September 03, 2010
NBA teams only have a limited amount of money they can spend on their players, obviously. They call it the salary cap and you know just as well as anyone who's heard of the NBA. Spend too much and you're paying a dollar-for-dollar luxury tax to the league which can get very expensive, very quickly. Spend too little and your team stinks. Spend on the wrong players and you're the Detroit Pistons. Teams need to get as much value from their signings as possible. Every cent counts, even those that go towards paying Elton Brand(notes).
According to Rich Steinlauf, a computer programmer who analyzes the NBA, the Miami Heat did an even better job this offseason than previously thought. Those huge contracts given to LeBron James(notes), Dwyane Wade(notes) and Chris Bosh(notes)? Totally worth it and then some. He shared his numbers with Sports Illustrated's Ian Thomsen who breaks it down like The Rapture in 2003:
"I'm projecting for next year [LeBron James will] be worth $31 million," said Rich Steinlauf, a New York-based analyst who has been studying the NBA for three decades.
Next season, James will be paid $14.5 million because cap restrictions on him and his new Heat teammates prevent the two-time MVP from earning his market value. It just so happens that Steinlauf has developed a system for rating each player's dollar value. If there were no ceilings on salaries and every player's compensation was based on his impact, then this season James' salary would be $16.5 million larger his current pay rate.
Steinlauf calculates that the second-best bargain on the market was James' teammate Dwyane Wade, who is rated as a $22.5 million player for next season. The Heat re-signed Wade to a six-year deal worth $17.9 million annually, so they're getting him below market value.
Miami's offseason coup of signing James, Wade and Chris Bosh has given the Heat the league's most cost-efficient payroll, according to Steinlauf. While some will question the $18.3 million average salary Bosh will earn over the next six years, Steinlauf insists that the Heat are paying him what he's worth.
"I have Bosh projected at $18 million and that's what he's getting from Miami," said Steinlauf. "They've got the Nos. 1 [James], 6 [Wade] and 10 [Bosh] players on the same team."
Heat owner Mickey Arison is definitely making his money work for him. You know, sound investments, buy low and sell high, other financial terms — he's really got his money straight. It's no wonder that Carnival Cruises — where Arison is acting CEO — is the world's largest cruise operator. He seems to be a pretty savvy businessman.
When you consider that none of the big three are even in the top 20 for annual salaries, you realize the Heat really did get a bargain this summer. Furthermore, the Heat have each of them signed during the prime of their careers to what turned out to be very beneficial contracts, which means these deals are only going to look better and better throughout the years.
We've known these guys are a steal for a while, but when you see how much they're really worth, it seems like an even better deal. I mean, Michael Redd(notes) is making more than these guys next year and he doesn't even have working legs. Not a bad haul for the Heat. Not bad at all.