10 Feet High

I have grown increasingly fed up with the dire economics of the NBA, especially the atrocity of the guaranteed contract.

Do me a favor and think for a second about the notion of a guaranteed contract. In no other business, including other professional sports, is there a business model as insane as this one.

The NFL is the most financially successful professional sport in America, and you know what?

In a stark contrast to the NBA, there are zero guaranteed contracts. The only guaranteed money comes from the signing bonus. The majority of contracts are based on incentives, which naturally creates a greater desire to perform.

Can you imagine negotiating your salary based on guaranteed money? In other words, when you sign a contract for a new job, would you ever say, “I want x amount of guaranteed money, even if I fail miserably and completely underperform?

Of course you can’t, because it’s a dreadful way of doing business. It’s unethical, and it doesn’t make any sense.

In effect, the ghastliness of the guaranteed contract has not only damaged the perception of the NBA, but it has also wounded the quality of the game.

Consider this: The NBA is better served when its marquee franchises – i.e. the Lakers, 76ers, Celtics and Knicks – are winning. When these teams are winning, the glamour perception of the league is restored, both on a domestic and global level. That’s why the Lakers-Celtics Finals match-up was a dream.

It’s the same with other sports. MLB is a better product when the Yankees and Cubs are winning, and the NFL likewise with the Cowboys, Steelers and 49ers contending. For years, the Knicks have been mired in bad contracts, with their money locked up like Plaxico Burress. Poor executive decisions - like inexplicably trading for disgruntled center Eddy Curry and his 6-year, $60 million contract, or signing Jerome James for $30 million, or trading for Stephon Marbury and the majority of his $76.8 million deal (notice a theme here)? - have proven too much to overcome for one of the league’s proudest and most celebrated organizations.

Larry Brown’s recent statement about Allen Iverson’s one-year, non-guaranteed deal with Philly is one of the most disturbing quotes I have ever read. Apparently Brown feels that AI has proven his worth over time and therefore deserves guaranteed money.

“I get worried about that message, but I also admire Philly for giving him a chance,” Brown said. “That's more meaningful for me. I look at a guy that scored 20,000 points and played hurt and did so much and now he’s got to play for a non-guaranteed contract, that's pretty troubling for me.”

What type of message is Brown sending to fans and to our youth?

Here, we have one of the most successful coaches in basketball history saying that a 34-year-old - controversial and often malcontent - guard deserves guaranteed money after he recently quit on a team after just three games, because he wasn’t happy with his role and overall lack of playing time.

The NBA game is a business, and business would improve if guaranteed deals were eliminated.

Players would have more to play for – specifically money, which is always a selling point – and therefore competition would be stiffer, and games would be better. It’s not healthy for the league to have the type of offseason we’re about to have.

LeBronapalooza wouldn’t garner the attention it has in New York City if the Knicks hadn’t made the mistakes they made in the past. If there weren’t so reliant on signing him (or another elite free-agent), they wouldn’t have cleared the cap to the level that they have, and in turn, and forfeited the opportunity to be competitive. One of the best selling points of any league is competition. With the current system in place, mediocre teams are rewarded to lose even more in the hope of landing a big free agent with a monster payday.

The incessant whirlwind of speculation about Dwayne Wade and Amare Stoudemire wouldn’t have the

relevance as it does right now. The hammerlock of a guaranteed deal has had a negative effect on the league ever since its inception.

(It should be noted that for the NBA eliminate guaranteed deals, it would have to come through a restructuring of the league’s Collective Bargaining Agreement. If it didn’t, this would be in direct violation of its anti-trust rules).

The other issue we must consider is the expiring contract, which, sadly enough, has become almost as valuable to teams as a franchise player. The fact that teams are trading for a surplus of expiring contracts is insane.

As a fan, you’re sitting there and your team is trading for Raef LaFrentz – a guy normally not exactly in demand - not because he will help the team, but because his deal is about to end.

If teams could just cut the player and not have to deal with paying him, the economics would be much healthier. But as long as we have the guaranteed contract in the NBA, teams will refuse to waste money. No professional sports league rewards losing teams more than the NBA. It should be the opposite.

Isn’t it time to turn this around?

With legacy contracts – players in the last year or two - teams try and pick them up to generate additional cap room to sign a LeBron James or Dwayne Wade type. Several sources close to the league have informed me that more than half of the NBA’s franchises are losing money.

The NFL has the ideal business model in that 100 percent of revenue from its national TV deals (NBC, CBS, Fox, ESPN) are shared.

The NBA also shares revenue from network deals, but unlike the NFL, not every game is broadcast on a national outlet. The majority of NBA games are televised on local channels, including cable, and this revenue is not shared. There is a big gap between the revenue generated from cable between the Lakers and Knicks than what the Milwaukee Bucks or Charlotte Bobcats receive. On a local level, every team has to fend for itself.

That issue may be unavoidable given the disparity in the games played between the two leagues: 16 and 82. But another problem is that the NBA is overexposed on national TV. To bolster the size of the deal, the league had to sell more games. The NBA is on nearly every night, and the quality of the games is often very poor. The downside translates to poor ratings and overall viewership. In 2008, ESPN’s broadcasts of NBA games averaged a 1.3 rating, while ABC’s Sunday games averaged a 2.2.

To give you perspective, the NFL averaged a 10.2 rating in 2008 (includes NBC, Fox, CBS and ESPN), while NFL games were also the highest rated local programs 88 percent of the time ... an all-time record for the league.

Another key problem for the NBA is that player salaries as a percentage of team’s revenue is awful. The average revenue of a team in the NBA is around $100 million, while salaries of teams are upward of $60 million, with guaranteed contracts.

How can franchises possibly make money?

Another vital issue is the inflation of the NBA’s ticket prices in a down economy. The league has priced itself out of the market where a family of four can’t afford to go to games anymore. As a result, most season tickets have been sold to corporations and businesses.

Even worse, the league is attempting to go to both China and Europe, in a drastic effort to create incremental sources of revenue. This is not the right time to do this, considering it comes during a period when the league still has so many things to fix in-house, with its core business in North America.

The bottom line is that the current system in place of guaranteed contracts and the consistent reward of poor play and cap room has wounded the NBA to the point where the fan is put in a terribly awkward position. One of the most painful experiences is rooting against your own team. No one should be put in such a predicament. Furthermore, spiked ticket prices and league expansion should not take place in this economic climate. The fans make all of the difference. Let’s not forget that.

The NBA needs to fix what has truly become a tarnished and broken financial system. The lockout excluded, this is as fragile a juncture as we've seen in the history of the league.

I just hope it’s not too late.