As the NBA ushered in its official free-agent signing period Wednesday, the usually feverish pace of trades, signings and huge contracts slowed to a crawl. The summer of 2009 has been a wakeup call for players and teams who've rarely known anything but booming economic times.
Ron Artest and Trevor Ariza, who would've been in heavy demand any other year, had to settle for the mid-level exception starting at $5.854 million next season. Restricted free agents David Lee and Paul Millsap are still waiting for lucrative offer sheets that might never come. Mike Bibby, who has been a $10 million-plus player for the past five seasons, squeezed out a three-year, $18 million deal to stay in Atlanta. As you might imagine in this economy, he couldn't be happier.
Potential free agents Kobe Bryant and Carlos Boozer opted to blow off the process altogether, keeping their current contracts intact rather than foolishly entering a buyer's market. Boozer, due to make $12.7 million next season, realized he wasn't going to exceed that as an unrestricted free agent. The richest agreements to this point, Ben Gordon to the Pistons and Hedo Turkoglu to the Raptors, will be in the $10 million to $11 million range in the first year of their new deals.
The five-year contracts for Gordon and Turkoglu are worth $55 million and $53 million. For comparison's sake, Gilbert Arenas re-signed with the Wizards last summer for six years at $111 million, and Elton Brand landed $82 million over five years from the Sixers. Two summers ago, Rashard Lewis reeled in a six-year, $118 million deal from the Magic.
The grim facts about how the recession has affected the NBA business have been delivered to executive offices throughout the league. In its annual memo setting the financial structure for the upcoming season, the NBA unveiled the widely expected news Tuesday night that the salary cap and luxury tax both will decline for the 2009-10 season. The salary cap will be $57.7 million, a modest decline of $980,000. The luxury tax threshold, after which teams are penalized $1 for each additional $1 in payroll, will be $69.92 million -- a decline of $1.23 million.
But the league's assertion in its news release that basketball-related income (BRI) -- upon which the salary cap is based -- actually increased 2.5 percent during the 2008-09 season doesn't tell the whole story.
A memo sent to all 30 teams warned that a reduction of between 2.5 percent and 5 percent in BRI is anticipated next season, which would send the 2010-11 salary cap plummeting as low as $50.4 million -- a level not seen in five years. A 5 percent reduction in revenue would set the '10-11 luxury tax threshold at $61.2 million.
The 5 percent scenario is in line with what many teams already were projecting, and is significantly better than the doomsday prediction of a 10 percent decline that commissioner David Stern floated (to little fanfare) during the NBA Finals.
Analysis of a league-wide revenue report for the 2008-09 season obtained by CBSSports.com helps to explain how and why the dollars are eroding.
Regular-season gate receipts -- the money generated by individual ticket sales and all forms of season-ticket plans -- declined $2.66 million league-wide in 2008-09. That's a minuscule 0.2 percent in a business that generated $1.1 billion in gate revenue the previous season.
But the results varied widely among the 30 teams, reflecting a growing chasm between haves and have-nots. Fifteen teams suffered declines in gate receipts last season, the worst being the New Jersey Nets, whose ticket revenue declined $11.4 million, a 29 percent drop from 2007-08. It's no wonder the Nets want so badly to move to a new arena in Brooklyn. The figures also peel away any curiosity over the Nets' decision to trade Vince Carter, scheduled to make $16.3 million next season. Carter, an eight-time All-Star, went to Orlando along with Ryan Anderson for the expiring contracts of Tony Battie and Rafer Alston, plus bargain-basement shooting guard Courtney Lee, due to make only $1.3 million next season.
The Bucks' decision to dump Richard Jefferson and his $14.2 million salary on the Spurs in exchange for expiring contracts was thought to be a prelude to Milwaukee's bid to keep restricted free agent Charlie Villanueva. But Bucks GM John Hammond, trying to get the team's finances in order, didn't even extend a qualifying offer to Villanueva, who became an unrestricted free agent and signed with the Pistons.
