Age & NBAAge & NBA

Drafts before 1996Drafts before 1996

A total of 7 college freshmen and A total of 7 college freshmen and high school seniors declared high school seniors declared themselves eligible for the NBAthemselves eligible for the NBA

2000% increase since 19962000% increase since 1996 College is no longer viewed as a College is no longer viewed as a

prerequisite for playing in the NBAprerequisite for playing in the NBA

Why the increaseWhy the increase

Kevin GarnettKevin Garnett Kobe BryantKobe Bryant

Rookies Salaries Re-Rookies Salaries Re-examinedexamined

Glenn Robinson: $80 Glenn Robinson: $80 million over 11 yearsmillion over 11 years

Jason Kidd ($65 million Jason Kidd ($65 million over 8 years)over 8 years)

Caused a consensus Caused a consensus among owners that among owners that salaries were out of salaries were out of controlcontrol

’’95 & ’99 Collective 95 & ’99 Collective Bargaining AgreementBargaining Agreement

’’95 & ’99 Collective Bargaining 95 & ’99 Collective Bargaining AgreementAgreement

Players who benefit the most from Players who benefit the most from CBA’s are the players most heavily CBA’s are the players most heavily represented in the NBPArepresented in the NBPA

Players drafted in the 1Players drafted in the 1stst round have round have restrictions on their rights to restrictions on their rights to negotiate their initial contractsnegotiate their initial contracts

““Soft” Salary CapSoft” Salary Cap

NBA was the first to introduce a salary capNBA was the first to introduce a salary cap Restricts teams from spending over a certain Restricts teams from spending over a certain

specified amount (usually a function of specified amount (usually a function of projected league revenue)projected league revenue)

““Soft Cap” allows for exceptionsSoft Cap” allows for exceptions Teams can re-sign their own players at any Teams can re-sign their own players at any

salary (the “Bird” exception)salary (the “Bird” exception) Various exceptions for middle and lower salary Various exceptions for middle and lower salary

playersplayers Exceptions have caused average salaries to Exceptions have caused average salaries to

increase by 250%increase by 250%

Post 1995 Agreement-Post 1995 Agreement-PositivesPositives

Veteran players gained greater free Veteran players gained greater free agency rightsagency rights

Increase of the total share of revenue Increase of the total share of revenue that goes to playersthat goes to players

Post 1995 Agreement & Post 1995 Agreement & RookiesRookies

Rookies drafted in 1Rookies drafted in 1stst round were restricted round were restricted to signing 3-year guaranteed “rookie scale” to signing 3-year guaranteed “rookie scale” contracts with below market maximum contracts with below market maximum salariessalaries

New “rookie scale” contracts resulted in:New “rookie scale” contracts resulted in: Draft picks being paid 15% less than year before Draft picks being paid 15% less than year before

in rookie yearin rookie year 23% less in their 223% less in their 2ndnd season season 39% less in their 339% less in their 3rdrd season season Eligible for restricted free agency after 3Eligible for restricted free agency after 3rdrd

season with right of first refusal ruleseason with right of first refusal rule

Post 1999 Agreement-Post 1999 Agreement-PositivesPositives

Low and middle income veterans Low and middle income veterans benefited in salarybenefited in salary

New salary cap exceptions for mid-New salary cap exceptions for mid-level playerslevel players

1999 Agreement & Rookies1999 Agreement & Rookies

Rules that affected future playersRules that affected future players Maximum salary for individual players (a first Maximum salary for individual players (a first

in professional sports)in professional sports) Maximum contract length and salary increasesMaximum contract length and salary increases 4-year rookie scale contract: 14-year rookie scale contract: 1stst round players round players

were restricted to signing 3-year guaranteed were restricted to signing 3-year guaranteed “rookie scale” contracts with below market “rookie scale” contracts with below market maximum salaries with a fourth year team maximum salaries with a fourth year team option and 5option and 5thth year restricted free agency year restricted free agency

Once rookies complete their contracts, Once rookies complete their contracts, they will still have restraints with salarythey will still have restraints with salary

Team Incentive for Drafting Team Incentive for Drafting Young PlayersYoung Players

Player’s salary is determined by the Player’s salary is determined by the draft for first 4 yearsdraft for first 4 years

Player’s often will be worth more Player’s often will be worth more than their salaries- their productivity than their salaries- their productivity usually exceeds the “rookie scale” usually exceeds the “rookie scale” maximum salarymaximum salary

Salary Cap & Labor MarketSalary Cap & Labor Market

Only a couple of teams usually can offer a high Only a couple of teams usually can offer a high productivity or “star” player a contract worth productivity or “star” player a contract worth more than the average salarymore than the average salary Teams are not prohibited from offering below Teams are not prohibited from offering below

average salary contractsaverage salary contracts 2002-03 season, every team was above the salary 2002-03 season, every team was above the salary

cap which makes it hard for “stars” to movecap which makes it hard for “stars” to move Largest profit opportunities come from drafting Largest profit opportunities come from drafting

or trading players before they are starsor trading players before they are stars Want a player whose future productivity Want a player whose future productivity

exceeds the post-rookie scale maximum salaryexceeds the post-rookie scale maximum salary

The OddsThe Odds

Higher probability of a high school player Higher probability of a high school player becoming a superstar, even if they are becoming a superstar, even if they are less productive than more experience less productive than more experience college playerscollege players

Rookie scale contracts have eliminated the Rookie scale contracts have eliminated the downside risk of selecting a player with downside risk of selecting a player with little or no college experiencelittle or no college experience

Hopeful they are drafting a future Hopeful they are drafting a future superstarsuperstar

High School v. College High School v. College PlayersPlayers

Players who stay in school are at risk Players who stay in school are at risk of revealing they won’t become a of revealing they won’t become a potential starpotential star

College players are:College players are: The safe pick (Shane Battier)The safe pick (Shane Battier) Nice additions to established teamsNice additions to established teams Know upfront if they are a “home run” Know upfront if they are a “home run”

playerplayer

Player PerspectivesPlayer Perspectives

School may reduce the projected probabilities School may reduce the projected probabilities resulting hurting their draft statusresulting hurting their draft status

Risk injury or poor play, hurting their draft Risk injury or poor play, hurting their draft chanceschances

Lower picks, affects rookie scale contractLower picks, affects rookie scale contract Delay’s when players are eligible for salary Delay’s when players are eligible for salary

increasesincreases Staying in school could cost some $66 million and Staying in school could cost some $66 million and

28% of their NBA earnings28% of their NBA earnings Staying in school could result in at least $2 million Staying in school could result in at least $2 million

lower salary every year up until the age of 35lower salary every year up until the age of 35