Building a Small Market Team

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Money can’t buy happiness.

Tell that to Jim Buss, owner of the Los Angeles Lakers.

Money isn’t everything.

Tell that to Micky Arison, owner of the Miami Heat.

Money is the root of all evil.

Tell that to Mikhail Prokhorov, owner of the Brooklyn Nets and the creator of the newest super team in the NBA.

Prokhorov is the latest to form an NBA super team, paying approximately $80 million in luxury taxes. Why? Because he can. The Lakers were also charged with approximately $30 million in luxury taxes for the 2012-13 season. Owners with deep pockets will go to considerable lengths to form teams that can contend for championships.

 
 

The fact of the matter is, the more money you have, the more competitive you are. Take a look at the history of past NBA champions and you will see a troubling correlation. Big market team names such as the Los Angeles Lakers and Boston Celtics repeatedly show up. The Celtics and the Lakers have won exactly 33 out of the 66 championships ever since the league’s inception in 1946. By my count, that’s 50%. It is amazing to think that two teams account for half of the league’s championship winners. How’s that for fair and competitive play?

It is also to no one’s surprise that these teams top the Forbes Most Valuable NBA Teams list. These teams generate more revenue from bigger television deals, bigger market shares, and have larger fan bases. The Lakers just signed a massive deal with Time Warner last year. They are reportedly raking in $200 million a year from just a television deal, whereas Forbes valued the entire Milwaukee Bucks franchise at a measly $312 million in 2013.

How are teams like the Bucks supposed to compete with juggernauts like the Lakers you ask?

For a majority of these teams, the answer is simple. They can’t. The Miami Heat swept the Milwaukee Bucks this past postseason and that is a perfect example of how a small market team stacks up against a powerhouse. The league has tried to make the NBA more competitive for smaller market teams, adding the luxury tax in 2003, with teams over the tax bracket paying out to smaller teams.  However, this plan seems to have backfired.

The luxury tax has made it even harder for small market teams to compete. It has forced teams to dismantle their rosters to try and stay under the salary cap. The one thing that hasn’t changed – big market teams still have money and can afford to pay to go over the salary cap. Owners with money to spend, such as Mikhail Prokhorov, make their moves anyways and laugh at the salary cap. If he has to pay $80 mil in luxury tax then so be it. The new CBA is introducing harsher luxury tax penalties in the coming years, and it remains to be seen whether this will restrict small market teams even more, or if it makes the league more competitive.

Big market teams attract big names. Shaquille O’Neal leaving Orlando for Los Angeles. Carmelo Anthony leaving Denver for New York. Chris Paul leaving New Orleans for Los Angeles. LeBron James leaving Cleveland for Miami. The League is ostensibly ‘better’ when the big market teams are competitive. They say ‘history’ and ‘rivalries’ are renewed when big market teams gain another superstar, but all I see is the rich getting richer, and the small market teams getting burned again and again. These superstars are so important to small market teams but they always seem to leave for greener pastures. Why is this?

 
 

Money. Fame. A chance at a ring. Things small market teams may not be able to provide.

The biggest stars will eventually gravitate towards the league’s biggest markets. With the salary cap in effect, there is more weight put on endorsement deals, which support players in bigger markets. LeBron James, Dwyane Wade and Chris Bosh all took less money to play together in the income tax-free state of Florida. Although Cleveland could offer LeBron substantially more money upfront, the allure of playing with two other superstars in a tax-free state with more marketing potential was incomparable to a higher salary. Micky Arison had enough money to pay three superstars and find them a solid supporting cast. His efforts have certainly paid off (pun intended), going to the finals three times, and winning two titles.

Of course there are exceptions to any rule.

The San Antonio Spurs are definitely that exception. They have won four championships in the past decade, and were a free throw away from winning another last year. The Spurs have been criticized for playing boring basketball. With a ‘boring’ superstar in Tim Duncan, people have been rooting against them for years. Yet every year there they are, in the conversation as championship contenders. They do not play in the biggest market, but through great management and selfless superstars, the Spurs have managed to stay competitive while staying under the salary cap, or paying minimal luxury taxes.

 
 

The Spurs wrote the blueprint for small market team success. Build through the draft and make smart financial decisions. Mistakes for a small market team can be costly, and can offset their growth for years. Just look at Charlotte when Michael Jordan was running things. They also don’t have to luxury to just fix their mistakes by writing a cheque. We’re looking at you James Dolan.

The latest small market victim?  The Oklahoma City Thunder.

The Thunder are trying to emulate the success the Spurs have. They have a humble superstar in Kevin Durant, and they have built their team by acquiring talent through the draft. However, one year removed from the NBA finals, Sam Presti had to disassemble his roster. He was forced to trade away a rising star in James Harden, just because he could not afford to pay both him and Serge Ibaka. He had to choose one or the other. The result: Russell Westbrook went down with a torn ACL and OKC lost in the first round. The Thunder are in even more financial trouble than most think.
 
 
 
The Thunder just recently signed rookie Andre Roberson to only 80% of the rookie scale, when normally rookies are offered 120% of the scale, or 100% with incentives that push the contract to 120%. This penny-pinching move saved the Thunder a paltry $185,000 this season, and it just shows how far teams will go to save money and stay under the luxury cap. Rather, this shows how far small market teams will go to save money. Can you imagine Los Angeles or Brooklyn being this stingy? If this was in Los Angeles, or Brooklyn, the owner would have no problem taking out their chequebook to keep a young contending team together. These are the realities of being in a small market team. This is the reality for most of the league. These teams have a handicap from the very start.

Some have suggested that lockout-shortened champions should have been branded with an asterisk. They argue that these titles can’t be compared to a championship won in a normal season. These people are mistaken. All competing teams have to go through the same problems caused by a shortened season. No team has any distinct advantage. Small market teams are the ones who have a disadvantage. They don’t need to wait for a lockout-shortened season – they go through these difficulties each and every year.

There should really be an asterisk next to small market teams who have won a title. Just to show on the record that they won with a disadvantage. That little asterisk would mean something.

It would remind us money isn’t everything.  

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