The Business of Basketball: Understanding the Implications of Superteams
From left to right, Chris Bosh, Lebron James and Dwayne Wade. Shot by Layne Murdoch, Image from Bleacher Report
Not one, not two, not three, not four. The creation of the Miami Heat Big Three of Lebron James, Dwyane Wade, and Chris Bosh marked a turning point in NBA history.[i] For the first time, three hall-of-fame caliber players manipulated the free agent market to create a “superteam.”[ii] Each player decided to take massive pay cuts, upwards of 15 million dollars each, in order to play with each other.[iii] Fans often credit the 2010 Heat with starting a trend that has grown in recent years: a star player taking less money to join forces with other star players.
More recently, in 2016, the Golden State Warriors assembled a true juggernaut by acquiring Kevin Durant in free agency. Adding Kevin Durant to an already stacked team which had just set the record for most regular season wins in NBA history seemed anticompetitive. After spending a few years with the Warriors, Durant formed yet another superteam with James Harden and Kyrie Irving on the Brooklyn Nets. James Harden’s exit from the Houston Rockets was highly publicized, seeing as he was very public about his desire to leave the team. Harden even went as far as arriving late for training camp, intentionally gaining weight, and fighting teammates at practice to achieve his goal of exiting the Rockets organization.[iv] After only 80 games played with the Nets, Harden pulled similar tactics in order to be traded to the Philadelphia 76ers, where he teamed up with star Joel Embiid.
Many individuals question whether the NBA should intervene in cases such as this. In fact, it is evident that Adam Silver has seriously pondered the issue himself.[v] That being said, the league typically focuses on anti-tampering measures, and NBA executives are often unwilling to focus on the core of the problem: a decrease in competitiveness in recent years. Unlike in the NFL or the MLB, where there is much more change in the standings year over year and many different teams can contend for a championship, there is more certainty when it comes to any given NBA season. With a few notable exceptions, such as the Milwaukee Bucks in 2021 and the Toronto Raptors in 2019, the vast majority of NBA championships in recent years have been won by teams with multiple superstars. In fact, one team, the Golden State Warriors, led by Stephen Curry, Draymond Green, and Klay Thompson (and for a time Kevin Durant) have won 4 of the last 8 NBA championships. Of the remaining championships in that time period, Lebron James’s superteams won 2 of them, with Kyrie Irving and Kevin Love on the Cleveland Cavaliers in 2016 and with Anthony Davis on the Los Angeles Lakers in 2020. Along with this decrease in competitiveness, the league has seen a general decrease in television ratings.[vi]
As it stands now, the NBA is not vested with the power to interfere in free agency, except in the case of tampering. Under Article 35A of the NBA Constitution, tampering is defined as “any person affiliated with an NBA team [attempting] to directly or indirectly (i) entice, induce, or persuade, or attempt to entice, induce or persuade, any player, coach, GM or other person under contract to any other NBA team to enter into negotiations for or relating to that person's services or to negotiate or contract for such services, or (ii) otherwise interfere with the employment relationship between that employee and the other NBA team.”[vii] Punishments that can result from a violation of the tampering rule include “suspension of the offending person, prohibition of the offending team from hiring the person being tampered with, forfeiture of draft picks, and individual and/or team fines of up to $5 million.”[viii] To eliminate the possibility of superteams forming, the league could perhaps add to its constitution some sort of fair market value clause, such that players are not able to join a team for significantly less than what a panel of experts has estimated their value to be. On the positive side, this would reduce the possibility of players decreasing competitiveness by banding together for contracts which many would deem unfair. On the negative side, however, this could be extremely difficult to regulate, as the fair market value of a player is entirely contingent on a variety of factors including age, annual performance, and injury status, which could change at any moment. The NBA could also set forth a designated period of time after a player signing a new contract where league officials could review it to determine if it would be anticompetitive in nature. However, the NBAPA, led by C.J. McCollum, would certainly take issue with these changes as they take power away from players and places it in the hands of the administration. Such actions by the NBA may even result in a lockout.
