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Monday, July 10, 2006
NBA Earnings as a Marathon, not a Race: Lebron James to Take Less Than Max

According to ESPN's Stephen A. Smith, Lebron James has informed the Cavaliers that while he is willing to sign an extension, he will not sign a max contract (5 years, $80 million), which the Cavs prefer. Instead, he is only willing to sign a 4-year extension worth $60 million. Considering that NBA contracts are guaranteed, you might wonder why he wouldn't want to maximize his earnings and take as much money as is on the table? It's because of this:
With the NBA's collective bargaining agreement set to expire at the end of the 2010-11 season, James could be positioning himself for an even bigger payday as a free agent when the cap goes up. Under a new agreement, James and other big stars could be in line for deals in the neighborhood of six years and up to $150 million.
James' age may be a factor here as well. Incredibly, he's still just 21 years-old. And when his 4-year extension expires, it will be the summer of 2011 and he will be 26 years-old. It would seem that he would be better positioned for the $150 million, 6-year contract at that point than if he were 27 years-old. But then again, it probably won't matter because he'll likely be the NBA best's player and able to command the max regardless of whether he is 26 or 27.

But here's where age may matter: let's think about James' bargaining position after that $150 million, 6-year contract expires: he would undoubtedly be in a better position for another lucrative contract at age 33 than at 34. So perhaps Lebron and his agent, Leon Rose, are astutely thinking ahead, to a time that may seem very far off (2017 or 2018) but is highly influenced by what they do now, in 2006.


Smart Guy. Everyone was ripping Lebron a couple of years back for hiring his buddies. Looks like its helping

Anonymous Anonymous -- 7/10/2006 3:32 PM  

Smart move by Lebron.

I wish more NFL players would think 3-10 years ahead before signing the 'biggest current 5-year contract' only to earn less than less skilled players 2 years later.

I know there are differences in the guaranteed contract vs. the NFL contract; that may be an even better reason for footballers to think years ahead rather than sign an unguaranteed deal.

Anonymous cj -- 7/10/2006 3:36 PM  

Damn that is some good agenting!


Anonymous Anonymous -- 7/10/2006 4:04 PM  

Well that sounds all well and good but what if he starts having injuries or something of that nature that doesn't make him worthy of a future max contract? Take the money and run. At 27, he could just take a 5 year $125 million deal. The thing is that either way really only makes about a $5 to $7 million difference depending how the future unfolds. In the cold world that is professional sports, take what you can get.

Anonymous Ron Jumper -- 7/10/2006 7:28 PM  

I'd really like to hear your thoughts on the Brett Myers-Bill Giles issue.

Bill Giles is one of the owners of the Phillies. If you didn't know, Bill Giles went public today stating that the statement given by Kim Myers to police describing the attack she suffered at the "fists" of Brett Myers was false.

Giles said that, despite Kim Myers's statement, Brett Myers did not actually hit her.

I have to believe that Giles must be fined by Bud Selig. Considering past precedent - Marge Schott - I also believe that Selig would be justified if he forced Giles to sell his ownership interest.

Bud Selig must show that baseball takes domestic violence seriously, even if the Phillies' ownership does not.

Anonymous Anonymous -- 7/10/2006 10:18 PM  


I agree with your points. To their credit, Lebron and Rose seem to be using a kind of foresight that players/agents seldom employ. I also agree that Lebron hiring Rose may be the best thing that he could have done for his career.


You bring up a good point--Lebron is taking a risk by not pursuing all of the guaranteed money that he can get. As you note, he could always get hurt (which would be terrible for the NBA, although that's a another story). I do imagine, however, that Lebron has bought insurance to partially offset that possibility.

Anonymous #2,

Thank you for raising the Myers-Giles story, a very serious and important story that I hope to blog on in the next day or two. I almost blogged on Myers when the Phillies decided to have him pitch against the Red Sox, the day after he allegedly beat up his wife (the Phillies' team president, David Montgomery, later admitted that letting him pitch that game was a terrible mistake), and now the topic seems even more blog-worthy. As you note, baseball, like any sport, needs to take domestic violence seriously, while at the same time recognizing that Myers is still presumed innocent.

Blogger Michael McCann -- 7/11/2006 12:35 AM  

I think it's a dumb financial move by Lebron. For the marginal increase in salary that he will get by being a 7-year free agent when his three year contracft comes up, he is risking TWO years of guaranteed max salary. That's insane (at least financially). The only thing that explains it is tht Lebron doesn't need the money and non-financial things are more improtant to him -- i.e., being on a winning franchise. Or, he just wants to get to a big market in his prime. But financially, it's a HUGE risk.

Anonymous john -- 7/11/2006 8:55 AM  


Thanks for your comment. I think you've raised at least two very good points: Lebron's extraordinary wealth (including earnings through his lucrative endorsement deals) makes the risk of turning down guaranteed money now seem less risky, and as you note, his possible ambition to play in a larger market might also be a factor in his preference for a 4-year, rather than 5-year, extension.

However, I did find it interesting that Carmelo Anthony and his agent now appear to want to replicate Lebron and Rose's strategy. It would be interesting to see any economic data on this kind of gamble (and related probabilities of injury/unexpected decline in play etc.).

Blogger Michael McCann -- 7/11/2006 11:57 AM  

Though Lebron is by far a much better player (and the future of the NBA), I point to several athletes who dropped off considerably for various reasons and never got a lucrative fourth contract: Glen Rice, Nick Anderson, Mitch Richmond, Larry Robinson, Kerry Kittles, Derrick Coleman, Vin Baker and, I predict, Kenyon Martin just to name a few.

Once again, Lebron's in a different league but to predict consecutive max contracts and SUSTAINED excellence and good health is a large gamble. A gamble that you can take when Nike's giving you a $100 million deal.

Anonymous Jason Chung -- 7/11/2006 9:28 PM  

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