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Throughout the entire month of January, E!, TMZ, and the like reported an ongoing contract dispute between the cast of “Jersey Shore” and MTV regarding payment for a second season. Snooki, Situation, and Pauly-D felt that they merited $10,000 dollars an episode, a figure that can also be seen as 780K for the “stars” for the season (6 People X 10k  X 13 episodes), but the folks at MTV were hesitant. About this dispute: two angles seemed really really obvious – 1) The 2nd Season of “Shore”, even down in the trashy Mecca that is South Beach, is going to be a new low even MTV’s programming (probably not true given the existence of Teen Mom) with zero shot at a season 3…

The Hedo Contract of Pop Culture... (Wouldn't Even Google her "pics")

The gimmick is up, and filming is probably getting in the way of Pauly-D’s DJ-ing career, and 2) $10,000 per episode just isn’t very much money – so even given angle 1, MTV needed to just give in. In reality TV, all of the money goes to the suits- the production companies, the parent company of the channel (in this case Viacom), and the cast members are treated as pawns. Basically, Snooki and JWoww (instead of shopping “pics” on the internet for cash) should be banding together with Russell from Survivor, “New York” from all those Flava Flav shows, and Kenny of RR/RW challenge fame in a union to reach a collective bargaining agreement with the suits who make so much money off of them.  They could even threaten to strike/get incredibly lucky and end up with the kind of deal NBA players have.  About 6 months before the world got to know Snooki, a guy named Hedo Turkoglu made himself famous with some clutch play, particularly against King James. While more-than-casual NBA fans have known Hedo for a while, he really was never more than “the one who isn’t Peja Stojakovich” when he broke into the league on those good Sac-Town teams and then one of those “tall euro-jump-shooters” who you’d even forget was on Orlando from time to time for the half decade thereafter.

I Can't Believe These Canadians Just Gave Me Oprah Money to Miss 3s and Not Play D

Enter last year’s playoff season, in which Hedo was in the last few months of his contract, absolutely made it rain, and then was offered a contract for 5 Years, $52 Million by the middling Raptors.

It seems pretty obvious: this has about as much of a chance of working out as Season 2 of Jersey Shore…

A few numbers to whip out for everyone while we are here:

The NBA Salary Cap = 60.7 Million Dollars

NBA Luxury Tax Threshhold = 70 Million Dollars ( I will explain this all in a second…)

Actual Raptors Salaries = 70 Mill

The Total Value of the Raptors = Approximately 400 Million Dollars

Yearly Revenues For the “Raps” = Approximately 130 Million Dollars

So why in the world would a team in a questionable market like the Raptors offer a 30 year old quasi-stiff who was a statistically below average guy (PER ~14) both last year and for his entire career a contract worth 1/8 of the value of the entire franchise? … and this wasn’t even breaking news for being one of the dumbest business decisions of all time?

The answer is simple: The NBA’s collective bargaining agreement and resulting business model is so whacked out that this was a perfectly normal thing to do.

The realities of this can be summarized in two points:

Apparently Shes "Not Really Even Italian"

1) In JWOWW TV Land, the employees may receive 1% of the revenues; the figure in normal industries is approximately 30%; in “the association”, the number is above 60%. As a result, it is next to impossible for owners to make money/ have money to invest in their teams – both in paying players and elsewhere, and small market teams are doomed to go out of business or perpetually require new owners/investors who will always be hemorrhaging cash.

2) NBA teams don’t construct teams with “basketball implications” in mind at all. Instead, they operate with frameworks of the Collective Bargaining Agreement (CBA) in mind, and the result is the total bizarro world that is the NBA.

Reality #1 is what it is. Either the economy will improve to the point that this doesn’t matter, new gazillionaire investors will constantly buoy teams (though we may have to resort to questionable Russian Oligarchs and Oil Sheiks like the Premier League has), teams will move/go bankrupt, or… the framework will have to change.

