A single NBA player has the greatest potential impact of any athlete in any team sport. Yet the NBA's current collective bargaining agreement puts earnings restrictions on all of its players, including its most important ones.

For all of the multitude of ambitions that LeBron James possesses, he must surely be cognizant of how underpaid he truly is given the value he adds to the NBA.

Looking at the numbers from the 08-09 season, basketball-related revenues (BRI) were $3.608 billion, with $2.146 billion being allotted for player salaries. LeBron earned $14.41M for the 08-09 season, approximately 0.67% of the aforementioned $2.146 billion reserved for players.

He is unquestionably worth far more than his 09-10 salary of $15.7M in terms of production on the floor, attendance he draws and NBA licensed merchandise he sells.

When the NBA extended its television contracts with ESPN and TNT, it increased by a margin of $165M, from $765M annually to $930M. At least part of that increase was as a result of new digital media, but LeBron had also just made his first appearance in the Finals that very month. The ratings of the four-game sweep between San Antonio and Cleveland were low, but many thought of it as a dress rehearsal for future LeBron Finals, similar to what NBC had with Michael Jordan in the nineties.

As much as LeBron has become an economy unto himself in Cleveland, fueling a buzz that spills over into restaurants and bars near the constantly packed Quicken Loans Arena, the Cavaliers haven't profited financially on an annual basis. The Cavaliers are expected to lose between $10M and $15M during the 09-10 season, according to a published report from the New York Daily News. The franchise may have also lost nearly $20M during each of the 07-08 and 08-09 seasons as well.

During Cleveland's first pre-LeBron season, they had a total home attendance of 471,374 (11,497 per game), which ranked last in the NBA. During LeBron's rookie season, they climbed to 9th at 749,790 (18,288 per game). This represented an increase of 59%. They then improved to sixth in 2005, fifth in 2006, third in 2007 and 2008, fourth in 2009 and second in 2010. Cleveland is in the middle of a regular season sellout streak that rests at 77. When on the road, the Cavaliers routinely sell out arenas with an average increase of 2,500 more fans than on average (1).

The Cavaliers were valued at $185M in 2000, but Gordon Gund sold the club to Dan Gilbert for more than double that amount, with a sale price of $375M in 2005, less than two years after LeBron was drafted in 2003. The Suns ($401M), Nets ($300M) and Hawks ($250M) were also sold at approximately the same time as the Cavaliers.

Based on my own rough estimates, given the size of the Cleveland metro area (just over 2M and decreasing in population), ranked as the 26th biggest market in the country, compared to Atlanta as the ninth biggest market and Phoenix as the 12th, LeBron conservatively added $75M in the value of the Cavaliers and as much as $125M.

The following three factors create a financial conundrum for the Cavaliers:

1. The Cavaliers can attribute a significant percentage of their franchise's value to having LeBron on their roster. If the Cavaliers don't retain LeBron, the franchise will lose a portion of its overall value and attendance will drop unless they are able to sustain their on-court success even without him. Gilbert and Danny Ferry have created an attractive culture that is capable of withstanding the loss of LeBron, but the Cavaliers would be operating in an entirely different financial ballpark (2).

2. To keep LeBron satisfied, the Cavaliers must maintain an exorbitantly high payroll fueled by a win at all costs mentality. They will pay approximately $85M in player payroll, along with an additional $16M in luxury tax penalties this season.

3. Unlike the Bulls, Celtics, Suns, even the Blazers and especially the Lakers and Knicks, the Cavaliers are unable to offset a high payroll with high revenue streams, such as expensive ticket prices and a lucrative home market television deal. Cleveland's average ticket price is right around the league average, a byproduct of a smaller market in terms of both population and wealth. After seven seasons of having LeBron, it is safe to assume that the franchise has nearly maxed out its earning potential.

LeBron's Contract On The Truly Open Market

The NBA has made a financially limitless open market for players such an unfathomable, radical concept that some insiders I proposed this question to were a little bewildered initially. The concept of evaluating the true value of superstars is something many hadn't considered for more than a decade. Others were immediately fascinated by the thought of what might be possible for LeBron and other superstars if their earnings were uncapped.

"I would take Michael Jordan's (contract) and then a time value of money," said one agent I spoke to about LeBron's fair open market value.

Jordan earned $33.14M in the 97-98 season, his final campaign with the Bulls.

Adjusting for inflation, that would put LeBron's contract at approximately $44.1M for the 10-11 season. Even if the contract was a flat rate and did not include raises, a six-year deal would be worth $264.6M, more than twice the figure he is expected to sign for this summer.

Another agent went a little higher with his estimate.

"It is my opinion that if there was no salary cap, the superstars would easily earn in excess of $50 million (annually)," said the second longtime agent. "First off, look at what the Lakers just agreed to with Kobe Bryant under the current salary cap system. With that as a basis, take away the salary cap system, and then put the Knicks in the position they are in this off-season. How much would they pay a superstar like LeBron in his prime? I believe a lot more than what the Lakers just agreed to pay Kobe under the salary cap system."

A third agent brought in baseball's richest contract as a comparison point.

