Why NBA Players Out Earn Other US Athletes


It seems like every year pro athletes in
the NFL, NBA and MLB are signing new record breaking deals, but not
all athletes are pulling in big contracts. In fact, a lot of one
athlete will earn over his career depends to a surprising degree on
the league they play in. The National Football League had some
of the flashiest contracts in 2019. That makes sense, since the NFL is
one of the biggest and most profitable sports leagues in the U.S. But on average, it’s not paying its players
nearly as much as those in the MLB and the NBA. There are three big reasons why NFL
players make less on average league structure, salary caps and
guaranteed money for players. As for the NBA, well, their
players have an especially good. In addition to having a higher average
pay per player, they also make more money off the court than their
peers in the NFL and MLB. That’s partly because NBA players have a
bigger fan base outside of the U.S. as of 2019. It’s the second most popular
sport in the world. NBA star LeBron James land won
the biggest endorsement deals ever with Nike. That could pay him one
billion dollars over his lifetime. So why do players in America’s
three biggest sports leagues make wildly different salaries in order
to answer that? First, we have to understand
how sports contracts work. Player contracts are partly based on
how a specific league is structured. The number of games in the season. The number of teams in a league and
the number of players on a team. NFL teams have 53 players on an active
roster, the MLB has 25, and the NBA has 15. The NFL season is
the shortest of the three. There are 32 teams that play
16 games throughout the regular season. In total, there are
256 games played collectively. The NBA has 30 teams across its league
that play 82 games in the season, bringing the total amount of
games played to 1,230. Then there’s the MLB, which has the
most amount of games played of the three leagues during
its regular season. There are 30 MLB teams that play 162
games in a season totaling to 2,430 games played collectively. Even though teams across all three
leagues tend to prioritize their spending on star players in terms of
average salary per player, the NFL ranks dead last out of the three. A lot of it boils down to basic math. The NFL plays the least number of games
in a season and and employs the greatest number of players. There are 1,696 active
players in the NFL. In the MLB, there are 877. And for the NBA there’s 439. Then there’s the number of teams. Every league has a common pool of
cash that is divvied up among teams every season. The more teams there are,
the smaller the cut of the pie. The size of the cash pool has a
lot to do with the TV broadcasting field signed by each league. Ironically, more games doesn’t directly translate
to bigger TV rights for leagues. So when you take a look at
the data that we look at, you know, the NFL has the highest percentage
of avid fans across the world. Call the big four, which is the three
other stick and ball leagues next to the NFL. Their fan base is massive. It’s almost it’s almost
half of the U.S. population sort of reports some
interest in the NFL. The length of season thing is actually
kind of interesting because if you think about it, scarcity of games. Right, could potentially work
in the NFL favor. There’s just a concentrated level of
interest across a shorter number of games. Each year, the NFL
receives an estimated 6.5 billion dollars. The NBA
gets an estimated 2.6 billion dollars and the MLB
makes an estimated 1.9 billion dollars. And so the players receive
today 51 cents out of every dollar. And that is 51 cents out
of the entire 8 billion dollar franchise. That is the NBA Enterprise. That is the NBA. And that
certainly does include the broadcast agreements, the local agreements, the national
agreements, digital international on any type of broadcast agreement is
included in our overall cool of basketball related income. 51 cents of it is delivered to
the players through the vehicle of our salary cap slash luxury tax system. But player pay isn’t
all about league structure. It also has a whole lot to do with
how well a player performs for a team and the rules. Each league
sets through the collective bargaining agreement with player unions. Every league has its own set of rules
around how it decides to pay its players. It’s called a
collective bargaining agreement. The CBA is a set agreed terms
made by the league’s players association and the league itself. It covers everything
from the number of games, rookie wages, practice requirements, health
care and player contracts. Each league has its own CBA and in
turn, each league has a different set of standards of how
player contracts work. One core component of the CBA
is something known as revenue sharing. Every league has a common pool of
cash that split among teams and players each season. The bulk some of that
money comes from television and media rights deals. Another key component of
the CBA is the salary cap. It is the total amount of money each
team in the league is allowed to spend on player salaries. In 2019, the NBA salary
cap was set to 109.14 million dollars. The NFL salary cap was set to 188.2 million dollars. And the MLB technically
doesn’t have a salary cap. They have a tax system in place
but we’ll get back to that. The salary cap helps create competitive
balance among teams because it prevents, richer teams from signing
all the best players. The NFL has a hard cap, meaning that
teams in the league can’t go over the salary cap no matter what. The NBA is a little bit more lax. It has a soft cap. The league issues a base salary cap
number, which teams can go over as long as they pay a luxury tax. But there’s a limit to how much a
team can go over that soft cap. You are able to exceed it
for a variety of reasons. You’re able to exceed it
to resign your players. That’s the Larry Bird exception. You’re able to sign a player
off the market, a free agent. Under the mid-level exception, you’re able
to trade for players who will bring you higher over the salary
cap under the assigned player exception. So we have a lot of exceptions to
the cap and it keeps it soft. And that encourages owners and teams to
give guarantees, to give long term goals and encourages them to be able
to give generous deals and not necessarily. Choose between one
player or another. Luxury tax limit helps prevent bigger
teams and bigger markets like New York and Chicago from
overspending on players. And so we agreed to put in place
this luxury tax back in 1999 following our six month lockout so that if
you exceed that tax threshold, which is usually about 20 million dollars over the
cap, that’s about where it is right now. Then you’re going to
have to pay for it. You can do it, but you have to pay. And the tax is pretty significant. It’s more it used to be dollar for
dollar and now it’s more than dollar for dollar. And it allows those teams to
feel as if they really need to go. They have a window. They’re going to take Iran.
