Call it a moment of clarity, self-actualization, or just putting “it” all together, but there is no denying Miami Heat small forward LeBron James has reached the pinnacle of basketball.
Over the past year, the 28-year-old has won his first NBA championship, an Olympic gold medal, and his fourth league MVP. He's reached a level that only two or three players ever have, and the Heat have been the main beneficiary, but for how long?
As James begins the peak years of what should assuredly be a Hall of Fame career, the Heat face difficult decisions over the next year of not only how to keep the best player of his generation, but his friends, too.
Unless Miami can figure out a way to afford the high-paid core of James, guard Dwyane Wade, and forward Chris Bosh beyond next season, the new, much stricter, NBA salary cap penalties that take effect next season could start the timer on the exploding clock of James’s time in South Beach.
One way the Heat can offset the heavy tax burden is by extending their lucrative television rights deal with Fox Sports regional network Sun Sports, but all three players could opt-out of their contracts in the summer of 2014, one year prior to the current agreement’s expiration.
Keeping James will have to be the club’s top priority. He led Miami in points, rebounds, and assists this season, carrying the club to first in the Eastern Conference while the aging Wade struggled with knee injuries and the oft-out-of-position Bosh averaged a career-low 6.8 rebounds per game.
Currently in the 16th largest television market in the country according to Nielsen, the Heat would have far less leverage over Sun Sports if they are lacking in star power.
A Heat spokesperson declined comment to IB Times regarding a reported possible extension with Sun Sports.
Team president Pat Riley and owner Mickey Arison will have to consider how to or if keeping all three of their superstars is the best decision for the Heat’s future. The almost-crippling salary cap restrictions could cost Miami upwards of $34 million next season alone. The new collective bargaining agreement set up cap penalty tiers, and each team will have to pay a maximum amount if they completely blow by a tier, increasing from $7.5 million to $8.75 million, then $12.5 million and $16.25 million respectively. Should a team spend more than $20 million above the luxury tax line, they will have to pay $3.75 for every extra dollar and an additional $0.50 for every $5 million increment there after.
The New Deal
Now in the second season of the new CBA, top-tier players will find their maximum contracts severely limited compared to their current ones.
In terms of a maximum deal, the new CBA allows for the first year of a contract to start at $16.4 million per season, or 30 percent of a team’s cap, as long as the player has been in the league for a minimum of seven seasons.
Much of the new salary restrictions were created to prevent teams in stronger, richer markets, like New York and Los Angeles, from simply outspending their rivals like Major League Baseball typically operates.
James, Wade, and Bosh are all in their 10th season, and exercising their opt-out clauses allows them to test free agency by re-negotiating with Miami or with other star-hungry clubs. James is expected to receive a maximum offer from numerous teams, while Wade and Bosh should also receive lucrative offers.
Each took less money in order to team up back in 2010, a point James felt many critics have overlooked. In theory, citing the trio’s success, each could actually be worth more than the sum of their parts, especially to a team lacking a superstar.
Ready For Their Close Up
In the previous CBA, teams paid a dollar-for-dollar penalty, with $20 million over the luxury line costing another $20 million. That rate is long gone, and even if an owner decides to load up their team for a one-season championship run, they run the risk of paying the repeater rate for continuously overspending.
The new, normal tax penalty will start at $1.50 for every dollar spent above the luxury line, but the newest facet to the CBA is the repeater rate. Starting in the 2014-15 season, teams will have to pay $2.50 for every dollar over the cap if they happened to exceed it in all three of the previous seasons.
Large-market NBA franchises have easily offset their salary cap penalties with huge television rights deals. In 2011, the Lakers reached a $3 billion deal with Time Warner, which will help them foot the $30 million superstar Kobe Bryant is owed next season, along with their expected tax penalty of $13 million. The deal took effect at the start of this season, and the Lakers will rake in a reported $200 million a season for the next 20 years.
New York Knicks owner James Dolan has his own cable system in Cablevision, and channel in MSG, and is quite aware of the power he wields, considering the blackout standoff with Time Warner during last season that was mainly broken by the feel-good story of Jeremy Lin and “Linsanity”. MSG is under Cablevision subdivision MSG Media, which earned over $600 million in revenue in 2012.
The billionaire Arison is the CEO of Carnival Corporation, one of the largest cruise ship operators in the world, but how much of his personal wealth he is willing spend on salary cap taxes remains to be seen.
The Heat also have a TV deal to fall back on, but whether or not they keep winning and have their star trio could determine if they reach the level of the Lakers television revenue.
Miami’s current deal with Sun Sports lasts another two seasons, but the two sides were reportedly close to an extension that would be second only to the Lakers’ Time Warner deal. According to a report by Forbes.com last June, the Heat could earn $80 to $100 million a season in television revenue.
That kind of income could technically cover the luxury-tax bill ownership would have to pay if the Heat decides to keep all three of their stars. However, Fox Sports later denied any negotiations were taking place, and referenced the time left on the two parties existing deal.
