Lebron James is Officially King

Lebron James has won a litany of awards and accolades over his historic career. He is currently chasing the most dubious distinction in the sport: Greatest of All Time (GOAT). This argument is more suitable for the First Talk desk or your favorite convoluted and oversaturated NBA mid morning talk show. The one thing that Lebron has been under praised (and probably over criticized) for is his transcendent approach to his career and contract structuring. In this aspect Lebron is in a league of his own historically.

The NBA is an evolving game so it is hard to compare contracts across generations because the rules were vastly different. Much like the game itself. For instance Magic Johnson signed a 25yr 25mil dollar deal with the Lakers in 1984. Times have changed dramatically since then. How much? I am glad you asked.

This chart signifies the salary cap changes from 1984 to 2012. This also doesn’t include the multiple cap exceptions such as the Bird Rule. Kobe Bryant is set to make close to what Magic Johnson was paid in 25years next season. So yes times have changed. But how exactly has Lebron James adapted to the change?

Lebron’s innovation with his contracts didn’t start with “The Decision” and his subsequent move to South Beach. It actually started 4 years before that when he opted to take one less year following his rookie contract. Chris Bosh and Dwayne Wade also opted to do the same thing so that they all would enter free agency at the same time. Was this a coordinated effort and if so who was the lynchpin? It is tough to tell so we will say that it was a shared idea to increase flexibility. The overstated mantra is that each player took “less” to go to Miami. That is false. On paper yes less total dollars. However the state of Florida has no state tax. Lebron James came from the state of Ohio whose maximum marginal income tax rate is the 1st in the United States. So no Lebron didn’t shrink his take home pay.

What Lebron also did this contract was take one less year from the maximum and gave himself the player option. Again he valued flexibility over security. This time he entered free agency with much less mass attention and build up. Presumably he learned from his “mistake” on the Decision. Let’s stop really quickly and discuss one small thing. Yes, proceeds for the Decision were given to charity. Specifically the local Boys and Girls club in Greenwich, Connecticut. Greenwich, Connecticut is home to many of Wall Streets hedge fund managers and is one of the wealthiest communities in America. So this was also just as much about business as it was a philanthropic event. Mini rant aside. Lebron this time decided that he wanted to go home (cue I’m Coming Home by Coach assaulting P. Diddy… Really Diddy a kettle bell)?

Then this happened

And This

The interesting thing that happened specifically with the Kevin Love trade was the letter that Lebron James wrote when he announced his return. It included specific plans for a lot of players on the current roster. It conspicuously left out #1 draft pick Andrew Wiggins and former #1 pick Anthony Bennett both considered valuable pieces. It was clear to see that their days in Cleveland were numbered. Lebron had made his wishes known behind closed doors. One of those wishes was apparently Kevin Love who was dealt for shortly afterward.

Lebron also structured his return contract to Cleveland very uniquely. The two year deal is understandable. There is no secret the new TV deal is going to ballon NBA contracts and Lebron isn’t foolish enough to not cash in on that when the chance comes. However the more interesting part of the contract (which he has since exercised this weekend) was the fact he decided to include an opt-out clause after year one. The easy argument here is by him opting out he is entitled to a pay raise of anywhere from 500,000 to 1.5 million dollars and you aren’t wrong there. However this clause is a testament to the symbiotic authoritative power Lebron covets. He is the puppet master and if his wishes aren’t met this is a reminder his hand is always on the door handle and his exit would be worse than Greece’s.

The reason all of this is brilliant for Lebron James is the absence of one key thing in his contract: More money. Before the boo birds come out and start throwing the draconian argument “he gets paid millions to play a game” at me harder than a kettle bell in an UCLA locker room. Let’s be honest that is false. Lebron James gets paid for providing Entertainment (with a capital E). No one laments Johnny Depp for getting paid $35Mil for his latest Pirates movie in 2011 ( I think it was titled Pirates of the… shit just give us your money)or proclaims he gets paid millions of dollars to play make believe. It is trivial to marginalize Lebron’s economic power in such a way. It is very hard to quantify the economic impact of a single person but that won’t stop us from trying!

In December of 2009, in the midst of LeBron’s last season with the Cavaliers before he took his talents to South Beach, Forbes reported that the Cavaliers franchise value was $476 million. At the time, that was the fifth highest in the NBA. Team revenue for that season was $161 million. Following LeBron’s departure, the team’s franchise valuation dropped to $355 million in Forbes’ 2011 roundup, followed by $329 million in 2012; Forbes.com

When Lebron James returned to the Cavaliers economist LeRoy Brooks estimated that Lebron James would generate a staggering $500M in revenue for the city of Cleveland. He has since come down off of that number and revised it to $162M.

Ok now that we have some raw numbers to work with lets look at Lebron James overall salary for this year. 20.64M. Let’s use Mr. Brooks more conservative prediction $162M. Our friend Johnny Depp made $35M on a movie that did $166.8M in revenue for its release month. Lebron looks to be way underpaid when you compare him across the entertainment spectrum. Someone with his star power should command a much higher salary because of his impact. However NBA rules only allow Lebron James to make “max contract” money. A dubious distinction that Lebron shares with players such as Joe Johnson, Deron Williams, and Rudy Gay. According to the NBA all of these players are “equal” value. Even players who rightfully deserve their salary such as Chris Paul and Kevin Durant still don’t deserve the distinction of being financially equal to Lebron James.

So Lebron has substituted the best thing you can for money other than time. Power. As the great Frank Underwood would say: “Money is the McMansion in Sarasota that starts falling apart after ten years. Power is the old stone building that stands for centuries. I cannot respect someone that doesn’t see the difference.” Lebron has learned how to harness his power year in and year out to reach the outcomes that he desires. At the end of the day isn’t that what everyone wants for themselves at their jobs? The authority to be able to make a statement and it be heard from the people at the top and respected by the people at the bottom.

Like him or hate him Lebron James is the modern day King of the NBA and he has rewritten the book. It should aptly be called “The New King James Version” of how to be an NBA Superstar. And as the boy king has turned into a man it is clear that he has earned his rightful place upon the Iron Throne.