July 21, 2017

July 20, 2017

Subscribe to Latest Legal News and Analysis

July 19, 2017

Subscribe to Latest Legal News and Analysis

July 18, 2017

Subscribe to Latest Legal News and Analysis

The NBA Super Team Phenomenon

On Tuesday 13 June 2017, the Golden State Warriors won their second NBA Playoff final in three years, with Kevin Durant winning the first of his career. Despite the Warriors being way ahead on games, the super star line-ups meant that dull moments were going to be hard to come by. No matter where your allegiance lies, it is hard to begrudge Kevin Durant his first and incredibly well-deserved championship, taking the mantle of series MVP and being the first player with five 30 point games in a row in NBA finals since Shaquille O’Neal in 2000.

Tuesday’s game comes amidst lots of talk in the NBA about ‘super teams’. Not least because Kevin Durant joined Golden State at the beginning of this season on a free agency, breaking Thunder hearts and creating a championship winning super team. That move thrust the idea of player loyalty back into the press, but KD was keen to explain at the time that his decision was made with a heavy heart. Nike capitalised on this criticism, releasing a short one minute advert playing on KD’s critics from the start of his career, the draft, to winning his first championship.

What is a super team?

A super team is a team with at least two superstars and usually an additional star. The concept is probably best illustrated by examples. Anyone born in the 80s (or earlier) will have fond memories of the ’96 Bulls team: Jordan, Pippen, Rodman. Despite the 2004 Lakers team falling short of the championship, the likes of Shaquille O’Neal, Kobe Bryant, Gary Peyton and Karl Malone were super team quality. It is also impossible to miss out the 2011 Miami Heat team. Those are just to name a few.

Why do people care?

Basketball in America, like other sports, operates on a drafting system, whereby the ‘worst’ teams get the first picks from the new college crop of players. The idea behind this system is that it should be harder for individual teams to achieve supremacy, since the winners don’t get first pick in the next draft and vice-versa. People are worried about individual franchises dominating and don’t want to see a situation, like for example in Spanish football, where two teams have won the La Liga title 14 times in 17 years. It also comes down to the sport. In a game of basketball, you only ever have five players on the court – if three of those are big names, you can see the immense impact that will have. Even teams without an all-star line-up usually have at least one star (thanks to the draft system) and often build their tactics around their star.

It is important to note that super teams are not a new phenomenon, as illustrated above. The difference between then and now is choice. Previously super teams came together through trades and drafting, whereas now players themselves have more agency in deciding where to go. They can effectively choose to make a super team.

Changing rules

At the start of this year, the National Basketball Association, the NBA, and the National Basketball Players Association (the “NBPA“), agreed a new Collective Bargaining Agreement (“CBA”) to avoid a fifth ‘lockout’ in the sport’s history. The CBA is the agreement between the NBA and the NBPA that codifies the rules that govern the league from well-known aspects such as salary caps to more intricate details like player dress code.

In terms of super teams, the key elements of the CBA are the salary cap, the exceptions to that salary cap and the rules around free agency.

Salary caps are supposed to be the key deterrent against the formation of super teams – in theory. These are dealt with in Section 2 of Article VII in the 2017 CBA. As Larry Coon explains in his CBA FAQ.com  the salary cap is:

“…a limit on the amount teams can spend on player contracts, which helps to maintain competitive balance in the league. Without a salary cap, teams with deeper pockets could simply outspend the remaining teams for the better free agents. The basic idea behind a salary cap is that a team can only sign a free agent if its total payroll will not exceed the cap — so a team with deep pockets is on a more level playing field with every other team.

 While this is true in theory, NBA teams in big markets nevertheless have been able to significantly outspend teams in small markets. For example, for the 2010-11 season the lowest team payroll was approximately $45 million and the highest was over $90 million (plus an additional $20 million in luxury tax).

 As a result, the correlation between team payroll and regular season wins is now very strong.”

The exceptions to the salary cap allow some teams to spend more on certain players. One of those is the so called ‘luxury tax’ whereby teams pay a penalty for each dollar their team salary is above a certain level. In the 2015–16 season, the salary cap was $70 million with a luxury tax limit of $84.74 million. For the 2016–17 season, the salary cap is $94.14 million with a luxury tax limit of $113.29 million.

One other such exception is the ‘Mid-Level Exception’ which allows teams to sign players for a certain number of years depending on the extent to which they have exceeded their cap. This operates in two key ways:

  • (i) the non-taxpayer mid-level exception which allows teams to sign players for up to four years with a certain percentage annual raise each season if they are under the ‘luxury tax apron’ (which is around $4 million dollars above the luxury tax); and

  • (ii) the taxpayer mid-level exception which operates on a similar basis, but only allows for three year contract extensions and is for teams that are above the luxury tax apron.

In the latest CBA, salary caps are now tied to revenue which is significant when you consider the fact that the league recently signed a $24 billion dollar television contract. Money from television is just one aspect of ‘Basketball Related Income’ which is dealt with at Section 1(a) and (b) of Article VII.

Curbing super teams

The NBA had two options in terms of limiting the formation of super teams in the 2017 CBA. They could have either put rules in place with the goal of restricting the movement of players, or incentivised players to remain at teams. The NBA went with the latter by way of Designated Veteran Contracts. Players can now be given higher salaries if they remain at teams rather than opt to move in free agency. The highest salaries are reserved for the real superstars and require certain high performance criteria to be met. These higher salaries are also reserved for players who have been with team for a longer period of time. These rules will only apply to a few players every year. This is also on top of a new “38-and-under” rule that allows older players to sign a final big deal at the end of their careers.

Perspective

Outside of the USA the concept of drafting players, limiting a sportsman’s choice as to where he wants to go and having a complex labour agreement between two unions are not common in sports. Although the merits of ensuring competitiveness and equality are plainly visible, so is allowing individuals to make the choices they want to make for the good of their career. In this context, incentivising players to stay seems like a better option than enforcing restrictions.

Simon Grossobel authored this post.

© Copyright 2017 Squire Patton Boggs (US) LLP

TRENDING LEGAL ANALYSIS


About this Author

Our international Sports & Entertainment group has market-leading experience in the legal, commercial and regulatory issues affecting the sports industry.

We bring you a dynamic team of sports specialists, fully immersed in the business and abreast of new developments and opportunities.

Operating efficiently and commercially, we deliver clear, straight-talking advice and work with our clients to achieve results on time and on budget. We have acted for national and international governing bodies, national Olympic...

216-479-8623