Why you should care
A rising NBA salary cap has put more mediocre players in a once exclusive club.
The ink was barely dry on Chandler Parsons’ new contract before the Memphis Grizzlies started to regret it. After the Grizzlies offered the starting small forward a four-year, $94 million maximum contract in 2016, a not-quite-healthy Parsons struggled through 34 appearances in 2017, totaling only 6.2 points, 2.5 rebounds and 1.6 assists in 19.9 minutes per game before a knee injury ended his season.
The Grizzlies haven’t seen anything close to the level of production they had hoped for when they inked Parsons to the max contract (an NBA provision dictating what percentage of a team’s salary cap a player can command based on how many years he has played and other variables). But they aren’t the only team with buyer’s remorse.
In the summer of 2016, the NBA went a little cuckoo. Thanks to a lucrative $24 billion television contract, the league’s salary cap rose from $70 million for the 2015–16 season to a whopping $94,143,000 ahead of the 2016–17 season. It was the biggest single increase in the league’s history — and, as a result, its teams leaned into their nouveau riche status, spending with reckless abandon.
But there’s a catch. Did your parents ever tell you, “Don’t spend all your money in one place”? The NBA took the axiom to heart. With a weak free agency class in 2016, rather than add impact players, most NBA teams did a funny thing: They started paying so-so players like stars. And the results can still be seen in some of today’s outrageous contracts.
The number of players making $10 million or more annually in the NBA has skyrocketed from 55 in 2014–15 to 140 in 2018–19.
Sure, a rising tide lifts all boats. With the cap rising by about 34 percent, it stands to reason that even role players and bench players would see their respective salaries inflate. But the number of NBA players making $10 million or more — once an easy benchmark for separating “good” players from middling ones — has risen by 154 percent, far greater than the amount the cap has grown.
The NBA’s average player salary of $7.4 million in 2018 leads all major league sports, with Major League Baseball (MLB) next, at 4.5 million, followed by the National Hockey League (NHL) ($2.9 million), the National Football League (NFL) ($2.1 million) and Major League Soccer (MLS) ($337,000). While the number of the MLB’s 10-millionaires was roughly steady in the same span (113 to 117), the NFL saw a similar explosion, going from 55 in 2014 to 143 players making an average of $10 million per year in 2018. The difference in the NBA? Many of those exceedingly well-paid players are backups.
“At the time of some of the signings, there wasn’t a great free agency class, so they spent their money as efficiently as they could, structuring the contracts with incentives to keep the cap hit lower to start,” explains Spotrac’s Scott Allen, a salary cap analyst.
Under the collective bargaining agreement between the NBA and its Players Association, teams must spend 90 percent of their salary cap each year. Superstar players can command up to 30 to 35 percent of the total cap. Typically, starting players command 10 to 20 percent, and role players, a single-digit percentage.
But role players, who typically play off the bench, are now making what used to be starter money — $10 million-plus per season. It’s created what capologist Eric Pincus calls a “robust middle class.” The Miami Heat do this better (or is it worse?) than any other NBA team. The Heat have eight players on their roster making $10 million or more on average annually; no other team has more than six such players, but many do have six. Why are the Heat and others letting so much money languish on the bench?
“With the new rules of the supermax and lottery odds shifting, the league is trying to have teams build from within through the draft and retain those players with the incentive of possibly offering those individuals substantially higher salaries than if they left,” says Allen.
Two years later, spending is evening out. The salary cap, which is set at $102 million for the 2018–19 season, is projected to rise only about $7 million in 2019–20. Moving forward, the league wants to see teams on the rise retain their star players. That’s where the “supermax” contract comes into play — which the NBA created in 2017 in response to Kevin Durant’s decision to leave the Oklahoma City Thunder for the already stacked Golden State Warriors. With supermax contracts, teams are able to offer their homegrown stars extensions for 35 percent of their salary cap. No outside teams can match that.
While the supermax has produced some notable successes — the Warriors retained Stephen Curry, the Houston Rockets re-signed James Harden — it hasn’t gone quite as the league intended. “The league has tried to legislate, via the CBA [collective bargaining agreement], star retention, but it hasn’t really worked well,” says Pincus. “Paul George, DeMarcus Cousins, Kawhi Leonard — all stars who ended up with new teams instead of taking the designated supermax.”
But teams like the Heat, who chose to remain competitive not by signing players to max contracts at 30 to 35 percent of their cap but by paying role players starter money, can only succeed if the league’s attempts to curb superteam building actually work. “The argument would be that there are very few superstars and that they’re teaming up, so you end up with maybe three to five teams with true stars and the remaining 25 to 27 are at a competitive disadvantage,” says Pincus.
Maybe it’s not true that the teams who paid a preponderance of players $10 million plus made a bunch of bad deals. After all, they’re just doing what the league wants: remaining competitive without poaching other teams’ stars.