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Why NBA collective bargaining is so difficult, and some possible tweaks that could benefit all parties

Los Angeles Lakers forward LeBron James holds a basketball during a timeout during the second half of an NBA basketball game against the New York Knicks Sunday, March 12, 2023, in Los Angeles. (AP Photo/Marcio Jose Sanchez)

A few months ago, when I was considering the conversation around Bradley Beal's loyalty to the Washington Wizards, I was struck by the double-edged sword that is the NBA's supermax contract.

Beal, a three-time All-Star, two-time 30 points-per-game scorer and one-time All-NBA selection, is criticized for receiving the five-year, $251 million deal he earned as one of the premier talents in his profession, and the Wizards catch heat for paying him. Both want to win a championship together, but paying a homegrown star to be one could preclude them from fulfilling that promise to the consumers who subsidize his salary.

So, I started asking around about issues anyone had with supermax contracts and their 35% correlation to the salary cap in light of the ongoing collective bargaining negotiations. The most striking of responses I heard from one agent was this: "There are so many problems with it, I wouldn't even know where to begin."

Months later, following two extensions of a December deadline for either the NBA or its players' association to opt out of the current collective bargaining agreement at season's end, I have been down that rabbit hole and seen the same light. No solution will ever satisfy all parties. Obstacles to sweeping changes of the existing salary cap system are also too great for both sides to find common ground on an entirely new vision before the current CBA expires in 2024, much less by the impending March 31 opt-out deadline.

This precedes the expiration of the league's media rights deal in 2025, when the current nine-year, $24 billion pact could double or even triple. Breakdowns in CBA negotiations might impact the next order of business, so both the NBA and NBPA anticipate an agreement on collective bargaining sooner than later, league sources told Yahoo Sports. "Everyone is benefiting, so why upset the gravy train?" one source said.

Who benefits most is another matter entirely and one that might have to wait until another CBA, when the disparity between the haves and (relative) have-nots will be even greater than it is now. In the meantime, there are simpler tweaks to the salary structure that could improve the existing system ahead of another cap spike (to an estimated $171 million) in the 2025-26 season, benefiting teams, players and fans of both.

Dallas Mavericks' Luka Doncic (77) works to the basket as Philadelphia 76ers' P.J. Tucker (17) and Joel Embiid, right, defend in the second half of an NBA basketball game, Thursday, March 2, 2023, in Dallas. (AP Photo/Tony Gutierrez)

The NBA's dwindling middle class

Reasons exist for every NBA player to complain about the salary cap. It is, at best, restrictive by a magnitude of millions per player and, at worst, in place only to save billionaire team owners from their spending habits.

The rookie scale, which assigns a salary to every draft pick, is inherently unfair, severely limiting a first-round selection's earning power for at least the initial four years of his career. Dallas Mavericks superstar Luka Doncic, en route to a third first-team All-NBA selection, was the league's 121st highest-paid player last year. His five-year, $215 million maximum extension, featuring a starting salary at 30% of the current $123.7 million salary cap, did not begin until this season. Even that falls well short of his actual value.

Not only does Doncic fail to qualify for the 35% supermax until 2026 (eight years into his career), he already counts among the handful of players who could command more than 50% of the cap if there was no limit to max salaries. Before the last round of negotiations, Kobe Bryant estimated LeBron James was worth $75 million to the Cleveland Cavaliers in a free market. Each team's salary cap at the time was $63.1 million.

Most teams feature at least one player worthy of max money. Teams without a second star preserve future cap space in the event they can add another. This puts the squeeze on the NBA's middle class of players, especially in terms of long-term contracts. Teams can maintain flexibility by filling out rosters with minimum, rookie and short-term mid-tier deals. Even the mid-level exception (MLE), which allows teams to exceed the salary cap annually for another suppressed league-average salary slot, comes with restraints. The most lucrative MLE triggers a hard cap. Others are limited to two years. All can be split between multiple players.

A 37-year-old P.J. Tucker was the sole player to receive the full non-taxpayer mid-level exception this past offseason. Only Reggie Bullock and Alec Burks received it in 2021; neither is fully guaranteed next season.

Everything changed in 1998, when Michael Jordan's $33.1 million salary exceeded the $26.9 million cap and a 21-year-old Kevin Garnett began a record six-year, $126 million extension. The ensuing lockout cost the players roughly $500 million and yielded the rookie scale, percentage-based max salaries and the MLE.

This crippled rank-and-file contracts. In the 1992-93 season, prior to the current structure, 60% of players earned somewhere between what the MLE and max salaries would have been (were they in place). Just 2% of players were paid the equivalent of a 25% max salary or more, and the remaining 38% earned between the minimum and what the MLE would have been. This season, 9% of players make the 25% max or better, 21% of salaries settle somewhere between the MLE and max, and 70% fall from the MLE to the minimum.