If restricted free agent Ramon Sessions gets a decent offer sheet, the Bucks might not retain him, either. It's easy to understand why if you examine Milwaukee's $3.6 million decline in gate receipts last season, a drop of nearly 18 percent, according to the figures obtained by CBSSports.com. The Bucks were one of only five teams in the league to generate less than $500,000 in gate receipts per home game, according to the data. The Pacers, Hawks, Timberwolves and Grizzlies were the others. Only the Hawks made the playoffs.
After the Nets, the next hardest-hit team was Sacramento, whose gate receipts declined $9.7 million, or 23 percent, in 2008-09. The Kings were one of only a handful of teams with significant salary-cap space to sign free agents this summer -- joining Detroit, Oklahoma City and Memphis -- but have wisely stayed on the sideline.
Other teams sustaining massive declines at the gate were the Raptors ($9.1 million), Pistons ($7.7 million), Clippers ($6.8 million) and Heat ($5.3 million). The Wizards, Bobcats and Pacers each went down more than $4 million.
The most interesting case is Oklahoma City, whose gate receipts increased $27.2 million last season, a 145 percent jump over the franchise's final season in Seattle. Jim Grinstead, publisher of the trade publication Revenues from Sports Venues, said the one-time bump from a new arena in an expansion city overshadowed the struggles in many other cities -- and can't be counted on again. If the team had merely experienced flat ticket revenues compared to the previous season in Seattle, the league as a whole would have posted an $11.1 million decline in gate receipts, according to analysis by CBSSports.com. Once the novelty wears off, the NBA will no longer be able to bank on such a boost from one of its smallest-market teams.
"I wouldn't call them a savior," said Grinstead, whose publication tracks arena revenues in all major sports. "I would say it made this year a lot better than it could have been otherwise."
To a degree, NBA teams are insulated from downturns in the economy because they share the league's eight-year, $7.4 billion national broadcast rights contract, which just completed its second season. But Grinstead said teams still derive a significant portion of revenues from their arenas in the form of individual tickets, season-ticket plans, parking, concessions and sponsorships. Those are the sources of income that are most vulnerable during a recession.
While the NBA claims that its arenas were at 90.4 percent capacity last season, that figure doesn't account for comp tickets and people who don't show up. According to the league data, an average of 14,072 fans actually attended NBA games last season, putting average arena capacity at 73 percent.
Paid tickets are good, but teams prefer to fill seats with people who are paying for parking and concessions. The teams that struggled the most to get people through the turnstiles last season were Memphis (7,570 per game), Minnesota (8,969), Charlotte (9,404), Indiana (10,057), Sacramento (10,188), Milwaukee (10,884) and Washington (11,030).
If a certain number of tickets can't be sold, Grinstead said teams prefer to give them away -- or "comp" them -- in the hopes that those fans will show up and spend money on food, souvenirs and parking. But too many comp tickets can also mean lost revenues. Three teams shared the dubious honor of handing out an average of more than 5,000 free tickets per game last season: the Hawks (5,616), Nets (5,213) and Timberwolves (5,205).
Even two perennial attendance powers, the Pistons and Heat, struggled to get fans to show up this past season. The Pistons, at the epicenter of the depressed Michigan economy, saw their streak of 259 consecutive sellouts end and posted actual attendance of only 77 percent capacity (16,957) in the Palace of Auburn Hills. The Heat, despite making the playoffs and having the No. 3 MVP vote-getter, Dwyane Wade, were at 70 percent capacity with only 13,578 showing up per game. Even the Thunder, among the 12 teams generating more than $1 million in gate receipts per home date, had trouble getting actual people into their arena, which was at 75 percent capacity (14,415).
With numbers like that, it's no wonder the usual free-agent spending spree took a hiatus -- one that almost certainly will last beyond this summer and might even get worse.