Fox Sports vice president of communications Chris Bellitti spoke to IB Times and reiterated the network's stance from last year.
"We have a long-term TV rights agreement in place with the Miami Heat, and we look forward to being partners with them for many years to come," Bellitti said.
The Heat have already proven they are a huge draw both locally and nationally. Earlier this season, television ratings soared for Sun Sports during Miami’s 27-game win streak, especially an 18.5 peak rating during their 25-point comeback performance against James’s former team, the Cleveland Cavaliers, back in March, according to a release by Sun Sports.
Even after the streak ended, ESPN picked up more of the Heat’s games for national coverage. And Game Two of Miami’s first round match-up with the Milwaukee Bucks garnered a huge 15.6 rating for Sun Sports, according to Sports Media Watch.
According to Nielsen, Miami-Ft. Lauderdale was the No. 16 market in the country in 2012 with over 1.5 million TV households, and the Heat have become one of the city’s biggest attractions with the NFL’s Miami Dolphins and MLB’s Miami Marlins floundering the last few seasons.
The Heat were valued at $625 million by Forbes earlier this year, sixth best in the NBA. That represented a 37 percent increase in one year after the franchise won its second title last season.
Like most teams, Miami’s huge valuation bump came from the new CBA, according to Forbes. The average NBA team is worth $509 million, due in part to new arenas, player salaries cut overall by seven percent, more revenue trickledown from larger to smaller markets, and more television revenue.
Three’s A Crowd
Should the Heat re-sign James, Wade, and Bosh, even if they accept less money like they did their last go round, that could give Arison and team officials much more leverage in a television deal.
But what if the Heat just keep one or even two of their Big Three? The current tax level, or the point where a team must begin paying the luxury tax, is $70.3 million, but should rise slightly next season. Before the Heat signed the three stars, the tax threshold was $69.92 million for the 2009-10 season.
By himself, James should continue to be Miami’s main draw, but he may have to keep up his amazing, winning pace by himself if the Heat decide to let Wade and or Bosh walk. James proved in the 2006-07 season that he can carry a team by himself, lifting Cleveland to the singular NBA Finals appearance in the franchise's history with a team made up of mostly spare parts and aging veterans. Though one of the core reasons James left Cleveland was the club's failure to attract top talent.
According to Professor T. Bettina Cornwell of the University Oregon, who specializes in sports marketing, the loss of James, or any of the Big Three, diminishes Miami’s position in any negotiations.
“Well, we already know that LeBron gives what has been called a ‘LeBoost’ to the Heat,” Cornwell stated in an email. “This has been argued based on ticket prices. From other areas such as our stadium naming rights research as well as research on NASCAR, winning does matter and losing top players negatively impacts winning.
“We also know that rights deals are based on eyeballs on screens so, yes, losing top players could negatively impact TV rights re-negotiations.”
Wade was the face of Miami before James arrived, and led the Heat to their then-only title in 2006. However, Wade is 31 years old, and he may not be worth a long-term deal. Wade, not Riley, was seen as the main recruiter that brought both James and Bosh to South Beach. Riley is also known to be loyal to his players, and letting Wade walk could be a public relations disaster.
Bosh, albeit an integral part of Miami’s title run last season, including the double-double he averaged against Oklahoma City in Miami’s four wins in the Finals, is still regarded as the weakest asset of the three. His inability to dominate in the interior is a contributing reason Miami finished last in the NBA in rebounding, and may prompt management to search for other options.
A core of James and Wade still leaves Miami with perhaps the best tandem in the league, and more salary wiggle room for Riley to build around. Choosing James and Wade could make Bosh the odd man out due to financial reasons.
James will have plenty of suitors come 2014, with the Lakers and, surprisingly, the Cavaliers, being the most rumored destinations. Bryant’s contract expires after next season, freeing up tons of cap space that could grow to more should L.A. not re-sign center Dwight Howard this coming summer.
A return to Cleveland may actually be in the cards, according to a report by Yahoo! Sports from January. After receiving widespread scorn, James later said he understood why fans were so upset by how he left Cavaliers, and could seek some redemption for his ESPN-television special "The Decision," where he chose Miami over Cleveland, and placed a call to Cavaliers owner Dan Gilbert reportedly minutes before he was set to go on air.
The Cavaliers certainly have several key pieces in place that might appeal to James. The team will have a huge amount of cap space in 2014, along with one of the game’s best young point guards in Kyrie Irving. The Cavaliers also have the No. 1 pick in this year's draft, along with other young talent.
The Heat are a year away from these scenarios, but professional basketball is a multi-billion dollar industry, with few important contracts left to chance.
“It is hard to buy synergy via individual contracts," Cornwell said, "but to focus on building with the remaining roster versus buying the next ‘LeBoost’ would be a strategy worth considering.”
Currently covering NBA, NFL, MLB, along with Real Madrid and Barcelona, focusing on trades, controversy, and injury updates. Joined IB Times in August 2012.