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July 23, 2008
Crossing the Atlantic
Does the NBA Have Competition?

by Kevin Pelton

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For some time, it has been evident that the NBA is increasingly in competition with Europe for the world's best basketball talent. The issue became impossible to ignore Monday, when ESPN.com reported free agent forward Bostjan Nachbar decided to sign with Russian club Dynamo Moscow for a contract worth $14.3 million over the next years. Even more intriguing, Yahoo.com had a report indicating Atlanta Hawks restricted free agent Josh Childress is mulling a three-year, $20 million offer from Olympiakos of Greece. Wednesday, Childress signed with Olympiakos.

With salary-cap space all but dried up around the league (only the Memphis Grizzlies still have room under the cap to offer more than the mid-level exception, and they appear uninterested in doing so), Childress and his agents may initially have been using a creative method of creating competition to get the Hawks to increase their offer. That it turned out not to be a bluff, and an established American player of Childress' caliber would leave the league to play in Europe, indicates a major change in the relationship between the NBA and Euroleague.

When foreign players have spurned the NBA or headed back for Europe after playing in the U.S., it has been easy to write it off as their cultural preference combined with the economics that make fringe NBA types more valuable as stars overseas. That's a trend that has been growing in recent seasons, culminating this summer. Nachbar joins Primoz Brezec, Carlos Delfino, Jorge Garbajosa and Juan Carlos Navarro as rotation-type players who have signed with European teams rather than exercising their free agency in the NBA.

The combination of rising salaries in Europe and the sinking value of the dollar relative to the Euro has allowed Euroleague teams to compete financially in a way that would have been difficult even a few years ago. While the exchange rate is likely to turn around in time, European teams will still have an important factor in their favor: They are unbound by the restrictions and vagaries of the NBA's Collective Bargaining Agreement.

The NBA's CBA makes life difficult for a handful of groups of players, and that has already played into the U.S. to Europe migration. Breaking them out:

  • First-round picks on rookie scale contracts. The NBA's deals for rookies have been a boon to the league in terms of avoiding protracted contract negotiations, and veterans like the fact that unproven players don't make the kind of crazy money we see for draft picks in baseball and the NFL. The downside is that a foreign player drafted in the first round who remains in Europe and develops can find it more lucrative to remain there rather than having to play for a below-market salary for four years. Such is the case with 2007 San Antonio first-round pick Tiago Splitter, while Portland had to sweat out big offers to their promising young guard Rudy Fernandez before signing him this month.
  • College freshmen. The NBA's age limit precludes players who might otherwise be talented enough to play in the league from being drafted until after their freshman season. While talk of players--especially those unable to qualify academically to play D-I ball--going to Europe for a year started as soon as the age limit was enacted, it was not until this summer that we got our first example in the case of Arizona recruit Brandon Jennings. While the general consensus is that Jennings signing with Pallacanestro Virtus Roma will not start a trend, he also surely won't be the last prep prospect to head to Europe.
  • Restricted free agents. Two years ago, in a column for 82games.com, I compared the cost of restricted and unrestricted free agents to other groups of players (those who signed contract extensions, those on rookie scale contracts, and second-round picks on their first contracts). I found that, on average, teams paid 26.8 percent more per minute for unrestricted free agents and an amazing 52.1 percent more per win above replacement player. While those figures are presumably exaggerated by the fact that marginal players don't tend to become restricted free agents (their previous teams are unwilling to extend them the necessary qualifying offers), it demonstrates the value of the matching rights teams enjoy in restricted free agency.
  • That's exacerbated in a buyer's market like this, where the number of quality players exceeds the available cap space. We saw a similar market in 2002, when the top free agents on the market (Portland's Bonzi Wells, who was restricted, and Seattle's Rashard Lewis, who was unrestricted) had to settle for relatively paltry deals because their only leverage was taking the qualifying offer or threatening to sign with another team for the mid-level exception.

    Naturally, matching rights don't extend to offers made by European teams, who also don't have to worry about cap space. That's what made Childress' dalliance with Olympiakos a good fit. Dealing with the same general manager (Rick Sund) who used a favorable negotiating position to get a great deal on Lewis six years ago, Childress and his agents found an alternative they preferred.

  • The elite of the elite superstars. The NBA's maximum salaries create an inefficiency of sorts in the league's market. Last year, Kobe Bryant made essentially the same amount as Allen Iverson, Jason Kidd, Stephon Marbury and Jermaine O'Neal. While in some cases that's more of an indication that the other guy is dramatically overpaid, it also shows Bryant is leaving a lot of money on the table. It's part of the reason he was reportedly one of the handful of players to vote against the 1999 post-lockout CBA that introduced maximum salaries. Younger players are even more limited by the maximum salaries; last year, approximately 25 players made more money than LeBron James did.

    Now, I know this is crazy, but consider this: What if one of the wealthiest Euroleague teams were to make an offer of something like $30 million for Bryant, or Dirk Nowitzki, or some other player of their ilk? Isn't it possible that one of them might take it? If you thought Josh Childress considering Europe made headlines, that would be an enormous story.

    Such a scenario is unlikely in the near future for a variety of reasons. Most American-born players would prefer to play here, of course, if the money is even close. (Italophile Bryant, who grew up in Italy while his father played there, might be an exception, though there's also the factor of playing against lesser competition.) The money would be incredibly enormous by Euroleague standards--possibly as much as the entire current payroll of the best-funded clubs. Lastly, the difference in salary would have to be enough to make up for the endorsement money a player like Bryant would lose by playing overseas.

    That said, it would only require one owner just crazy enough to make such an offer and one player open-minded enough to take it to dramatically shift the power between Europe and the NBA. I'm thinking here of someone along the lines of Shabtai von Kalmanovic, a Russian oligarch with a checkered background who owns the women's power Spartak. von Kalmanovic pays WNBA stars like Sue Bird, Lauren Jackson, Diana Taurasi and Tina Thompson over a couple of million dollars combined and they have helped Spartak win consecutive Euroleague and Russian Superleague titles.

    von Kalmanovic isn't making any money off the success of his team; according to reports, attendance at games is free and he pays for them to be televised. Instead, Spartak is something of a playtoy for van Kalmanovic, a way for him to compete and win regardless of the cost. For an owner like that (in soccer, Chelsea owner Roman Abramovich comes to mind), not only would luring a star NBA player offer success in Euroleague and domestic competition but also incalculable prestige.

It would be a mistake to read too much into the recent trend of players signing in Europe. We're not about to see a flood of players going overseas. (In fact, when it comes to Americans going to Europe, there are rules hindering that movement, as many domestic leagues have rules restricting foreigners or non-EU players.) The NBA is not in danger of being overtaken by Euroleague as the world's premier basketball league any time soon.

At the same time, the growing strength of European basketball figures to play a role in the way NBA teams do business in years to come. We may see increasing wariness to consider international prospects in the draft because of the possibility that they will return overseas or never come to the U.S. in the first place. The number of foreign players in the WNBA has declined in recent years for similar reasons. Thanks to Childress, the complex game of chicken that is restricted free agency now has another element.

In the long term, when the NBA and its Player's Association revisit the CBA, up for renewal as soon as the summer of 2011, they may have to consider how competition from Europe figures into the way rules are written.

Kevin Pelton is an author of Basketball Prospectus. You can contact Kevin by clicking here or click here to see Kevin's other articles.

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