This is great for the additional 33 players who are making max money but less so for the 103 players whose salaries have dropped into the NBA's lower class (which, admittedly, is still more than the rest of us make).

Take Boston Celtics forward Grant Williams, for example. He reportedly rejected a four-year extension in the $50 million range during the preseason, hoping instead to seek a reported $20 million annually in restricted free agency this summer. Only, almost two-thirds of the league's teams are projected to have less than $20 million in cap space come July. Much of the remaining third will not want to commit a chunk of its available money to a player whose salary the Celtics can match. That could leave Williams settling for either the MLE (the Miami Heat are among teams interested at that price, per league sources) or Boston's original offer.

The advent of max salary slots created a greater disparity between the highest-paid players and mid-level NBA salaries. That gap will only grow wider with a new media rights deal, even if percentages for max salary slots remain the same. The 25% max was roughly double the MLE in 2002-03, and it is triple 20 years later. Fast forward to the 2032-33 season, when the 35% max and the MLE are projected to be $55.1 million apart from each other on an annual basis, and there will likely be even fewer mid-tier contracts.

There is no 'fair' in collective bargaining

This may be fair in the context of a salary cap, although the system itself is inherently unfair to all players. Stars drive revenue. In a free market, their salaries would still significantly outpace those of the players who elevate their teams from playoff to championship contention. Mid-tier deals like those doled out during the cap spike-induced spending spree in 2016 free agency are proof that: 1) team owners would not be able to help themselves in the absence of a cap, and 2) rank-and-file players are more likely to be "overpaid" with a cap.

Do not bat an eyelash when superstars earn $70 million starting salaries as the cap exceeds $200 million in the not-so-distant future. Most will be worth more than that. Remember, the average franchise valuation has risen at a rate (roughly 1,200%) four times the growth of the salary cap over the past two decades. In the NBA's first season removed from in-arena pandemic restrictions, only the Brooklyn Nets — a failed super-team experiment in the league's largest media market — lost money last year, according to Forbes.

How the NBA's middle class feels about a growing income disparity in relation to its elite teammates may differ from the reality that might result from lifting salary restrictions and the cap altogether. This is where we remind you that superstars Chris Paul and James were respectively the NBPA president and first vice president when the union last negotiated the CBA in 2016. James and Kevin Durant were among those pushing hardest to remove all restrictions on max salaries in the years leading up to that agreement.

This year's NBPA leadership features C.J. McCollum as union president and Williams as his first lieutenant. The two could find themselves on both extremes of what non-stars can earn between a max and MLE.

Again, there is no perfect system. While 30 teams compete against each other for titles, the NBA has not faced a challenger for half a century, and the basketball business is no egalitarian endeavor. Average NBA salaries rose nearly tenfold over the life of the ABA. The leagues merged in 1976, installing a salary cap by 1984, and team owners have been taking bigger bites of the basketball-related income pie ever since.

There is a reason billionaire team owners have wrested more control in successive bargaining sessions, even though the league's existence is far more dependent on multimillionaire players than their bosses.

"Miss a couple of paychecks and uh-oh," said once source from the union's perspective.

The concept of a hard cap, which the NFL uses to wield more power over its players, is "a non-starter" for the NBPA, according to league sources. Removing max salary restrictions under the NBA's current structure only favors a handful of true superstars. Lifting the cap entirely, like MLB has, would perpetuate competitive imbalance; no amount of revenue sharing could prevent Los Angeles Clippers owner Steve Ballmer from outspending everyone to an even greater degree than he already is.

When Durant said of his peers in 2014, "A lot of these guys are worth more than they're making," Dallas Mavericks owner Mark Cuban countered by suggesting the NBPA would have to give up guaranteed contracts in order to eliminate salary restrictions. Let us not forget collective bargaining is a give-and-take.

There is a limit to what team owners can and/or will spend. Salaries can only skyrocket so much until someone bears the brunt of those costs, whether it is non-stars on the payroll or fans at the box office.

Boston Celtics forward Jayson Tatum, right, shoots over Atlanta Hawks forward Saddiq Bey during the first half of an NBA basketball game, Saturday, March 11, 2023, in Atlanta. (AP Photo/Alex Slitz)
As wild as it sounds, count Boston Celtics forward Jayson Tatum among the underpaid. (AP Photo/Alex Slitz) (ASSOCIATED PRESS)

Tinkering around the edges of a new CBA

There is room for negotiation within the existing system, so long as everyone understands its innate issues. It makes no sense to have rules in place that a) prevent players from earning a 35% max salary into their prime and b) more often result in past-their-prime players with 10 years of service making the most money.

Going back to the Celtics, Jayson Tatum is limited to the 25% max because his two All-NBA selections sandwiched the one season he needed to achieve that status in order to qualify for a 30% max. Never mind he was one of the 15 best players in the league — and worthy of a 35% max — by age 22.

