darko $20 million?



It makes sense on the surface, just as it does to roll your eyes at the dude driving a $100,000 SL550, shouting about how hard it is to make his ends meet. If you can't turn a profit, why are you spending $20 million on a player as irrelevant as Darko? But let's not get bad talent evaluation twisted with a need to spend. We can't let David Kahn define the state of NBA finance.

Gooden is actually a great example of why NBA owners are stuck between a pickle and a painfully spicy jalapeno right now. The Bucks are not terribly profitable, owed to the size of the Milwaukee market, the small share of Bradley Center revenues the Bucks earn based on the team's lease agreement and the recent lack of high-level on-court success. In markets like Milwaukee, you need to compete at the highest levels to have a chance of building a strong enough demand for the product to turn a decent profit.

And to compete at the highest levels, you've got to spend money.

The Bucks made the postseason last year, thanks to improvement from star center Andrew Bogut, a fortuitous midseason trade to acquire John Salmons, and a solid rookie season from lottery steal Brandon Jennings. But the Bucks lost Bogut just before the playoffs began, and didn't survive a first-round match-up with the Hawks.

Milwaukee needs to do better to get over the hump and truly contend in order to make some money for owner Sen. Herb Kohl. And to do that, they really have to spend money. Salmons, a free agent, had to be re-signed. There goes $39 million. The offense needed a serious jolt, even with Salmons returning. There's the trade for Corey Maggette, due $30 million over the next three seasons. The frontcourt needed a great rebounder and low-post threat. There's our lightning rod Gooden, signed for the full mid-level exception.

Those three players alone earned combined commitments of $103 million from Kohl and the Bucks. And that's really not out of line with what most teams have done when approaching the conference elite. To go from "playoff team" to "contender," you simply have to spend this sort of money.

And to be a viable NBA franchise in a small market, you simply have to become a legit contender.

Like it or not, Gooden and Salmons are not wildly overpaid. The collective wisdom of NBA pundits is stuck in the early aughts, where $5 million a year was exorbitant and $7 million extravagant. The cost of doing business in the NBA has simply risen. Salaries have gone up almost across the board -- it's not just Joe Johnson and Rashard Lewis who have helped salary growth outpace revenue growth since 2001. (Leaguewide payroll rose 42 percent between 2001 and 2009. League revenue rose 35 percent over that same span, this despite the introduction of restrictions on maximum salaries and the luxury tax.)

In 2001, about 350 players made $5 million or less, and less than 100 players made more than $5 million. In 2009, about 260 players made $5 million or less, and some 200 players made more than $5 million. As the salary distribution below shows, much of that salary growth is contained in the $7-10 million range.



Those are the salaries that push payrolls like that of Milwaukee into deadly territory. But those are the signings teams like the Bucks have make to successfully transition from playoff team to contender. It's a real double-edged sword: Every extra dollar of payroll weighs on the franchise's ability to exist, but if those dollars aren't spent, the team has little chance of turning a profit long-term. The Knicks and Clippers can get away with mediocrity, thanks to market size. The Bucks? The Timberwolves? The Grizzlies? They can't.

Speaking of the Grizzlies ... this is what is so infuriating about Memphis owner Michael Heisley's continued efforts to save a buck any way he can: He could be the league's best example of why the current salary system is broken. The Grizzlies improved wildly last year, going from terrible to just-outside-the-playoffs in largely organic fashion. Rudy Gay's payday came up this summer, and the Grizzlies quickly locked up the young forward to the near maximum salary available. That's the price of doing business for a small-market team like Memphis: You grow talent via the draft, and when that talent develops you are forced to sign the check or return the mediocrity. Rudy Gay is an example of why the salary system is broken.

But Heisley spoils any chance he has at being an advocate for change by arguing with a lottery pick over $300,000, exactly one half of 1 percent of the Grizzlies' salary outlay for next season. Similarly, Wolves owner (and chair of the league's labor committee) Glen Taylor can hardly complain about salaries when his rogue GM (Kahn) is out there doing who-knows-what. The Kings, who haven't spent a dime of the team's $17 million in cap space, can't legitimately raise hackles about the salary explosion given that they haven't paid a free agent in two years now.

These small-market teams have legitimate gripes, but most undercut themselves in the public sphere and potentially at the bargaining table by acting cheap or belligerent. And that allows players and pundits alike to equate "Darko for $20 million" with fiscal health, even though, just as with the broke dude in the $100,000 car, it's a facade. The league needs major salary reform, and the free agent spending spree of 2010 only proves it better than ever.