The Small-Market, Smart-Market Takeover
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Forbes recently released their report on the speculated value of NBA franchises and to no surprise, big market teams like the New York Knicks, Los Angeles Lakers, Chicago Bulls, Boston Celtics and Brooklyn Nets came up on top. While it's great that these franchises were estimated by Forbes to be valued in the range of $780 million to $1.4 billion, the reality is that among these top valued teams, only the Bulls have a winning record (and barely that, at 21-20). Sitting atop the standings are smaller market teams like the Indiana Pacers (No. 12 on Forbes list), Portland Trail Blazers (No. 12), Oklahoma City Thunder (No. 11) and San Antonio Spurs (No. 10). Clearly, in the NBA, making money and winning are two mutually exclusive things. The more-punitive luxury tax, negotiated into the 2011 Collective Bargaining Agreement, undoubtedly affected the big-market teams like Boston, L.A. and Dallas, who were used to outspending the competition to gain an on-court advantage.
Those Celtics, Lakers and Mavericks, who used to customarily go $20 million over the luxury tax and consequently pay a $20 million penalty, now were going to face $45 million penalties for the same transgression, forcing them all to re-think their business plan.
It's no coincidence those 2008 through 2011 NBA champions all underwent a cost-cutting mode, with the 14-29 Celtics trading its coach (Doc Rivers) and veterans (Kevin Garnett, Paul Pierce, Jason Terry, Jordan Crawford) for draft picks, the 16-26 Lakers failing to replace max-contract center Dwight Howard while also amnestying starter Metta World Peace, while the 25-18 Mavericks--three seasons ago--let six of their top nine minutemen leave after winning the NBA championship, rather than re-sign those players to similar contracts.
Other big-spending teams--Brooklyn ($101.7 million plus another $85 million in penalties), New York ($88.8 million plus another $35 million in penalties), Chicago (salary-dumped Luol Deng's contract to go from $85.2 million to under the tax at $70.9 million)--have yet to produce a winning record this season and are obviously re-thinking their strategy.
Meanwhile, the lone remaining big spender, the two-time champs Miami Heat, have even unloaded $10 million worth of contracts this season (amnestied Mike Miller and traded Joel Anthony) to scale the team payroll down to $81.3 million, keeping the overage from hitting $10 million on top of the $71.748 million luxury tax.
That said, it's interesting that the four teams with better records than the 30-12 Heat are all small-market squads who have payrolls under the luxury tax: the 33-7 Indiana Pacers ($69.9 million), the 32-9 San Antonio Spurs ($64.3 million), the 32-10 Oklahoma City Thunder ($69.5 million) and the 31-11 Portland Trail Blazers ($62.7 million).
Oklahoma City GM Sam Presti took a lot of heat for trading away max-contract player James Harden for young players and picks, but his patience is paying off now with young players excelling off the bench (Reggie Jackson, Jeremy Lamb, Perry Jones and Steven Adams), while the big-market teams are scrambling to unload some big-contract players in the next month.
Spurs GM R.C. Buford was really diligent about signing newcomers Marco Belinelli ($2.8 million annually) and Jeff Ayres ($1.8 million annually) to bargain contracts this summer, while also waving bye-bye to Gary Neal ($3.2 million annually) when he wouldn't sign for comparable dollars. Frugal decisions like that have given San Antonio an extra $7.4 million of spending tax room should they desire to pull off a big deal at the February 20 trading deadline.
By having a low payroll, Trail Blazers GM Neil Olshey also was in position to accept starting center Robin Lopez's annual $6 million contract from New Orleans for only rookie Jeff Withey and two second rounders.
As for the Pacers, Indiana GM Larry Bird had such a low payroll that he was able to offer All-NBA forward Paul George a junior-max extension next season, while still keeping the team payroll at $60.6 million, giving his squad enough room under the 2014-15 estimated $75.7 million luxury tax to re-sign Lance Stephenson, Danny Granger and/or Luis Scola.
Keep in mind, these four are truly small-market teams, ranking 25th (Indianapolis), 37th (San Antonio), Oklahoma City (45th) and 77th (Portland) in television market size.
And they're all winning because of smart budgeting.
That's what really makes this an official small-market, smart-market takeover, y'all.