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Friday, February 22, 2013

How much should LeBron James be paid?



Well look at this, my little blog post has gotten some attention from ESPN. There is also the slight possibility that the brief surge of media interest following NPR’s publication of the story had an impact, but it’s not worth quibbling about the source. The LeBron is underpaid story simply will not go away.



As has been explained at length, LeBron is incapable of being paid what he “deserves” in the NBA. The structure of the collective bargaining agreement between the players association and the owners dictates the maximum that any specific player can earn given their tenure in the league, tenure with their current team and several other factors. As I noted in my earlier post, this has taken the ratio of top salary to average salary from over 20:1 in 1998, when Michael Jordan dominated, to just about 5:1 now with Kobe Bryant leading the way.



But what if it didn’t? What if players could freely sell their services to any team with no limits on the player’s salary or the team’s payroll?



There are a couple different ways to crack this – so I will try them all



Soccer (EPL and La Liga) - $51.5 million



LeBron would probably be quite a soccer player, but would he like to be paid like one? If the NBA’s labor market were like soccer’s (still with the same average salary) he would be in for a big raise.



The average player in the English Premier League in 2011-2012 made an annual salary of 1.16 million pounds (roughly $1.96 million). The highest-salaried player in the world – outside of well-known players slumming it in Russia for massive, oil-fuelled paydays – was Cristiano Ronaldo at Real Madrid with $19 million according to Forbes. Don’t worry about the comparison between EPL and Real Madrid, suffice it to say that there is a roughly 10x multiple above the average player for the best-compensated one.  Taking the NBA’s $5.15 million average, even I can do the math on this one.



NFL - $62 million



With an average salary (as of 2011) at $1.9 million and top salary at $23 million (way to go 2011 Peyton Manning!), the NFL boasts a 12x multiple from average to top.



MLB – $49.8 million


The average MLB player pulls in $3.31 million (again as of 2011) and Alex Rodriguez managed to convince the Yankees to pay him $32 million in the same season.




MLB, but fancier – $120 to $164 million



Buying a win via free agency, in terms of WAR, tends to cost MLB teams roughly $4.5 million. With half the games, however, the wins are worth twice as much in the NBA, so $9 million. Alas, the payrolls are lower overall ($67 million in the NBA vs $92.9 million in MLB) so we will drop it back to $6.5 million to stay in line with the overall spending as it is.



Stepping into our time machine for a second, way back in 2009-10 when LeBron was still shouldering most of the load himself in Cleveland he put up an insane 25.3 WARP according to Kevin Pelton. Basketball-reference.com has him on a slightly less-high 18.5 of their not-quite-comparable Win Shares stat.

Basketball WARP (Kevin Pelton) - $40.5 million

Pelton, who developed WARP for basketball and now writes for ESPN.com, puts $/WARP at $1.5 million and derives $40.5 million from that. 


Three Letters: CBA


All of these numbers, but especially the Baseball to WARP/WS-based metrics, imply that LeBron is seriously underpaid at $17.5 million this season. 

Pelton's $40.5 million is very different from my $120-$164 based on the same WARP (or Win Shares) metrics, but his is based on what teams pay for WARP within the current structure. The MLB number is (relatively) free market compensation for talent and I believe represents a better version of what LeBron would make in a similarly free market.

The NBA’s unique individual player salary caps make it the only league here where the top paid player is neither the best in the league nor had any claim to being the best at the time the contract was signed (calm down Kobe lovers, he used to be really good but he signed that contract in 2010).

1 comment:

  1. What strikes me as remarkable is how close the estimates are for the NFL, MLB and soccer data. All predict a narrow range between about $50 and $60 million.

    Of course the only way for this to happen would be to significantly reduce the median salary and have a few superstars like LeBron keeping the average in place - i.e., not likely to be approved by a majority of the NBPA.

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