Unless Tatum's All-Star teammate in Boston, Jaylen Brown, makes an All-NBA team, Brown cannot be extended for max money until he enters unrestricted free agency in 2024 (for no other reason than the fact that he accepted less than the max on his rookie extension). This benefits nobody but his potential suitors.

Is the league not interested in incentivizing teams to reward and retain their best players? Teams should be able to extend players for whatever they can pay them in free agency down the line. There has also been some discussion of a system that only counts a percentage of a homegrown player's max salary against the cap. At the very least, the cap hit of a max contract should remain at the given percentage for the life of the deal, so we avoid situations where 8% annual raises outpace cap growth and further limit team-building (like how Russell Westbrook's supermax contract increased to 40% of the salary cap by its fourth season).

Other ideas, like a path to ownership equity for players, are less likely right now, per league sources. It will take that kind of outside-the-box thinking — and investments from both sides — to inch closer to fairness, but "lawyers by nature are not creative," one source said, and the game's power players are doing just fine.

The double-edged sword of supermax contracts

None of this solves the fact that not all max salary players are the same. Phoenix Suns center Deandre Ayton, who found one team in free agency willing to offer him the 25% max, is on the same deal as Tatum, who would have all 30 teams lining up to pay him far more than the 35% max if they could. The cap feeds on this inequity, and that may also be unfair contextually. One team's best player will be better than the next, but it will result in situations where Beal gets his 35% max 10 years into his career, and everyone is mad.

The success rate of teams paying 35% of the cap to any one player is especially low. The pool of players eligible to receive that contract is limited to a) 10-year veterans and b) anyone seven years into his career who has been a) voted the Defensive Player of the Year or to an All-NBA team in his most recent season or both of the two previous seasons, or b) who has named MVP in any of his three most recent seasons. (Keep in mind, most rookie extensions carry a player through his eighth or ninth season in the league.)

The list of players to receive that contract since the CBA first allowed for it in 2017:

  • Stephen Curry (2017-)

  • Russell Westbrook (2018-2023)

  • LeBron James (2018-)

  • Chris Paul (2018-21)

  • James Harden (2019-22)

  • John Wall (2019-23)

  • Kevin Durant (2019-)

  • Paul George (2021-)

  • Giannis Antetokounmpo (2021-)

  • Kawhi Leonard (2021-)

  • Damian Lillard (2021-)

  • Bradley Beal (2022-)

Outside of Curry, James, Antetokounmpo and (maybe) Durant — arguably the four most impactful players of the past 13 seasons — the quality of those deals ranges from prohibitive to disastrous in terms of roster construction. This reinforces the notion that, if you do not have one of a handful of players on your team, you do not stand a chance. (Those four players, plus Leonard, have combined to win the last 11 titles.)

Westbrook is on his sixth team since signing a supermax extension. The Los Angeles Lakers and Utah Jazz are paying him $47.1 million to play for the Clippers. Harden is on his third team in as many years and took a $15 million pay cut to help the Philadelphia 76ers construct a contender. And these are recent MVPs.

The Trail Blazers' ability to build around Lillard only grew harder as his max jumped from 25% to 35% in 2020. They just tacked two more years onto his deal, because he is worth that to the city of Portland. Unless the Blazers commit to paying a luxury tax, which they have only done minimally on a few occasions, Lillard's contract also likely precludes him from winning a championship unless he chases a ring elsewhere.

Therein lies a problem. Lillard could not have earned the 35% max with any other team than the one that drafted him until this season, when he's 32 years old (an NBA lifetime for most diminutive point guards) and not a single team had the cap space to give him that contract. Yet, there is no rule in place to prevent Portland from setting its own hard cap, even as the team's value has increased sixfold in Lillard's tenure.

Facing a similar scenario, Anthony Davis asked off the New Orleans Pelicans, who have never paid the luxury tax, and left $60 million on the table — money the Lakers pocketed when he delivered them a title. Lest we forget the reason the Lakers can afford Davis is because James also has his max salary capped. Percentage-based max contracts actually promote the concepts of super-teams and superstar movement.

Like the agent said, too many problems to count.

Given the brief history of supermax contracts, the prudent thing for Portland to do would have been to lowball Lillard, daring him to leave. Same goes for the Wizards and Beal (and John Wall before him). In other words, if your team does not boast a transcendent superstar — an all-time legend, really — it is incentivized to restrict a star's earning power even more than it already is, and stars have it better than 91% of the NBA.

Nobody outside the union really cares, because $200 million contracts are funny money to the rest of us, and they will get get sillier as they soar further into the unfathomable in 2025. The question is whether the vast majority of players who earn far less (and will soon see that disparity grow) would ever bring the gravy train to a halt for a CBA that increases financial flexibility for rookies and expands the NBA's middle class.

Welcome to collective bargaining, where the house always wins in the end.