Why NBA Players Out Earn Other US Athletes

It seems like every year professional

athletes

from the NFL, NBA, and MLB sign new record-breaking deals, but not all

athletes

get big contracts. In fact, what an athlete will

earn

throughout his career depends to a surprising degree on the league in which he plays. The National Football League had some of the flashiest contracts in 2019. That makes sense, since the NFL is one of the biggest. and the most profitable sports leagues in the U.S. But, on average, it doesn't pay its

players

as much as those in the MLB and NBA. There are three big reasons why NFL

players

earn

less on average based on the league's structure, salary caps, and guaranteed player money.

As for the NBA, well, its players have it especially good. In addition to having a higher average salary per player, they also make more money off the field than their peers in the NFL and MLB. This is partly because NBA players have a larger fan base outside of the US as of 2019. It is the second most popular sport in the world. NBA star LeBron James landed the biggest endorsement deals in history with Nike. That could bring him a billion dollars over his lifetime. So why do players in America's three major sports leagues earn wildly different salaries to answer that question?

First of all, we have to understand how sports contracts work. Player contracts are based in part on how a specific league is structured. The number of games in the season. The number of teams in a league and the number of players on a team. NFL teams have 53 players on an active roster, the MLB has 25, and the NBA has 15. The NFL season is the shortest of the three. There are 32 teams that play 16 games throughout the regular season. In total, there are 256 matches played collectively. The NBA has 30 teams across its league that play 82 games in the season, bringing the total number of games played to 1,230.

Then there is the MLB, which has the most games played of the three leagues during its regular season . There are 30 MLB teams that play 162 games in a season for a total of 2,430 games played collectively. Although teams in all three leagues tend to prioritize their spending on star players in terms of average salary per player, the NFL ranks last of the three. A lot of this comes down to basic math. The NFL plays the fewest games in a season and employs the most players. There are 1,696 active players in the NFL. In the MLB there are 877. And in the NBA there are 439.

Then there is the number of teams. Each league has a pool of cash that is divided among the teams each season. The more teams there are, the smaller the slice of the pie. The size of the pool has a lot to do with the field of television broadcasts signed by each league. Ironically, more games do not directly translate into greater television rights for the leagues. So when you look at the data that we analyzed, you know, the NFL has the highest percentage of avid fans in the entire world. Call the Big Four, which are the

other

three stick and ball leagues next to the NFL.

His fan base is huge. That's almost half of the American population that reports some interest in the NFL. The length of the season is really interesting because if you think about it, there is a shortage of games. Well, it could potentially work in the NFL's favor. There's simply a concentrated level of interest in a shorter number of games. Each year, the NFL receives approximately $6.5 billion. It is estimated that the NBA gets $2.6 billion and the MLB about $1.9 billion. That's why players today receive 51 cents of every dollar. And that's 51 cents of the entire $8 billion franchise. That's the NBA Enterprise.

That's the NBA. And that certainly includes the broadcast deals, the local deals, the national deals, the digital international in any type of broadcast deal is included in our overall pool of basketball-related revenue. 51 cents are given to players through the vehicle of our luxury tax system that reduces the salary cap. But player salaries aren't just about league structure. It also has a lot to do with a player's performance on a team and the rules. Each league establishes through the collective agreement with the players' unions. Each league has its own set of rules for how it decides to pay its players.

It's called a collective agreement. The collective bargaining agreement is a set of terms agreed upon between the league's players association and the league itself. It covers everything from the number of games, rookie salaries, practice requirements, medical care and player contracts. Each league has its own collective bargaining agreement, and in turn, each league has a different set of standards for how player contracts work. A central component of the collective bargaining agreement is something known as revenue sharing. Each league has a pool of cash that is divided among teams and players each season. Most of that money comes from television and media rights deals.

An

other

key component of the collective agreement is the salary cap. It is the total amount of money each team in the league can spend on player salaries. In 2019, the NBA salary cap was set at $109.14 million. The NFL salary cap was set at $188.2 million. And MLB technically doesn't have a salary cap. They have a tax system, but we'll come back to that. The salary cap helps create a competitive balance between teams because it prevents richer teams from hiring the best players. The NFL has a strict salary cap, meaning teams in the league cannot go over the salary cap no matter what.

