Flattops, Afros, Euros and Oligarchs: How the NBA’s End Begins

By: Dan Diamond

A confession about my newspaper-reading habits. Even in tough times–actually, especially in tough times–I immediately open to the sports section, trying to avoid the headlines screaming about the world’s problems. But lately, basketball news hasn’t provided a refuge from stories about stagflation and the dollar’s drop. And as a result, it’s got me wondering: After surviving accusations of fixed drafts, point shaving and even racial discrimination, could the NBA be done in… by currency fluctuations?

Let’s back up. Since June, a handful of mid-level, foreign-born NBA players like Primoz Brezec and Bostjan Nachbar have returned to Europe for fat contracts in the Euroleague, the NBA’s heavily accented weaker sister. By itself, this isn’t earth-shaking. Fringe NBA players can spend years hopping back and forth between the leagues, and even when the occasional star like Bill Bradley or Dominique Wilkins plays abroad, it just reinforces the NBA’s preeminence. How competitive could the Euroleague be, the thinking goes, if Bradley could lead an Italian team to the 1966 title as a weekend hobby, fitting his games around studying at Oxford? Or if Wilkins could win the league’s 1996 MVP, just months after the 36-year-old couldn’t make an NBA starting lineup? When NBA teams began spending first-round draft picks on players like Brezec and Nachbar a decade ago, the Euroleague seemed further relegated to also-ran status, filled with forgotten college All-Americans and second-tier international players.

However, the dollar’s decline against the euro has foreign players rethinking the economics of playing in the U.S., just as European teams are showing some muscle and snapping up players like Nachbar and Carlos Delfino, who’ve been mediocre in the NBA but are proven on the international circuit (which follows slightly different rules and better rewards skill over athleticism). For instance, BC Khimki just signed Delfino to a contract that pays about 3 million tax-free euros per year. Given the exchange rate and U.S. income taxes, Delfino will take home just as much this year as NBA star Caron Butler, who receives a $9 million salary. That’s All-Star-level compensation for a player who started just six games and shot 40% in his three-year NBA career, and two-to-three times what the Detroit Pistons, who were also courting Delfino, would have paid.

Of course, the NBA still retains many top international players. Barring major roster moves, about 70 foreign-born players will play in the NBA next season, equivalent to 15% of all players in the league. (That’s a considerable percentage compared to previous decades, although it would represent a five-year low). The NBA’s global presence will be further on display next month, as our Olympic basketball team faces teams like Germany and Spain, respectively led by All-Stars Dirk Nowitzki and Pau Gasol. But if the outcome’s anything like the previous Olympics or World Championships, the U.S. team of NBA All-Stars will be lucky to win even a bronze medal, further burnishing international basketball at the NBA’s expense.

Taking all of this together, it’s clear that the NBA’s losing its monopoly on the two drivers—prestige and pay—that determine where elite athletes want to play. As a result, rising Euroleague stars aren’t even bothering to sample the U.S. anymore. Serbian center Nikola Pekovic didn’t make himself eligible for this year’s NBA draft, despite projections that he could be the third pick behind uber-prospects Michael Beasley and Derrick Rose. And as the Euroleague retains its players and the talent gap narrows, there’s less interest in sacrificing salary to play in the arenas that Jordan, Bird, et al. built. Australian center David Andersen rebuffed the Atlanta Hawks by demanding at least $5 million per year, which would have been a rookie record for a foreign player; “I don’t want to take a massive pay cut just to go to the NBA,” said Andersen, before signing with FC Barcelona last month.

The news is even more groundbreaking on our side of the pond. Rather than spend a year playing college basketball, 18-year-old Brandon Jennings spurned decades of tradition to sign with Lottomatica Roma, hoping to get paid while improving his skills and maintaining his high NBA draft status. Should the player with the Kid-like flattop succeed, future elite prospects are all-but-guaranteed to seek out similar apprenticeships for pay, and who knows? Some may even stick around the Euroleague. Jennings’ funky-haired NBA counterpart is Josh Childress, who’s reportedly leaning toward ditching the Atlanta Hawks for a stint with Olympiakos in Greece. A “coveted, young talent” known as much for his funky Afro and intellectual curiosity as his range of skills, Childress is the kind of player that NBA executives would never expect to lose to an overseas market–and one who would legitimize Euroleague as a viable option for NBA free agents.

