The Collective Bargaining Agreement and Competitive Balance

In the summer of 2011, there was an NBA lockout. The point of the lockout? Many small market owners were losing money. So what to do? How on earth could the NBA set up the system to ensure competitive balance? It took them quite a while to get it sorted out.

In they end, they reached a number of agreements that, in theory, would held the small market teams make money. How so?

By making their teams better? How so?

Two ways: by giving them opportunities to get good free agents, and by letting them keep their own star players.

How did they plan to do that? Well, that's a little more complicated.

The NBA put in salary cap rules that made it harder for stars to leave their teams. Under the new rules, maximum contracts from a player's old team lasted 5 years, while new teams could only offer 4 years. A player could get more money over a longer period of time to stay with his own team.

Other rules inhibited teams from spending excessively. There's a rule that places a 74 million dollar hard cap on teams that use their mid-level exception. Teams who pay the tax can no longer use the bi-annual exception, and they have a smaller "mini"-mid-level exception. There's a new "repeater" tax and, soon, much harsher luxury tax penalties will come into effect. Supposedly, these rules would keep down the spending of teams and ensure competitive balance.

Yeah, right.

For years, the Dallas Mavericks had one of the largest payrolls in the league. While that money couldn't guarantee a championship (they ended up winning one in the Dirk era), it could guarantee success. The Mavericks have won 50 games for 11 of the 13 years that Cuban has owned the team. Why? Because he spent, spent, spent. Sometimes he overspent.

And, during negotiations, it was rumored that Mark Cuban supported a "no-cap" system- no limits on spending, no competitive balance. Sure sounds great for a billionaire, right?

But that's not what the lockout was about. The lockout was about ensuring competitive balance by giving small market teams an equal chance at star players as large markets. The idea was to keep spending low- even for teams in Los Angeles and New York. Even for teams with billionaire owners.

So that's what they tried to do. The NBA made rules to hurt the high rollers and help the small market teams.

Let's look at some of the biggest markets and their marketable stars:

New York (USA's #1 Market): Carmelo Anthony, Amare Stoudamire, Deron Williams, Joe Johnson

Los Angeles (#2): Chris Paul, Kobe Bryant, Blake Griffin, Dwight Howard, Steve Nash, Pau Gasol

Chicago (#3): Derrick Rose (led the NBA in jersey sales last season)

Dallas (#4): Dirk Nowitzki

Houston (#5): Jeremy Lin (2nd in the NBA in jersey sales last season)

Miami (#8): Dwayne Wade, LeBron James, Chris Bosh

The majority of the NBA's most marketable stars play in large markets, while small markets suffer.

Orlando (#26), New Orleans (#46), and Denver (#21) have all lost big stars in demanded trades recently. Those stars all went to either Los Angeles or New York- top markets.

Dwight Howard ended up with Los Angeles (#2), but what other teams could he have been dealt to? Brooklyn (part of the NY market, #2) and Houston (#5).

Deron Williams, when he was a free agent this summer, was choosing between two teams: Brooklyn (#2), and Dallas (#4).

Obviously, big stars are still migrating to big cities.

Remember, there were two goals to the new CBA: evenly distribute stars, and to make spending fair.

Well, unfortunately, stars are still in big cities (or Oklahoma City), but at least big market teams aren't grossly outspending small market teams, right?

Let's look at the payrolls of the teams in the top 5 teams, market wise. Knicks, Nets, Lakers, Clippers, Bulls.

The Knicks have a payroll of 79.3 million, the Nets 81.8 million, the Lakers 101 million, the Clippers 69 million, and the Bulls 74.5 million.

That's right. Of teams in the top 3 markets, only the Clippers are not paying the luxury tax next season. And even the Clippers are way over the cap.

Look at some of the small market teams.

Portland (#101), Utah (Salt Lake City, #48), Oklahoma City (#43), Memphis (#41), and New Orleans (#46) are the 5 smallest-market teams in the NBA.

Portland has a payroll of 56.7 million (under the salary cap), Utah 66.6 million, Oklahoma City 66.2 million, Memphis 74.9 million, and New Orleans 62.1 million.

Memphis is the only team who is over the luxury tax, and Portland is still under the salary cap. The 5 big market teams have 4 tax payers, and everyone is over the cap. The 5 small market teams have 1 tax payer, and one team isn't even under the cap. There's a noticeable trend here.

Let's look more closely at the Lakers. They already have 100.98 million dollars in guaranteed salary. Just the Lakers three biggest contracts (Kobe, Pau, and Dwight) make 66.39 million combined- more than the entire roster of the Oklahoma City Thunder, who represented the Western Conference in the NBA finals last season. The Lakers starters (those three, Nash, and Metta World Peace) make a total of 82.55 million. That means that the Lakers are spending more on their starters than 28 teams spend on their entire roster.

The defending champion Miami Heat have the second-highest payroll, and are spending just $100,000 on their entire roster than the Lakers are spending on their starters alone.

The Lakers now have more committed salary next season already than Portland, Utah, OKC, and New Orleans have this season. And that Lakers number for next season is without a Dwight Howard extension, if Metta World Peace opts out of his contract (he won't), and if the Lakers decline their option on Eyenga. If all of those dominoes fall, the Lakers are looking at over 90 million in committed salary for next season. That's right. More for next season than any team has for this season.

It's fair to say that big market teams are outspending small market teams. It's fair to say that superstars tend to be migrating to large markets.

And, if you accept those two facts, then there's only one realization to be made: the new CBA has failed. The lockout was for nothing, and we're going to have another one very soon. Because nothing was fixed.