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Official NBA week 18 thread

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Here is something I dont understand (and Im not a business major).

Why do the owner's hate the arrangement where the salary cap is pegged to earnings? Ok if max salaries and MLE's are pegged to percentages of a salary cap which are pegged to earnings, then they will be paying for inflated salaries when income starts dwindling.

but from what I am aware, only max salaries and MLEs are tied to percentage of cap which are pegged to earnings. And it's not as if earnings and then the cap have dropped by half. They would be a bit out of pocket, but is it enough to risk a fan base over?

I havent done the numbers, to see exactly how much these pegged max salaries and MLEs are costing them.

Well, its also the luxury tax which is linked to the Cap. If they are over the Cap now and close to the luxury tax, then a fall in the cap (due to a fall in earnings) will also result in a fall in the luxury tax number. As the luxury tax requires a payment (i.e. "tax") equal to the dollars you are over that number, being over the luxury tax number costs you double.

In an environment in which salaries are usually pegged to go up each year (over a contracts life) because you have assumed that earnings will go up, then falling revenues, falling profits coupled with rising salary costs, compounded by increased luxury tax payments is a nightmare scenario for owners who have seen/are seeing their assets (NBA & elsewhere) being devastated.

I mean lets say we had a team with a current salary bill $70 million (current cap is $58m and luxury tax is $71m).... next year, their contracts will kick up and salary will be $75million - they are hoping this will be ok because revenue always goes up (like property :D) and the luxury tax limit will also go up. Instead revenue falls, say, 15% (and thats conservative according to many) and the cap number falls to $51million and the luxury tax to $62 million..... they are now $13 million over the luxury tax number which costs them $13 million in luxury tax. So they have declining earnings, increasing costs and a one-off annual hit of $13 million unbudgetted. 20 of the 30 teams are losing money this year, under that scenario some will be really struggling. If the fall in revenue is actually greater ie. 20%, 25% etc, then the damage increases exponentially because of the luxury tax number drop and the contract numbers being locked in....
 

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Bye Bye Dallas. 14-2 run by OKC to get it to 12 points
Retract that. Dirk has gone off with two 3 point play to get it to 2
 
Yer spoke too soon!

2:52 OKC - Shooting foul on T. Sefolosha
2:52 DAL - D. Nowitzki drives to the hoop for a layup. Assist: J. Howard
3:03 DAL - J. Howard steals the ball from R. Westbrook
3:31 DAL - D. Nowitzki drives to the hoop for a layup
3:47 OKC - Out of bound lost ball turnover on R. Westbrook
 
Westbrook having a nightmare couple of minutes.

Missed shot.
Ball stolen from him twice.
Threw it out of bounds once.

Dallas have it now.
 

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Nuggets are in the middle of shitting themselves against LAL.

Looks like they might have cleaned up their own mess.
 

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I mean lets say we had a team with a current salary bill $70 million (current cap is $58m and luxury tax is $71m).... next year, their contracts will kick up and salary will be $75million - they are hoping this will be ok because revenue always goes up (like property :D) and the luxury tax limit will also go up. Instead revenue falls, say, 15% (and thats conservative according to many) and the cap number falls to $51million and the luxury tax to $62 million..... they are now $13 million over the luxury tax number which costs them $13 million in luxury tax. So they have declining earnings, increasing costs and a one-off annual hit of $13 million unbudgetted. 20 of the 30 teams are losing money this year, under that scenario some will be really struggling. If the fall in revenue is actually greater ie. 20%, 25% etc, then the damage increases exponentially because of the luxury tax number drop and the contract numbers being locked in....
Funny you mention property. I felt like I was having a debate about house prices and equity here for a minute. Now if the luxury tax falls to 62 mil...then thats insanely bad becasue as you note, that also means revenues are down. But, the worst estimates I have seen show the SC dropping 1-2mil, and theluxury tax about the same. Maybe it will drop that %'s you mention, it would be an apocolypse.
 

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