It adds up to a shift in the labor market that could not only force NBA teams to sign lesser talent, but throw the league’s own growth strategy into question. With signs that the NBA’s domestic audience has stagnated, given flat revenues of $3.5 billion (compared to more than $6 billion for both the NFL and MLB) and sliding popularity, the league’s hitched its future to capturing overseas markets. So far, the NBA’s gained international fans by aggressively touting its emerging foreign stars, rather than developing an international minor league or expanding franchises overseas. It’s a workable model when, say, you’ve got China’s two leading stars–who can draw 200 million Chinese TV viewers to an otherwise uneventful midseason game–but it fails as soon as the best international talent starts playing for another league.

Some fans see a simple solution: Pay more. But it’s not that easy. The league’s luxury tax—which forces teams to pay double for every dollar that exceeds a salary ceiling—effectively caps spending, forcing teams like the Denver Nuggets to discard quality players like Marcus Camby for virtually nothing. And even if the NBA significantly hiked the luxury tax, the average NBA team only clears $10 million per year, which would rapidly evaporate in any salary-boosting effort to match the euro’s rising power. So where would the extra dollars come from? Given broader economic troubles, teams may be unable to wring out any more from the financial companies that buy luxury boxes or brand arenas, which contribute far more to a franchise’s bottom line than raising prices for the average ticketholder.

The financials obviously favor the Euroleague, which is moving to seize the opportunity. The league’s working to improve and modernize its arenas, and encouraging teams to spend more on talent; while the best Euroleague teams budget at least $30M per year, that’s still well below the $100M budget of an average NBA team. Although there’s no clear revenue stream in Europe to make up the difference, given a smaller fanbase and TV contracts, the Euroleague’s got two secret weapons: 1. No salary cap and 2. A Russian oligarch. Mikhail Prokhorov, the world’s 26th richest man, bankrolls reigning champion CSKA Moscow and doesn’t need to look far to see how a single man can change the face of a league. In English soccer, countryman and fellow oligarch Roman Abramovich more than doubled Chelsea’s budget over the past five years while acquiring a stream of top foreign talent, motivating other teams to spend on player salaries and turning the English Premier League into “the best in the world.” If Prokhorov ever elected to throw $50M per year at LeBron James, there’d be nothing that NBA teams could do to match without substantial rules changes.

Of course, James won’t be a free agent until 2010, and since losing players like Brezec, Delfino, and even Childress has negligible short-term effects on the league’s talent level, the ramifications of this summer’s básquetbol exodus won’t be obvious until our homegrown mega-stars start stamping their passports. But here’s a tip: NBA fans should get used to the Euroleague idea of relegation. Because unless the dollar bounces back or the NBA changes its stripes, our league’s got nowhere to go but down.

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Dan Diamond is an editor and writer in Washington, D.C. He looks forward to purchasing a Euro-League Pass subscription within the next few years.

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8 Comments

  1. Pekovic got drafted #31 by Minnesota so obviously he was eligible.
    Remember also that its projected that next years top draft pick will be Ricky Rubio, the spanish 17yr old sensation.

    Comment by Steve on July 22, 2008

  2. This is just another example of the decline of the United States, which is still a world leader, but not “the” world leader anymore.

    The NBA and NHL are in far more danger than the NFL and MLB of losing stars to overseas teams.

    On a brighter note, Will Bynum, arguably the best player in Europe, is about to sign to play with the Detroit Pistons for less money.

    Still, if I am Lebron James of Dwyane Wade, why nt consider an offer to play in England, especially if the US economy continues to decline?

    Tony Wichowski is a writer for the Bleacher Report and the host of “That’s Real Sports Talk” on the Godly Network.

