Lebron’s contract is for only 2 years – gives him all the power…and oh yeah, all the money too

Lebron James’ contract details have come out, and it turns out he and his agent really got it right.  He signed a 2-year deal worth $42.1M.  His contract is very unique, in that it also gives him the power to opt out of the deal after his first season, and after his second season.  Lebron says he’s committed to the Cavs for the long term, but he has options if something comes up in the short term.  Being the best player currently in the game, this potentially gives him say over every aspect of the organization, be it the coaches, player pursuits, etc.  But the real reason Lebron’s contract is set up this way is to take advantage of future salary cap increases.  The current salary cap is $63.2M.  (Note: The maximum salary a single player can have is approximately 35% of that amount, or $22M, per the collective bargaining agreement)  This $63.2M is based on “Basketball Related Income”, which TV rights are a major part of.  The league currently makes about $930M per year from these TV rights.  That’s right now.  Other sports have had major increases in profits generated from TV rights in the last few years.  Major league baseball’s TV rights are twice what they were in 2012, and the NFL’s rights increased by about 60% in 2011.  Well, basketball is headed in the same direction.  The NBA’s TV agreements expire after the 2015-2016 season, which just so happens to be when Lebron’s contract is up.  After the TV deals are renegotiated, it is projected that the salary cap will jump to around $80M from it’s current $63.2M.  If that’s the case, and a max contract could be worth 35% of the cap, the new maximum contract could be $28M – a $6M per year raise for King James.  If he would have signed a 4-year, $88M deal right now, he could have missed out on ~$12-14M in potential earnings for the 2017-18 and 2018-19 seasons.



Sources: Business Insider, ESPN

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