While LeBron James and the NBA's other free agents are all certain to sign rich new deals, the simple act of becoming a free agent will affect their bottom lines.
While neither LeBron James or Dwyane Wade are going to need the help of a telethon to make ends meet following free agency, the facts are both players will have their short-term income reduced by a decision to enter the marketplace.CLEVELAND, Ohio -- When asked about it before the start of the NBA Finals, NBA Commissioner David Stern was adamant there would be no "free agent summit" with LeBron James, Dwyane Wade and Chris Bosh, among others, after July 1.
Considering what this free agency might cost them, who could afford such a convention?
It is widely believed that James, Wade and Bosh will skip their contract options for next season and become unrestricted free agents next month. But while they're all certain to sign rich new deals, the simple act of becoming a free agent will affect their bottom lines.
If James goes ahead and becomes a free agent it will cost him more than $2 million in salary over the next three years alone -- even if he re-signs with the Cavs. It could cost him up to $4 million over the next three seasons if he decides to sign with another team.
Perhaps that's one reason why James may plan to enjoy his free-agent process so much, it's a huge purchase.
"We don't know what it is going to look like over the long run yet, but in the short run opting out of their contracts is going to cost," said one prominent player agent. "They're essentially going to have to write seven-figure checks just for the right to be free."
The reason is that next month the salary cap is going to be reduced for the second consecutive season. In the 26-year history of the cap, this is a first. The size of maximum contracts, which James is expected to sign, is tied to the salary cap.
If LeBron James' main goal is simply getting the best short-term financial deal, picking up his option season of 2010-11 with the Cavaliers would be the best choice.FOLLOW THE MONEY
Breaking down LeBron James’ options when he contemplates the salaries available in free agency:
1) OPTION PLAY
If James extends his current contract by June 30, can pick up his one-year option and add four years:
2010-11: $17.1 million
2011-12: $18.9M
2012-13: $20.7M
2013-14: $22.5M
2014-15: $24.3M
Annual raises: $1.8 million. Total: Five years, $103.5 million
2) STAYING HOME
If James signs a new contract with the Cavs after July 1 for up to six years:
2010-11: $16.5M
2011-12: $18.2M
2012-13: $19.9M
2013-14: $21.6M
2014-15: $23.3M
2015-16: $25.0M
Annual raises: $1.7 million. Total: $124.5 million
3) HITTING THE ROAD
If James signs a new contract with another team after July 1, with a maximum length of five years:
2010-11: $16.5M
2011-12: $17.8M
2012-13: $19.1M
2013-14: $20.4M
2014-15: $21.7M
Annual raises: $1.3 million. Total: $95.5 million
— Brian Windhorst
The shrinking cap has shrunk what maximum salaries will be to the point that the number is expected to be significantly below the current contracts enjoyed by James, Bosh and Wade.
If James were to pick up his option with the Cavs for next season, the deadline for which is June 30, he would earn $17.1 million. If he lets that contract end and re-starts after July 1, he's likely to make about $16.5 million.
Over the long term, this gulf only widens when the yearly salaries are compared. If James were sign an extension to his current contract June 30, he would make nearly $19 million in the 2011-12 season. If he lets it expire and then signs a new contract with the Cavs, he'd make about $800,000 less that season.
If he signs with another team, because of rules that limit raises when changing teams, he'd make about $1 million less in just the 2011-12 season alone. Even to millionaires that is significant money, especially as it piles up over the life of contracts.
However, they may consider those unexpected losses as the cost of doing business.
"LeBron will lose some salary money even if he re-signs with Cleveland and that isn't something we usually see," said one league executive. "But it still may not be a bad business move. He's going to lose half of that money in taxes anyway, having to pay a couple million for all the hype and publicity he's getting is probably a good investment, the way he looks at it."
Being a free agent after two years of shrinking salary caps isn't most desirable situation for a star. Yet signing a long-term contract this summer is imperative because of an uncertain future linked to next year's expiration of the NBA's collective bargaining agreement.
There is a chance that owners will look to reduce the value and length of long-term contracts -- meaning that getting new deals under the current rules is likely the best option. There is also a chance of a lockout next season and a halt to new contracts.
That is why several stars besides James, Wade and Bosh who have opt-out clauses in their deals this summer are likely headed for free agency. This includes veterans Dirk Nowitzki and Paul Pierce. Lakers stars Kobe Bryant and Pau Gasol already signed extensions so they can be grandfathered in under the current system.
"The last time around, LeBron, DWade and Bosh all signed three-year deals so they could be free agents this summer and doing that ended up being a little unlucky because of what happened with the cap. So they're going to maybe lose some money," a league general manager said.
"But this time around with the CBA coming up they'll probably want to sign the longer deals to protect themselves. If they do that, there's a chance they'll make up whatever they lost in the later years of their contracts after the rules change."
Coaching search update: According to sources, the Cavs are making progress in their coaching search. They have had a second round of discussions with multiple candidates. However, the team does not appear to be planning to offer the job to anyone until after Thursday's NBA Draft. With no draft picks, having a coach in place isn't as important.
Sources indicate Byron Scott is still the frontrunner -- the team has compiled significant research on his tenures with the Nets and Hornets. It is possible both Scott, who long has had interest in coaching the Lakers, and the Cavs will wait until after Phil Jackson makes up his mind about whether to re-sign with Los Angeles.
Jackson has indicated he'll have an answer by this weekend. There's a chance the Cavs will as well.