    Comment by Tony on July 22, 2008

  3. toni you joke about lebron playing in england…england only country in europe with no basketball tradition, may change with luol deng and ben gordon.

    in order of best europe national teams tradition/current form
    1) serbija, until 2002, although in two years they will become superpower they were once again, their youth teams won u18 u20 euros and u19 world vs usa in final…and lets face it they still have/hAD greates forein players in nba aka stojakovic, divac etc…their national team has just underacheived in last few years, still reaching all major tournaments
    2) greece…paploukas-zisis-spanoulis-bourusis etc powerhouse
    3) lithuania- macijkausks, ilgauskas, kleiza, lavrinivic bros, siskauskas
    4) russia- AK47
    5) spain- deomralized after eurobasket but currently best european team
    6) italy-good traditions, three of best young europeans- bargnani, belinelli, gallinari
    7)croatia- roko ukic, zoran planinic, nicola vujcic, solid
    8)turkey- hedo and mehmed
    9) slovenia- rasho, boki, jaka lakovic, sasa vujacic, good team
    10) france
    11) germany
    12)bosnia

    Comment by drazen on July 22, 2008

  4. lituania for me r the best AT THE MOMENT, in terms of european history, ex jugoslavija, fromer USSR and greece are best…

    PG SARUNAS JASEVIKIUS
    SG MACIJKAUSKAS
    SF SISKAUSKAS/KLEIZA
    PF LAVRINVOC
    C ILGAUSKAS

    Comment by drazen on July 22, 2008

  5. Steve, you caught me. By “didn’t make himself eligible,” I should have specified: Just days before the draft, Pekovic signed a long-term deal to stay in Europe, effectively signaling that he didn’t want to come to the US (Basically, that decision made it “all but impossible” for any NBA team to use a first-round pick on Pekovic and buy out his contract, given the rookie salary scale and per ESPN’s John Hollinger). However, Hollinger (and others, like Tom Ziller at the Fanhouse) accurately predicted that because NBA teams have greater flexibility to buy out the contracts of 2nd round picks, NBA teams would immediately jump on Pekovic and other Euro stars at the start of the second round.

    In terms of Ricky Rubio, he’s obviously a great talent–and among the best projected to be available–but too many factors make me doubt that a Euro point guard will eventually be selected at #1 next June. For one, for Rubio to have any financial reason for coming over, the dollar needs to get a lot stronger against the euro; instead, it’s expected to fall further. Assuming that the dollar merely holds steady–and that Rubio could get a Euroleague contract in line with that league’s top guards–coming to the NBA would mean sacrificing at least $3 million to $4 million (tax-free) PER YEAR over the course of his three- to five-year rookie contract, even if Rubio’s the top pick. Unless Rubio and his advisers think he can increase his marketability by $15 million or so by coming to the US, it’s unlikely to happen.

    (Also consider how much projections can swing over the course of a season. At this time last year, Nicolas Batum was pegged as the #3 overall draft pick by NBAdraft.net; he eventually went #25)

    Tony, agreed that the NBA has some similarities to the NHL on this front–the NHL’s competitor Russian league, the KHL, is posing a real threat in poaching players, especially with the NHL’s new salary cap. It’ll be interesting to see where that goes, and what the NHL will do in response.

    Drazen, it’s amazing to me that European players have come so far, so fast; most of the national teams that you mentioned have at least one former NBA All-Star playing for them. A handful of NBA squads can’t make the same claim.

    Comment by Dan Diamond on July 23, 2008

  6. Why do all those articles talk about “tax free” Euro contracts? Since when was personal income tax abolished in Europe? Huh?

    Comment by Derol on July 23, 2008

  7. Derol, there are taxes–but teams in Europe pick up the tab, not the players. Don’t expect that to happen anytime soon in the U.S.; it would add $30-$40 million to the average team’s budget.

    Comment by Dan Diamond on July 23, 2008

  8. [...] Actually read an article on tihs subject today: Flattops, Afros, Euros and Oligarchs: How the NBA’s End Begins | NationalSportsReview.com [...]

    Pingback by Players leaving the NBA for Europe? - VolNation on July 23, 2008

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