"It would climb to a level of an A-Rod contract," said the agent, referring to Alex Rodriguez's 10-year, $275M deal with the Yankees. "You would see a $200M deal."

I also spoke with George Andrews, a former agent who represented players like Magic Johnson and Isiah Thomas before the NBA went to its current salary cap structure. He also has experience working on the team side as an assistant GM of the then-Vancouver Grizzlies and he was a key contributor to the NBA's CBA negotiations in the mid-1990's.

"I have always been an advocate that the top guys should not have a cap," said Andrews. "The league is a superstar league. The top handful of teams and top 10 or 11 players drive the economy of the league."

If the top 10 players in the NBA average $20M annually, their salaries represent approximately 9.3% of the BRI for players. At any given time, there are as many as 450 players in the NBA, so that 2.2% of total players is leaving 90.7% of the rest of the earnings pie for the other 440 players.

In the real world, the richest 2% are believed to own more than half of the wealth on the planet, which makes the distribution amongst players look incredibly fair by comparison.

Andrews discussed with me how a team would determine a fair value for an open market contract of a superstar.

"Any function you are going to use to pay somebody is predicated on revenues unless you're in a mode where you don't care about anything but winning. There's only maybe four or five guys in the league that sell tickets. Start from there.

"LeBron, Kobe, Wade, to a lesser extent Howard and Anthony are in that category. Then you see Paul, Deron, maybe Derrick Rose slotting up.

"For all those guys, I don't think the numbers would be appreciably better, but with those four exceptions," Andrews said.

"The Nets, because of their new building, they could probably pay a lot. They have lots of unsold tickets and unsold sponsorships. They have an owner (Mikhail D. Prokhorov) with the European mentality that wants to win."

Andrews cites European basketball as the only true open market in sports, where owners of the top teams are almost strictly in the business of winning and losing money is nearly a given.

"LeBron would sell half a million more tickets at $40 apiece, that's $20M. He would add $5M in concessions and another $15M in sponsorships, so that is a total of $40M in added revenues.

"LeBron would be worth $50M annually for the Nets."

Andrews unsurprisingly believes the Knicks would also be competitive bidders.

"I think they would deficit spend, similar to George Steinbrenner and the Yankees. Their number would be close.

"With Chicago, (LeBron) doesn't do as much (financially) since they're already sold out."

Even though Andrews casually mentioned Paul Allen and the Blazers, he foresees other teams being unable to economically justify the expense.

"Except for the New York teams, and Chicago if they were financially imprudent, there wouldn't be any other teams where it would make sense at that amount."

The length of the contract would also be very important.

"I don't think LeBron would get $50M for more than four or five years," indicating that it could also scale down due to longevity concerns.

Beyond Paul Allen, I also couldn't help but think of Mark Cuban as a potential bidder, but nobody I spoke to mentioned him. Cuban has been more fiscally cautious over the past few seasons, but I believe he would have to be considered a wildcard in a LeBron bidding war, with the possibility of playing a half dozen or so games in Cowboys Stadium as a new revenue stream.

While either of those incredibly wealthy, emotionally invested owners could conceivably offer a blank check where their bid will be 15% higher than any other team, we have safely established $30M per year as an absolute baseline and a number closer to $50M per year as a realistic amount if no salary restrictions were in place.

How Much Money Can LeBron Actually Make

LeBron has earned just over $62M during his seven-year career and his next contract will be worth $96.2M if he signs a five-year deal outright with another team, or approximately $126M if he signs a six-year deal with the Cavaliers.

Therefore, LeBron's annual average from the 10-11 season to the 15-16 season will probably be $21M. During the 15-16 season, LeBron will finally earn over $25M at the age of 31.

For his next contract, LeBron's year-by-year totals would look something like this (3):



16-17: $26.53M

17-18: $27.86M  

18-19: $29.25M

19-20: $30.72M

20-21: $32.25M

21-22: $33.86M



Total: $180.48M

The current system financially favors players remaining with their incumbent teams (4) and also players who have a longer NBA tenure. Kobe Bryant recently signed a three-year extension with the Lakers that will likely pay him approximately $83M, while clearing the $30M threshold during the 13-14 season.

Bryant's deal would have been worth almost $5M more over the life of the extension had he waited until the summer to opt out and then sign a max contract with the Lakers, but for all intents and purposes, this is about as much money as a player can make in today's NBA.

In other words, we are 12 years removed from Michael Jordan's $33.14M contract and a system is in place where today's players can't realistically match it even on a pre-inflation basis.

There is a caveat, however, to the Jordan contract.

"The first year was clearly make up money," said Andrews of Jordan's contract. "It was supposed to drop back down the second year, but David Falk and Jordan were able to negotiate it to remain where it was."

The Bulls went on to win their sixth title during that 97-98 season and the franchise still made a small profit, according to Andrews.

Maximum Contracts During 09-10 Season

Joe Johnson

Kevin Garnett

Paul Pierce

LeBron James

Shaquille O'Neal

Dirk Nowtizki

Carmelo Anthony

Kenyon Martin

Yao Ming

Kobe Bryant

Jermaine O'Neal

Dwyane Wade

Michael Redd

Chris Paul

Tracy McGrady

Dwight Howard

Rashard Lewis

Amare Stoudemire

Tim Duncan

Chris Bosh

Deron Williams

There were approximately 30 players on max contracts for the 04-05 season, so the number has been reduced to 21 in 09-10, representing a decrease of 30%.