They’re able to do it. They’re able to pay that tax
and still take these players. As for the MLB, they have something
similar to the NBA soft salary cap, but it works a bit differently. Historically, the MLB has always seen
big payroll disparities between big market teams and small market teams. In 2003, the MLB CBA implemented a
luxury tax similar to the NBA soft salary cap. It’s called
the competitive balance tax. MLB teams that exceed the predetermined
payroll threshold are subject to this tax. Unlike the NBA,
there’s no luxury tax limit. So a team can pay over as much as
they want, as long as they pay the taxes and are okay with facing league
penalties like lower draft picks. For 15 years the New York Yankees
weren’t too concerned with the payroll threshold or loss of draft picks. The team paid over 341 million dollars
in tax penalties alone from 2003 to 2017. Another very important part of
the league, CBA, is guaranteed contracts. A fully guaranteed contract ensures
a player will receive the full value of their
contract no matter what. Unlike the MLB and NBA, not all
contracts in the NFL are fully guaranteed. Even though on paper, NFL players
sign big flashy contracts, that doesn’t mean they’ll see all the
money they’ve been promised. Unlike the NBA and MLB, guaranteed contracts
aren’t really a thing in the NFL. Take the
Oakland Raiders quarterback. Dereck Carr’s contract is a five
year 125 million dollar contract. Of that 125 million dollars, little
bit over 70 million dollars is guaranteed. Compare that to the
MLB as Yu Darvish. The pitchers contract is a six year,
126 million dollar contract that is fully guaranteed. That means no matter
what happens to him, he’s taking home all 126 million dollars. Generally speaking, across all three
leagues, there are basically two kinds of contracts, rookie
and veteran contracts. Once a player completes their rookie deal,
they can renegotiate for a new contract as a free agent for the NFL. Most first round rookies in franchise
tag players have fully guaranteed contracts. If you’re looking at a
big time like quarterback or wide receiver guys, you’re looking at five
year, sometimes six year contracts. And the first two to three years
on those contracts could be potentially fully guaranteed. But pass that you get
in an area where the only thing protecting that player against being
released is a pro-rated signing bonus. So signing bonuses, so you have
a 20 million dollar signing bonus, the preparation, which you think an
accounting tool for the salary cap where that 20 million
is divided by five. If it’s a five year contract or even
if it’s a six year contract, only prorated contract over five. So other than first round rookies
in franchise tagged players, there are no regulations forcing a team to
guaranteed every single dollar on a player’s contract. Of all veteran contracts in
the NFL, only 13 have fully guaranteed contracts. Five of those contracts are worth over
10 million dollars and only one contract is for more than one year. Despite the NFL being famous for
not paying their players contracts in full, the MLB and NBA are known
to have massive contracts with hundreds of million dollars. They’re
100 percent guaranteed. MLB contracts are pretty straightforward
since they are fully guaranteed. The value of the contract is
typically divided evenly through the contracts length. So let’s say you and
the team don’t agree on the number you’re going to come up with one
number in your agent or whatever. The team with another number
based on Rosa Autistics. It’s not like you’re gonna be
at 100 made a difference. So it’s gonna be based on
a good, good amount of statistics. And then with that they own the team
could either accept the team or deny they go to arbitration. So it’s like
a panel and the panel goes and discusses after February, I believe. And then with that, they either pick the
teams or they pick yours it’s not in between or anything. So they kind of based on the statistics
of other players at your level in the league and they’re going to
pick one or the other. So it’s how you put yourself in
a position to probably get a higher contract or you’re going to
get some of the worst. Nba contracts are very similar
to them obese contracts. The Golden State Warriors player Steph
Curry signed a five year 201.2 million dollar contract in 2017, meaning
that he makes over 40 million dollars each year. So even if he
gets injured, Curry is still taking home 40 million dollars. Another key difference is that some NBA
players can make even more money off the court in 2018. Three of the top 10 athletes in
the world with the highest earnings from endorsement deals were NBA players. No player in the top 10
played for the NFL or MLB. Endorsement deals are huge
for NBA stars. It allows them to make a steady
flow of cash outside of their contracts. Players can sign endorsement deals with
pretty much any company and these deals can prove to
be very profitable. Well, after a player
retires, take Shaquille O’Neal. He retired back in 2011. Please continue to lend
multi-million dollar brand deals. Since then, brand endorsement deals have
