There's always a lot of talk about money when free agency season rolls around. But today people are doing something they don't always do with all those ones and zeroes: tie them to value, translate them into signs of worth.
That's right, the economists have finally descended upon the NBA, and done a good job of making some real sense of what exactly LeBron James' return to Cleveland will mean. Bloomberg News' Mark Niquette came out with a fascinating article yesterday on what the experts had to say about the total economic impact of a basketball player's return to Northeastern Ohio. They said this:
The return of the star forward to his hometown Cleveland Cavaliers will have a $500 million a year impact on the local economy, with a boost from additional ticket sales and other spending, County Executive Ed FitzGerald said today.
NPR's PlanetMoney had a wonderful episode a year ago that looked deep into just how much LeBron James is underpaid. Part of their evidence simply looking at what it meant for the Heat as a revenue generating business that James came there four years ago. Talking about how much he, an individual player, increased the value of the team markedly, they threw around figures like 30%. If the Miami Heat were the Clippers, which recently sold for $2 billion, that means, through the move alone, that single act, he would have made them $600 MILLION dollars.
And that's only looking at the team, through that one act--not at all considering the links that the Heat have to the community and the economy of the Miami area. Niquette's article goes right into the thick of that network of connections:
Other spending increases will come at restaurants, convention business and hotels, FitzGerald said. Anticipated benefits include a $34 million increase in annual spending by fans at games to $170 million a year plus 500 additional jobs supported by the Cavaliers, the county said.
There will even be a boost to debt-service payments because revenue from an admissions tax is used to help support about $9 million a year for the $120 million in bonds that the county issued in 1992 to build what is now Quicken Loans Arena where the team plays, said Nathan Kelly, county deputy chief of staff for economic development.
Eric Freeman at Yahoo! Sports today casts doubt on these figures. But he uses dubious sociology to do so, relying on the excessively suspicious logic that it is in the "interest" of FitzGerald to present good figures. It is just as possible that even these figures, if they just account for the revenue LeBron playing for the Cavs will generate, might be understating the impact. The members of the Cavs: the Blog staff had a great podcast this weekend trying to wrap their heads around the whole LeBron situation, and they hit home an excellent point. LeBron's return will also turn the nature of the Cavs team into something completely different than anything it has been before: it will become a draw for free agents and for players, who will want to come to play with LeBron.
They explain that when James was on the Cavs before, he didn't quite operate as a draw in this way, because he never gave any clear guarantees that he would eventually be staying with the team. This left the team in an awkward position, as far as its revenue generating strategy was tied to its success as a basketball operation: it mainly operated as a small-market team with an oversize value, and could never make the jump into becoming anything bigger than that. With LeBron now there, and with the flexibility the Cavs have going forward (assuming they don't trade for Kevin Love), they will be able to act like a bigger-market team, and use the NBA talent pool as a whole as a way to expand the team and make it better. This is what the draft itself was always supposed to accomplish for small-market teams, but which it never quite was able to do: while getting Kevin Durant in the draft would have helped Portland immensely, this still isn't enough to change the dynamic whereby the team still effectively is in the position of poaching from the rest of the league, rather than altering its flows of talent. When a small-market team gets a player of LeBron's skill in free agency, however, that's exactly what happens.
It simply shows what has been always true of the NBA and of sports generally, that local loyalties are nearly as effective as star power in the success of a team as a business venture. A case could be made that what succeeded for the NBA in LeBron's case was not the draft system and the trade system, but these systems working in concert with these local motivating factors. If the dynamics of the league's basketball operations somehow end up capitalizing upon this, we could see some interesting developments. It would be a shift from the globalization-mindset that characterized the domestic economic moves of the NBA in the 1990s and 2000s, to a more community-minded and organic kind of economic model. As a further sign of these changes, it is already rumored that Kevin Durant is thinking that he will return to Washington, DC.
It also throws suspicion on the other styles of operating a basketball team, one of which we find now working against the Rockets. Daryl Morey has gotten a lot of flack for how his "genius" has ended up backfiring against him--rumors abound that many rival GM's are happy that he's finally got his comeuppance this year, after moving too many pieces ended up blowing up the Rockets' roster. Yesterday Chandler Parsons said he was offended by the way he was given up, when the Rockets had a chance to further develop him as a player.
It is hard not to understand his point about Morey, even with someone who may have a slightly oversized evaluation of his talents like Parsons. Grantland's Netw3rk has been saying a lot of things that basically everyone has been thinking about Daryl Morey lately, and Andrew Sharp has written a column that expresses things similarly and puts it in insightful and incisive terms:
The best way to understand Daryl Morey is think of Chris Paul at the end of playoff games. There’s nobody more relentless, and nobody more devious, nobody with more stubborn dedication to defy the limits that apply to everybody else. Every angle gets exploited, every trick gets used, and it never stops. But every now and then he gets impatient, tries to do too much too fast, and all that frenetic energy gets counterproductive. The tricks become pointless, and exploiting every angle distracts him from the bigger picture. Trying to do everything leaves him with nothing.
In the end, as we find out the effects of all figures being thrown around in free agency, we find some comments upon the nature of basketball operations in the present moment. Efforts that are used to circumvent the new organic economic networks that are springing up among superstars and communities, ultra-competitive efforts that border on gaming the system, may in a strange twist represent the past, not the future, of NBA economics.
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