For the 10-11 season, the NBA will gain Brandon Roy into the max club, but lose both O'Neals, along with McGrady and possibly Yao if he opts out to sign a long-term deal with the Rockets.

Following the next season, Pierce, Redd and Martin will come off max contracts, while Kevin Durant is extremely likely to take one.

The next season beyond that, the 12-13 season, Garnett and Duncan will be lost, but Derrick Rose will almost certainly begin his own max deal.

Based on those projections, the NBA will have 15 max players for the 12-13, which is a 50% decrease in less than a decade of market correction from its most recent CBA negotiations.

Gilbert Arenas was offered the max contract in 2008 and accepted less in order to reduce his cap strain on the Wizards. Pau Gasol and Zach Randolph signed near-max contracts in 2004, but aren't true maxes.

"Most of the players wouldn't be worth more than $5M above the max," said Andrews if the NBA had an open, no cap market. "Some of them would get less than the max since it creates an artificial price point."

Because LeBron is an exception to that other group and will be paid well below his fair value, he is a 'Supermax' type of bargain. I believe that is at least part of the reason why so many teams have risked what they have in an attempt to sign him this summer.

How Big Contracts Affect The NBA's Middle Class

Because the NBA has fewer players and it's top earners are capped, it has the richest middle class in sports.

When an undeserving or injured player is on a big contract, other players are left battling for smaller contracts because those other players are eating cap slots. This is clear and follows very simple logic.

But the rush for teams to clear cap space has made it acceptable to skimp financially on the players that round out their rotation and round out their roster.

The luxury tax also punishes teams for every dollar they spend over the threshold, which curbs spending in the offseason.

"There is no question the luxury tax is an inhibitor for spending," said Andrews.

The fact that the game's best players don't have an open market and must be signed by their current team or by teams under the cap hurts not only their overall earning potential, but it also trickles down to hurt other players and here's how:

The Knicks annually would use their mid-level exception, whether for Jerome James or Jared Jeffries and they also would execute sign-and-trades for players such as Jamal Crawford and Eddy Curry, using contracts that were nearly expiring. Their decision to pursue cap space for this free agent class greatly reduced their payroll, which meant less salary for players and also less luxury tax revenue for other teams. Their payroll for the 10-11 season will be more than half of what it was just a few years ago when factoring the luxury tax expenses and if they do sign two max contract players, they will have virtually no other space to offer anything beyond the veteran or rookie minimum to fill out their roster.

If the Knicks were allowed to make any type of bid for LeBron that they could afford and not have it count against the cap, they would then be able to offer larger contracts to other players with the remainder of their cap space.

I'm not sure how the NBA could identify exceptions to its current rules for all other players, perhaps an MVP award clause, or an All-NBA first team clause. But since that would give teams who either have that kind of player, or sign that kind of player a competitive advantage, a franchise player clause similar to what is established in the NFL would be more equitable.

Teams would be able to sign those players for any agreed upon price between the two parties and his cap hit would not exceed the predetermined max contract, but it would still count against the luxury tax.

Under this type of system, the NBA could quite easily pay the LeBrons, Wades, Kobes and Howards their true value while not adjusting the BRI percentages and the remaining players wouldn't feel any real tightening on the median of salaries.

Nobody I have spoken to expects uncapped maximum contracts to be an issue of main discussion for the upcoming CBA negotiations, or even broached in earnest. The owners want contract lengths reduced in general and they also want to be saved from themselves for the contracts that are around $10M annually for five or six seasons for marginally above average players. The players don't want their percentage of BRI to be chipped away and the large middle class has much more riding on talks than the small handful of superstars.

Competitive balance is a crucial and necessary aspect of sports, but so is appropriate compensation. Teams are guaranteed to keep their drafted players for a minimum of five seasons, but is it fair that a system is in place to limit salary and also allows incumbent teams to pay players more money and for more years?

It is fair to the NBA league office and at least most of its owners.

"Hopefully he'll stay," said commissioner David Stern last week before he presented LeBron with his second consecutive MVP award. "That's the way the system is designed."

I don't believe LeBron James necessarily needs another advocate since he already has Leon Rose, Warren Buffett and William Wesley, but his salary is absolutely not commiserate with his true value.


Notes

1.) The 2,500 increase is particularly impressive when considering there is no increase when the Cavaliers visit teams that already are at capacity, an increase of zero is calculated.

2.) The Cavaliers could conceivably become more profitable without LeBron because of revenue sharing, provided they still have a team that compels attendance to not drop below approximately 80% of what it is now.

3.) Assumes he signs a contract extension with his then-team instead of opting out and that there are no CBA changes.

4.) Sign-and-trades do work around that issue, such as the Rashard Lewis example.


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Chris Reina is the executive editor of RealGM. Follow him on Twitter at http://twitter.com/cr_reina.