Reality #2 – Well… I think it takes some further explanation:

In the NFL and NHL, the salary cap is “hard”. Basically, you aren’t allowed to make trades or sign free agents that put you over the cap (though it is possible with severe penalties – see the late 90s/early 2000s 49ers moves that lead them to their current mediocrity). In the NBA, there is a so-called “soft cap”, meaning that teams are allowed to use a vast array of “exceptions” to exceed the cap.  In fact, next to nobody operates under the cap. The so-called “Luxury Tax” is the other important number: for every dollar that a team is over this level, they have to pay a dollar in tax to a pool that is divided up amongst the “non-Tax” teams. Even given this, a large portion of teams disregard the tax and suck it up and pay. (Another side result of this: if a team has an 80 million dollar payroll, then their de-facto player expenditure is actually 90 million, so % revenues going to players is actually upwards of 70%).

So what are the “Thousand Ways to Die” for an NBA GM?

#1) The Way Too Long/Too Guaranteed/Back-loaded Contract:

The Kids Get Better and Better With Photoshop Eh?

Let’s suppose you are the Washington Bullets, and you see this really promising Attorney General of New York named Eliot Spitzer who, while maybe isn’t one of the 5 biggest stars out there, is a borderline top 10 biggest name in the business with White House level potential, so you sign him to be your starting Governor of New York for the next six seasons, and then half way through season two, his hooker problem spirals out of control and suddenly not only is he suspended indefinitely, but he’s pretty much damaged goods for life. This all actually occurred… except that the Bullets are unfortunately now called the Wizards… and Eliot Spitzer is actually Gilbert Arenas.

Oddity #1 of the NBA CBA that needs explanation: contracts are not really negotiated within a free market. You can’t lock up Taylor Swift for the next 10 years for 30 million dollars per year just because you know that she’s a sick investment. Contracts are nearly all based on “scales” with a maximum salary for the year that a contract is signed determined by league revenues, the player’s years of experience in the league, and with the allowed salary increase in future years fixed at certain percentages (since nobody can actually know what the league revenues will be in those future years). The result is that in order to make contracts “rich”, they have to be back-loaded. When you see a “100 million dollar contract”, that usually means that a guy is getting something like 13 Mil in year one… 15 in year two… 19 in year three… 23 in year four… etc… which is particularly problematic if these incremental increases outpace league revenues, both because it is the determining factor for the salary cap, crippling your ability to sign other players, and because this means that an even higher % of the team revenue is going to it’s players, preventing teams from making investments that would result in higher revenues and break the cycle (Basically, revenues won’t increase… but contracts still will given the current situation).

Perfect Enough to Lock up for 10 Years? Yeah Probably...

Teams are forced to mortgage their future to sign players… and in a sport where 1 player makes more of a difference than in any other… they are powerless to do otherwise. Players and agents know this, and that’s how these 4+ year contracts come to be.

Perhaps the biggest issue with this aspect of the system: What happens to Spitzer/Agent Zero after their scandals put them on the bench? They continue to get paid in full. This is an extreme example, but let’s take a more common situation:

It’s 2001 and you are the GM of the New Jersey Nets. After a promising first CD with breakout hit “Faith”, huge second CD featuring “Nookie” and “Rearranged”, you sign budding legend Fred Durst to a 6 year deal. You want the guy for life. In year one, everything is going well and Durst starts in the All-Star game on the strength of gems like “My Way” and “Rollin” off of “Chocolate Starfish and Hotdog Flavored Water” – so good you even sign Durst’s buddy Wes Borland (the one with the sketchy masks/contacts) to a long term deal, but in year two, Durst shows up for the season totally out of shape, he and Borland start having terrible chemistry because they are having an affair with the same hooker, and neither of them are good anymore. What can you do about this? Zero – contracts in the NBA are entirely guaranteed… so once you get a deal, you can feel free to suck (See Eddy Curry).