tend to favorite NBA athletes because basketball has more of an
international reach than baseball and football. And NBA stars have a
huge following on social media. As for the MLB, Mike Trout has
the highest paying contract in baseball history, worth over 426
dollars over 12 years. Trow also makes an estimated 2.5 million dollars from
endorsement deals. Compare that to NBA
star Kevin Durant. D has a four year 164 million
dollar contract with the Brooklyn Nets. But when you count in sponsorship
dollars, the pay divide is bigger. In 2014, Durant signed a 10 year
deal with Nike worth an estimated three hundred million dollars. And sneaker deals are
huge for NBA stars. LeBron James annual income from his
sneaker deal is worth 32 million dollars a year. For comparison, back
in 2017, Odell Beckham Junior signed the biggest sneaker deal in the NFL,
worth 25 million dollars over five years. So LeBron just went looked
at his personal Instagram account. His most recent post is a picture of
one of his Nike pairs of sneakers. So really strong promotion quality. It’s a product placement thing, single
use of a hashtag or mentioned. And it generated about 1.6 million total. Interactions
on that post. So because of the quality of the
promotion and level of engagement that it’s getting. It could be worth anywhere
from 500 thousand to about 1 million dollars in an adjusted add
value based on the quality that promotion and engagement
that it generated. And LeBron James has a lifetime endorsement
deal with Nike worth a rumored 1 billion dollars over time. The super max contract is unique to the
NBA and it’s one of the biggest contracts in sports. Players like Steph Curry and Russell
Westbrook have super max deals over 200 million dollars. It essentially boils down to this. It’s a way for teams to extend players
who have been in the league for seven to nine years to a
four or five year contract. The super max contract is valued up to
35 percent of the salary cap for that year. It begins. And then there’s
an 8 percent increase in salary, which is tacked on to each of
the subsequent years of the contract. Super max contracts were
introduced in 2017. It was the league’s solution to the
problem of players upgrading to bigger market teams or winning teams. These contracts were designed to incentivize
star players to stay put with the teams that drafted them. But before a player qualifies for
200 million dollars super max contract. They must meet a
laundry list of requirements. Plus, players need to receive high
performance accolades and two of their most recent seasons or be named the
MVP of any of the three previous seasons. Klay Thompson missed out on being
part of the all NBA team and was ineligible to get
a supermax deal. Players who have signed super max
deals are often huge financial burdens on a team and can cripple the
team’s ability to sign or reassign talent. If you make it so that one star takes
up a larger part and it’s going to be harder for you to be able to go
out and fit in two or three star players. And so absolutely, I
would say that you more salary that you’re paying to any
individual player, the harder it’s going to be to attract other players,
because usually when you attract stars, you’re doing it using room under the
salary cap and less room, you have less ability. You have to go out to
the market and bring in more players. Essentially, if a team decides to offer
a super max contract, it can take up to a third of the team’s
salary cap space for that season, leaving roughly two thirds of the team’s salary
cap space to be distributed among 14 other players. So far, only five players have signed
super max deals, so time will tell if super max contracts
are here to stay. So what does the future
hold for sports contracts? It all depends on the changes that
are being made and implemented by each league’s collective
bargaining agreement. Just take the NFL. It’s the most profitable league compared to
the MLB and NBA, but its players are not seeing the
same guarantees as those leagues. But new changes are about to be made
with the NFL CBA that’s set to expire at the end of the 2020 season. The NFL Players Association and the NFL
teams are working to establish a new CBA for the 2021 season. For most the last 10 weeks, about
every Monday or Tuesday I’ve been in Chicago, are a park nearby. Negotiating with the Players Association
about our future labor agreement. The MLB CBA is also set to expire
in 2021, which can see changes like adjustments to the
competitive balance tax. As for the NBA, the league reached an
agreement on the CBA back in 2017. The deal will continue through the 2023
to 2024 season through a lockout for six months in 1998. There was no basketball until
February of that year. We were locked out again in 2011. There was no basketball
until Christmas Day. And so we’ve certainly demonstrated that,
you know, we’re going to fight for what’s right. We have
the ability and the wherewithal. I think it’s expected that we’re going
to stand up and exert whatever leverage and ability we have.

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