The NBA is a little more lax. It has a soft cap. The league issues a base salary cap number, which teams can exceed as long as they pay a luxury tax. But there is a limit to how much a team can exceed that soft limit. You can overcome it for various reasons. You can overcome it to resign your players. That's the exception of Larry Bird. You can sign a player off the market, a free agent. Under the mid-level exception, you can trade for players that allow you to go over the salary cap under the assigned player exception.

We have many exceptions to the cap and it keeps it soft. And that encourages owners and teams to give guarantees, to give long-term objectives and encourages them to be able to give generous deals and not necessarily. Choose between one player or another. The luxury tax cap helps prevent bigger teams and bigger markets like New York and Chicago from spending too much on players. And so we agreed to implement this luxury tax in 1999, after our six-month lockout, so if you exceed that tax threshold, which is typically about $20 million above the cap, that's the current level. Then you will have to pay for it.

You can do it, but you have to pay. And the tax is quite significant. What's more, it used to be dollar for dollar and now it's more than dollar for dollar. And it allows those teams to feel like they really need to go. They have a window. They are going to take Iran. They are capable of doing it. They can pay that tax and still accept these players. As for the MLB, they have something similar to the NBA's flexible salary cap, but it works a little differently. Historically, MLB has always seen large payroll disparities between big market teams and small market teams.

In 2003, MLB's CBA implemented a luxury tax similar to the NBA's flexible salary cap. It is called a competitive equilibrium tax. MLB teams that exceed the predetermined payroll threshold are subject to this tax. Unlike the NBA, there is no luxury tax limit. Therefore, a team can pay as much as it wants, as long as it pays the taxes and agrees to face league sanctions, such as lower draft picks. For 15 years, the New York Yankees weren't too concerned about the payroll threshold or losing draft picks. The team paid more than $341 million in tax fines alone between 2003 and 2017. Another very important part of the league, the CBA, are guaranteed contracts.

A fully guaranteed contract guarantees that a player will receive the full value of his contract no matter what. Unlike the MLB and NBA, not all NFL contracts are fully guaranteed. Although on paper NFL players sign big, flashy contracts, that doesn't mean they'll see all the money they've been promised. Unlike the NBA and MLB, guaranteed contracts don't really exist in the NFL. Take the quarterback of the Oakland Raiders, for example. Dereck Carr's contract is a five-year, $125 million contract. Of those $125 million, just over $70 million is guaranteed. He compare that to MLB like Yu Darvish. The pitchers' contract is six years, $126 million and is fully guaranteed.

That means that no matter what happens, he will take home the $126 million. Generally speaking, in all three leagues, there are basically two types of contracts, rookie and veteran contracts. Once a player completes his rookie contract, he can renegotiate a new contract as an NFL free agent. Most first-round rookie franchise players have fully guaranteed contracts. If you're looking at a big time quarterback or wide receiver, you're looking at five-year contracts, sometimes six years. And the first two or three years of those contracts could potentially be fully guaranteed. But that happens in an area where the only thing protecting that player from being released is a prorated signing bonus.

So the signing bonuses, you have a $20 million signing bonus, the setup, which you think is an accounting tool for the salary cap where that $20 million is divided by five. If it's a five-year contract or even if it's a six-year contract, just prorated contract over five. So, other than first-round rookies in franchise-tagged players, there are no regulations forcing a team to guarantee every dollar in a player's contract. Of all the veteran contracts in the NFL, only 13 have fully guaranteed contracts. Five of those contracts are worth more than $10 million and only one contract is for more than one year.

Even though the NFL is famous for not paying its players' contracts in full, the MLB and NBA are known to have massive contracts worth hundreds of millions of dollars. They are 100 percent guaranteed. MLB contracts are quite simple as they are fully guaranteed. The contract value is normally divided equally by the contract duration. So let's say you and the team don't agree on what number you're going to get on your agent or whatever. The team with another number based on Rosa Autistas. Not that reaching 100 made a difference. So it will be based on a good amount of statistics.

And then, with that, the team owners could accept it or refuse to go to arbitration. So it's like a panel and the panel goes and discusses after February, I think. And then with that, either they choose the teams or they choose yours, there is nothing in between or anything like that. They then rely on the stats of other players at your level in the league and will choose one or the other. So that's how you put yourself in a position to probably get a higher contract or you're going to get the worst. NBA contracts are very similar to obese contracts.