Quick Break to Appreciate Limp Bizkit’s Masterpiece “My Way” Video:

This brings us to oddity #2:

#2) When Basketball Players Become Expiring Contracts:

The signing of mediocre/terrible dudes to long term deals is so rampant in the NBA, that a huge portion of management strategy revolves not around getting good basketball players, but instead simply clearing cap space to sign more mediocre/terrible dudes to long term deals next year. The most important operator in this game is the so-called “expiring contract”.

Let’s go back to Durst for a second. It’s now 2007 and the Nets have been an NBA cellar-dweller for the better part of a decade because they’ve had no money or cap room to sign somebody actually good. At the end of the season, Durst’s 24 million dollar salary is off of the books, and the team can partially have a clean slate. Given that you are the Nets GM and that you clearly suck at your job, your buddy over at Golden State calls you up and tries to screw you like so:

“We really want to start fresh in Oakland… to see if we can become a contender for the first time since Rick Barry was involved. About 38 people show up to your games… and most of them are there for all you can eat funnel cake night or to ogle at your cheerleaders… You guys haven’t made the playoffs in forever, and even if you will be crippling yourself again long-term, you need to make the playoffs this year before the Saudi Royal Family tries to buy the team and move it to Riyadh.

Montag May Have Gone Too Far, But Ashlee's Work was Spot On...

We accidentally signed Ashlee Simpson (Simpson-Wentz) and Pete Wentz to 5 year deals in 2004, and we owe them 11 Mil each this year with 10% raises each year hereafter, but surprisingly, Ashlee lip-syncs and is only still in our rotation because of her extensive plastic surgery… and Pete turned out to be only a little better than the guy from Gym Class Heroes, but you guys could probably get the 7 seed in the East with them on your team. You’d have to pay them 22 Mil for the next 2 years, but we’ll give you our 1st round pick this year too (as long as it’s not in the top 5) and even our first round pick next year (as long as it’s not in the top 10), if you give us Durst’s expiring contract so we can blow it up and start over?”

Simply because Durst’s contract is imminently ending, it has enough value to justify giving up decent players and draft-picks for it in order to start from scratch. This was pretty much exactly what happened with Tracy Mcgrady. The Knicks got rid of their commitment to pay the miserable Jared Jeffries  next year, Larry Hughes’ smaller expiring contract, their most recent #1 pick Jordan Hill, in addition to their 2012 #1 pick and the rights for Houston to swap #1 picks with NY in 2011 all in exchange for McGrady’s massive expiring deal. (As an aside: The Rockets must really love Kevin Martin to have done this…)

Notice how one expiring contract in the T-Mac deal was traded for another smaller one + some other stuff? That’s because one of the rules of the CBA is that the salaries of players going to each team in a trade must be within 25% + 100k of one another if the teams are over the cap (basically everyone is) – the so-called “Traded Player Exception”, and in order to achieve this, teams have to throw in random expiring contracts. The result is the following: instead of teams making trades that make basketball sense, they make trades that make money sense…

For example: The following trade – Durant straight up for Dwight Howard – is a perfectly equitable deal basketball wise (Durant is the bigger basketball talent but Howard is a big man… and the bigger the player the more relative value they have), but as is illustrated in ESPN’s Trade Machine, it is impossible.

For the record, Durant >>>> Howard

But hypothetically, this following would work (even though it couldn’t be more insane):

The Knicks Really Did Agree to Pay All of Those Guys...

So in order to make that first trade work, the GMs would have to throw in a bunch of random expiring contracts (mostly white dudes who don’t play):

Always Knew JJ Redick Would Amount to Something...

See the problem with how this all works?

By forcing teams to make trades that are “money equal”, the system of giving value to expiring contracts and therefore long-term terrible contracts is corroborated and condoned.

It get’s more convoluted though… Let’s say that in the upcoming offseason, the T-Wolves want to trade Jason Biggs’ expiring contract worth 5 Mil a year and Tara Reid’s contract worth 9 Mil a year with 2 years left on it to the Bucks for Sean William Scott- a better player than either of the aforementioned gems, but whose contract is currently 10 Million Dollars expiring this year.