The NBA does have some history of intervention regarding the formation of superteams, although it was under a very unique set of circumstances. In 2011, the New Orleans Hornets attempted to trade elite point guard Chris Paul to the Los Angeles Lakers, effectively forming a big three of Paul, Kobe Bryant, and Dwight Howard. At the time, David Stern chose to veto the trade. Notably, the NBA itself owned the Hornets at the time of this trade. Viewing Stern as the controlling owner of the franchise, it could be argued that his actions were no more significant than any other NBA owner exercising their power. However, there was perhaps a conflict of interest present here as well. Since Stern, in his position of authority for the NBA, likely recognized that upholding the trade could have devastating consequences for the future competitiveness of the league, he might have made his decision with this fact squarely in mind. Further, this decision came shortly after a prolonged lockout and the renegotiation of the league’s collective bargaining agreement. Many team owners and players were frustrated with this decision, as it seemingly diminished their autonomy. On the other hand, however, many owners, such as Mark Cuban, urged the league to veto the trade.[ix]
The dilemma of current and future NBA intervention has certainly been on many NBA fans’ minds as of the past decade. Although the Warriors dynasty has been disassembled, and exciting teams such as the Giannis-led Bucks and Jokic-led Nuggets have restored the league to an increased level of competitiveness among teams captained by only one true superstar, it is possible that another team will soon try to recreate what the Warriors did, assembling an unbeatable squad with perennial all-stars at every position. That being said, achieving such a feat could be quite difficult. In the modern NBA, the max contract structure is significantly different than it was in 2010 when the Miami Heat formed. In order to assemble three or more superstars in free agency, each star would have to be willing to take an even more significant pay cut, which is something that we have yet to see. Additionally, the Warriors’ signing of Kevin Durant was anomalous to the extent that it occurred right after the NBA had a cap spike from their new television deal. Due to this influx of capital, teams essentially had $24 million extra dollars to spend at the end of the season, giving them the ability to assemble a much more stacked team than usual. The league could face this same issue again in 2025, when its TV deal expires. In order to curb the formation of egregious superteams in such a situation, the league should heavily consider cap smoothing, giving players all of the money that they are owed without drastically altering the cap all at once.[x] This would reduce the possibility of superteam formation because it would not allow teams to sign an additional star without giving anything up, but it would also likely cause significant backlash from the NBAPA, who would argue that withholding money from players under any circumstance is unacceptable.
From a business standpoint, the formation of superteams proves to be a serious point of contention for the NBA. On one hand, it is likely that league stakeholders fear revenue loss due to a lack of competition in the league. On the other hand, owners and players would likely be very upset if the NBA tried to stage further intervention. This is especially true for teams like the Warriors and Big Three Heat, whose talent was assembled in free agency, rather than through trading or drafting. One possible avenue that the league could take is instead of providing negative incentives for players trying to form superteams, providing positive incentives such as salary increases and bonuses for players who choose to stay with the team where they are drafted. For example, Bird Rights, which is an exception to the salary cap, allows a team to re-sign a player without corresponding cap space. This sometimes results in the player earning more money over more years than they otherwise would on the open market. An even more extreme form of such an incentive could involve a large end-of-career bonus for players who stay with one team throughout the duration of their career.
The league’s current collective bargaining agreement, which lasts through 2023, clearly grants players the right to join any team they desire when their contract expires, apart from cases in which tampering may be involved. Even in instances of tampering, enforcement has only levied draft pick compensation penalties and financial penalties. It is currently ambiguous whether tampering rules can be applied to players coercing other players to join their team at a reduced salary, in hope to form a superteam. In my opinion, the NBA should tighten their tampering rules and institute stricter penalties such as suspensions for players who engage in prohibited conduct. Instituting harsher penalties would provide a much greater incentive for players to avoid tampering at all costs. What to do about tampering will likely be a major point of debate when the NBA renegotiates its CBA in 2023, and the formation of superteams is a problem that will require significant quantitative analysis to determine the correct path for the league to take.
[i] Jim Gray reflects on Lebron, the 'decision', ESPN, T. Haberstroh
[ii] Prior to the Miami Heat joining forces in 2010, one example of a team that helped to establish the precedent of multiple all-stars coming together was the 2007 Boston Celtics, led by Kevin Garnett, Paul Pierce, and Ray Allen. This team differs from contemporary superteams because it was not assembled by the players themselves, and it was primarily formed through trade maneuvering from GM Danny Ainge. However, it served as the spark that caused a series of superteams to emerge in order to stay competitive with them
[iii] “Heat Stars Sign Six-Year Deals.” ESPN, ESPN Internet Ventures
[iv] The 2-month trade request: How James Harden forced his way out of Houston. BLEACHER REPORT, Farbod Esnaashari
[v] Adam Silver says NBA must update free agency rules to curb tampering, WASHINGTON POST, Ben Goliver
[vi] Can NBA ratings grow again? don't bet on it, Variety, A. Wallenstein
[vii] Constitution - National Basketball Association. (n.d.).
[viii] Id.
[ix] Wow: The NBA just vetoed the blockbuster trade that would have sent Chris Paul to the lakers, BUSINESS INSIDER, T. Manfred
[x] Cap smoothing 101: How the NBA can prevent another 2016-like Spike with a new television deal looming. CBSSports, Sam Quinn