Golden State Warriors player Steph Curry signed a five-year, $201.2 million contract in 2017, meaning he earns more than $40 million each year. So even if he gets injured, Curry will still take home $40 million. Another key difference is that some NBA players can make even more money off the court in 2018. Three of the top 10 athletes in the world with the highest earnings from endorsement deals were NBA players. No players in the top 10 played for the NFL or MLB. Endorsement deals are huge for NBA stars. It allows them to generate a constant flow of cash outside of their contracts. Players can sign sponsorship deals with virtually any company and these deals can be very profitable.

Well, after a player retires, let's take Shaquille O'Neal. He retired in 2011. He continues to award multimillion-dollar brand deals. Since then, brand endorsement deals have tended to favor NBA athletes because basketball has more international reach than baseball and soccer. And NBA stars have many followers on social media. As for MLB, Mike Trout has the highest-paid contract in baseball history, worth more than $426 over 12 years. Trow also earns approximately $2.5 million from endorsement deals. He compares that to NBA star Kevin Durant. D has a four-year, $164 million contract with the Brooklyn Nets. But when sponsorship money is counted, the pay split is greater.

In 2014, Durant signed a 10-year contract withNike worth an estimated three hundred million dollars. And sneaker deals are huge for NBA stars. LeBron James' annual income from his sneaker business amounts to $32 million a year. For comparison, in 2017, Odell Beckham Junior signed the NFL's largest sneaker contract, worth $25 million over five years. So LeBron just went to look at his personal Instagram account. His most recent post is a photo of one of his pairs of Nike sneakers. A really strong promotion quality. It's a product placement thing, unique use of a hashtag or mention. And it generated around 1.6 million in total.

Interactions on that post. Because of the quality of the promotion and the level of commitment you are getting. It could be worth between 500 thousand and approximately 1 million dollars in an added value adjusted based on the quality of the promotion and the engagement it generated. And LeBron James has a lifetime endorsement deal with Nike worth rumored to rise to $1 billion over time. The super max contract is unique to the NBA and is one of the largest contracts in sports. Players like Steph Curry and Russell Westbrook have super max deals over $200 million. It basically comes down to this.

It's a way for teams to extend players who have been in the league for seven to nine years to a four- or five-year deal. The super max contract is valued at up to 35 percent of the salary cap for that year. Starts. And then there is an 8 percent increase in salary, which is added to each of the following years of the contract. Super max contracts were introduced in 2017. It was the league's solution to the problem of players being promoted to larger market teams or winning teams. These contracts were designed to incentivize star players to stay with the teams that drafted them.

But before a player qualifies for a $200 million super-max contract. They must meet a long list of requirements. Additionally, players must receive high-performance praise in two of their most recent seasons or be named MVP of any of the previous three seasons. Klay Thompson missed out on making an NBA team and was ineligible for a supermax deal. Players who have signed super-max deals are often enormous financial burdens on a team and can cripple the team's ability to sign or reassign talent. If you get a star to occupy a bigger part, it will be more difficult for you to be able to go out and fit in with two or three star players.

And absolutely, I would say that the more salary you pay an individual player, the harder it will be to attract other players, because normally when you attract stars, you do it using cap space. and less space, you have less ability. We have to go out to the market and bring in more players. Essentially, if a team decides to offer a super-max contract, it can take up up to one-third of the team's cap space for that season, leaving approximately two-thirds of the team's cap space to distribute among 14 other players. So far, only five players have signed super max deals, so time will tell if super max contracts are here to stay.

So what does the future hold for sports contracts? It all depends on the changes that are being made and implemented in each league's collective agreement. Take the NFL for example. It is the most profitable league compared to the MLB and the NBA, but its players are not seeing the same guarantees as those leagues. But new changes are about to be made with the NFL's collective bargaining agreement set to expire at the end of the 2020 season. The NFL Players Association and NFL teams are working to establish a new collective bargaining agreement for the 2021 season. For most of the last 10 weeks, roughly every Monday or Tuesday I've been in Chicago, there is a park nearby.

Negotiating our future labor agreement with the Players Association. The MLB collective bargaining agreement will also expire in 2021, which may include changes such as adjustments to the competitive balance tax. As for the NBA, the league reached an agreement on the CBA in 2017. The agreement will continue through the 2023 to 2024 season through a six-month lockout in 1998. There was no basketball until February of that year. In 2011 they blocked our access again. There was no basketball until Christmas Day. And we've certainly shown that we're going to fight for what's right. We have the capacity and the means. I think we are expected to stand up and exert whatever influence and ability we have.