Don't Think A Serious Career is in the Cards for the Stifmeister.

You’re the Buck’s GM, and you don’t have any random expiring contracts to throw into the deal, so you say: well let’s just resign Stifler at 14 Mil a year and then ship him off to Minny to make this trade work. Here’s where a rule called “Base Year Compensation” comes in. Long and short of it: if you give a guy a raise over a certain % of his past salary, for the next 6 months either his past salary or 50% of his new salary are used as his “de-facto trade salary”… basically to prevent teams from doing this kind of thing…. But the following ludicrous loopholes still do exist:

“Pulling a McDyess” – In last year’s Nugz-Pistons trade involving Iverson going to Detroit for Chauncey Billups, Antonio McDyess was sent to Denver to make the money add up. The Nugz immediately bought out his contract, and he resigned with Detroit 30 days later when such was allowed. A lot of people expect this to occur with Cleveland/Washington and Zydrunas “Big Z” Ilgauskas imminently.

“Pulling a Van Horn” – In order to make the Jason Kidd-Devin Harris deal work last year, Dallas needed to add more money to the trade in order to compensate for how brutally overpaid Jason Kidd was. They couldn’t even achieve this with NBA legends Desagana Diop, Maurice Ager, and Trenton Hassell, but they still technically had the rights to Keith Van Horn… who officially had not yet retired… so they signed him to a three year deal with only the first year guaranteed for 4 Mill… and sent him to the Nets… even though the Nets also had no intention of ever playing him and waived him shortly thereafter. All in all, the “2nd Best White Big Man Ever to Go to Utah” got 4 million dollars to do nothing… just because the NBA CBA makes no sense.

This, while not a traditional example of such, also brings me to Oddity #3 on our list.

#3) Why Sign?… or Trade?… When you can “Sign and Trade”?

How killer of a picture is this?

So lets just say that you are GM of the Clippers now, and you’ve had budding talent Michael Cera on your roster since you drafted him in 04 and subsequently resigned him after his rookie deal so that he’s now earning 7 Mil a year, but his contract expires at the end of this year. You have this inkling though that Cera has become a somewhat “one dimensional player” over the years, and that his niche really worked on “Arrested Development” and in “Superbad”, you think he could really use a fresh start before he makes “Youth in Revolt II”. He wants to “develop as an actor like Shia Leboeuf” too, so you and Cera amicably agree that he needs a change of scenery. You could trade him right now… but what if you are in the midst of a playoff push and don’t think you could get much back for him? or potential suitors who you would trade him to are worried that he won’t resign with them in the off-season, and thus they’d get screwed? In baseball, if you waited for the season to end before making a move, Cera would just bolt and you’d get nothing out of it. The principal rules of the NBA “Soft Cap”, though, disincentivize this action.

This is Supposed to be Heidi Montag (Version 3.0) In front of Mount Doom?

Back in the day when Sauron was forging the CBA in the flames of Mount Doom, there was some dude named Larry Bird on the Celtics. Not only was he pretty sick at basketball, but the fans in Boston really dug how Caucasian he was, and the league figured out that things would “hit the fan” if he had to leave Boston over contract stuff. Still, the dude deserved to make bank and get raises… bigger raises than the Cs could offer the guy under the salary cap. The result: the birth of the CBA provisions known as “Bird Rights”, “Early Bird Rights”, and “non-Qualifying free agents”.

The quick summary of what that means: If you have been on one team (or were traded but never were a free agent) for three or more years, you qualify for “Bird Rights”. This means that your current team can resign you for the maximum salary and with larger incremental raises despite being over the cap. Likewise, “Early Birds” are players who have not been free agents for two seasons and can resign for a maximum of either the league average salary or a 75% raise with a similar incremental raise advantages, and “non-qualifying free agents” represent everybody else – but are still able to resign with their current team at a 20% raise even if that would put the team over the salary cap. These rules, basically allowing you to resign your guys despite being over the cap, are the foundation of the “Soft Cap”.

But how does this affect players switching teams? Back to Michael Cera… It’s now the end of the season, and your buddy who runs the Bobcats calls you up and says:

One of the Greatest Debates of our Generation

“We really want Cera. We were worried if we had tried to make a deal with you before the deadline that a hot commodity like that wouldn’t have signed a long term extension with us because we are a terrible NBA town, but we really want to see if we can make an ensemble Superhero RomCom with him, and we think with Owen Wilson, Michele Rodriguez, and Kirsten Dunst on our roster we’d be able to make a sick one… maybe something in which Cera dies freakishly but gets to come back as a ghost with super powers? We have Luke Wilson on our squad, and his contract isn’t even that bad, he’s just out of shape and rusty from only doing AT&T ads, but he still has value as a wily vet. I mean…. “Alex and Emma”… the guy is golden! Come on! How about you sign Cera to a raise that we couldn’t give him if he were just a free agent? and we’ll throw you guys Luke and a first round pick in 2011?

The Clippers win because they get Luke Wilson and a #1 pick (probably a solid one) from the Bobcats instead of just having Cera walk; Cera gets more money than he could have if he had just left as a free agent; and the Bobcats get their prized new star under a long term contract…

Ladies and Gentlemen: “The Sign and Trade”. It is such an institution in NBA dealings that the CBA has institutionalized it as an “atomic transaction” – meaning that the “sign” and the “trade” are treated as one event… so you can’t “punk” Cera by telling him that you are going to “Sign and Trade” him… and then keep him the new contract.  With the off-season of the vaunted 2010 Free Agent Class impending, expect to see a lot of this going on. I’d say it’s a good bet that this is how all of the guys: Wade, Bosh, James, Joe Johnson, The Booz Cruise, Rudy Gay, etc.. move if they choose to do so.

We’ve almost made it through the gauntlet here, but I would be oversimplifying the whole thing if I didn’t at least mention one last category of oddities…

#4) There’s always another exception to the rule…

It would be way too easy and make too much sense if the 3 aforementioned monkey wrenches were all that stood in the way of the NBA having rules that made sense, but in the never-ending quest to be “over the cap” without being “over the cap”, five other little rules came to be:

Sure He Turned out Way Better than Darko... but the dropoff was "Precipitous"...

The Rookies Exception: Just like there really isn’t a free market for signing veterans as so much is constrained by salary scales, the same goes for signing first round picks. In fact, each pick in the first round must be paid a designated amount based on where in the first round they are taken. What if the draft has much less talent one year than usual? Doesn’t matter. What if there is a significant drop-off in talent level from one pick to another like in the 03 Draft when the first guys taken were: Lebron/Darko/Melo/Bosh/Wade… and the #6 guy was Chris Kaman – who turned out to be damn good, but was not in the same league as a prospect? Doesn’t matter. Each team has to sign their first round pick for at least the scale amount, and while such counts towards their total team salary, they are allowed to sign the pick for that amount regardless. The only wiggle room: giving the picks up to 20% above the scale amount if for instance, they were playing in Europe and it wouldn’t economically make sense for them to sign otherwise. As usual, this exception tilts “advantage players”.

The Mid-Level Exception: Probably the most famous of the exceptions used on other team’s guys, the premise here is that even if your team is “over the cap” (sound familiar…), you can sign one guy per year to a contract up to five years with a salary exactly equal to the league average for the first year with up to 8% raises each year thereafter. How much is the league average? Around 6 Mil per year – so we are talking about enough money to sign a real impact guy and exceed the cap by  an additional 10% each season for all eternity. Why is there a cap again?

Final Verdict: Simpson's Surgeon > Montag's >>>>> Ryan's

The Million Dollar Rule: You’re the Lakers GM this time, and as usual you are the odds-on favorite to win the title, but the whole dynasty thing is getting a little monotonous. Of course you are 40 million dollars over the cap already, so how can you spice things up? How about adding a lovable but washed up superstar who is already loaded and just wants a title for cheap? Maybe Snoop Dogg? Maybe a post-awful-plastic surgery Meg Ryan? Well, there’s (thankfully) an exception that allows this too: “The Million Dollar Rule” allows over the cap teams to sign one guy every two years to a two year deal worth up to 2 Mill per year (It used to be 1 Mil a year, but as always, these salaries have had a way of doubling). This is exactly what the Lakeshow tried to do when they signed Karl Malone before somehow choking in the finals against the Pistons back in 04. They should basically rename this one the “In case it didn’t suck enough being a GM of a crappy NBA team” exception.

The Minimum Rule: This one is real self explanatory – teams can sign as many guys as they’d like to the league minimum salary for 2 year deals even if they are over the cap. What is the league minimum? About 500k for a rookie, 1 Mil for a 5 yr Vet, and 1.5 Mil for a 10 yr Vet… So is this de-facto almost identical to the “Million Dollar Rule” without any limits on quantity or frequency of use? Pretty much.

Doesn't This feel like a long time ago? Even old people love Snoop now. Unfortunately, this wouldn't count as a "Disability".

The Disability Rule: Finally an exception that makes sense: If a player cannot play due to physical disability (not basketball injury, but something like Leprosy or Ebola), then a team can exceed the cap to sign a guy worth the Mid-Level exception or 50% of the diseased dude’s salary… whichever is LOWER (the first time in a long time the word “lower” was involved).

So this is the world in which NBA teams are forced to operate: Knowing that fanbases and revenues largely hinge on fielding not just competitive but star-laden teams, but also knowing that the players have the vast majority of the power and that the CBA is a reflection of that. The nature of the CBA is such that salaries will grow at a rate that outpaces the growth of the Salary Cap – all of the oddities of the system guarantee this. Basketball, moreso than football or baseball, is a team sport defined by the individual, by the superstar. The result has been that labor negotiations have moved in the favor of the players to a level that drastically exceeds that seen in the other major sports. Those other sports may ultimately find themselves in the same position as basketball currently is in, but their evolution has occurred more slowly in light of players being more replaceable. The question is: what is the next stage in sports business evolution? The NBA has inauspiciously become the forerunner in this experiment, and the likely lockout that will result from the renegotiation of the CBA this offseason could provide any of a number of answers. Commissioner David Stern acknowledges that the % Revenue allocated to the players simply must decrease for the league to persist, and that moves towards semi-guaranteed contracts could seriously help to limit the dead money given to the Gilbert Arenases and Eddy Currys of the world. Mavs Owner Mark Cuban favors a move away from salary caps, which he feels actually hurt the small market teams by forcing them to spend proportionately to league revenues and not their own revenues. He also acknowledges that the players receive a huge % Revenue without shouldering any financial risk, and the exact opposite is true of owners. Houston GM / MIT Business Professor Daryl Morey favors a move to “Hard Caps” because all of these exceptions actually allow teams with incompetent management to continue to spend indiscriminately and run themselves out of business in the process. From a “basketball standpoint”, he argues that a hard cap would be the system that would create the purest “basketball meritocracy”, in which good management would be rewarded on the court… and poor management punished.

You can’t help but notice what’s obvious: Players who suck get paid 10s of Millions of dollars to ride the pine. Trades are made solely for the sake of adhering to a ludicrous set of legal nuances with basketball implications only secondarily involved, and most importantly – Nets-TWolves games with fewer people in the stands than you’d see at an 8th Grade Talent Show.

I know the fans go to games to see players and not owners, and that it’s hard to feel as though men who are multi-millionaires or even billionaires are being exploited, but that seems to be the honest reality. The players have fought hard for their rights to get from being treated like Snooki to where they are today, but they have reached a point where they are legitimately threatening their own livelihood and the dream that they are so lucky to be able to live.

It may be an ugly next year or two, but things need to change. At some point, the owners and the players will figure out how to do it. Basketball is worth it.

Word,

Nick