Why would LeBron sign a longer deal than necessary?
— -- Is LeBron James signing a new contract with Cleveland a big deal? Yes, if you look at the length of the contract and not just the dollars.
Of course, a four-time NBA MVP signing a new contract as an unrestricted free agent should be a big deal. On the other hand, James' return to the Cleveland Cavaliers was a foregone conclusion. Any question about whether James would re-sign with the Cavaliers was removed when he declared his intention to defend the team's championship at the parade.
So the only real question besides when James would officially re-sign was how long the contract would be. We now have that answer, as reported by ESPN's Brian Windhorst: three years and $100 million, meaning James opted to get the largest possible 2016-17 salary using the Early Bird exception rather than taking a smaller two-year deal that would have allowed him to become a free agent next summer.
In fact, this is the first time since he was on his rookie deal that LeBron has signed a deal with Cleveland that will not allow him to become a free agent at the earliest possible date.
Why would James make that choice? The answer might have interesting implications for the NBA's next collective bargaining agreement (CBA) with its players.
LeBron's choices
James was in an unusual spot because of a small-print requirement of the Early Bird exception: It allows players like him who have been with the same team for the previous two seasons to exceed the salary cap and re-sign for a raise of up to 75 percent, but Early Bird contracts must be for a minimum of two years not counting options.
To sign James to the same kind of one-plus-one contract he has signed the previous two summers (a two-year deal with a player option on the second season), then, the Cavaliers would have had to renounce his Early Bird rights and sign him using the non-Bird exception. That would have limited James' raise to 20 percent of his 2015-16 salary.
Let's put some numbers behind these options. Using non-Bird rights, James' maximum 2016-17 salary was a little less than $27.6 million (with a possible 2017-18 player option for $28.8 million).
Instead, James' new contract will actually pay him a league-high $31 million this season with raises to $33.3 million in 2017-18 and $35.6 million in the final year, which will be a player option.
The idea of taking a two-plus-one contract became more attractive for James when the league revised its salary-cap projection for 2017-18 downward after this summer's spending spree. Based on the current projection of a $102 million cap, James is giving up almost nothing in 2017-18 salary by locking in now. Under the current rules, James' maximum possible salary in 2017-18 would be about $33.4 million -- barely higher than his actual salary.
But what if the rules change?
Will new CBA mean new max?
Both players and owners have until Dec. 15 to opt out of the CBA after this season, which is almost a foregone conclusion because of the unexpected implications of the cap spike -- unless the sides can reach agreement on a new deal before that date.
The max salary figures to be an interesting talking point in negotiations. New National Basketball Players Association executive director Michele Roberts has expressed the desire to remove the limits on player salaries, which arose out of negotiations during the 1998 lockout.
At the same time, owners might be interested in increasing or even eliminating the max as a way of preventing stars joining together to create "superteams" like the Golden State Warriors. So there's common interest in some sort of change to the system.
If that happens, James might regret taking a longer contract. Let's say, for example, that the two parties decide to increase the maximum salaries for each experience level by five percent, allowing players like James with 10-plus years in the league to make 40 percent of the cap instead of 35 percent. (Technically, the calculations for max salaries use slightly different figures than those used to set the cap, but they're similar figures.)
Under that scenario, James could make up to $38.2 million in 2017-18, which would be the largest figure in NBA history. In that case, he'd be giving up about $1.5 million combined over the two seasons.
There are certainly benefits to taking more money now. James gets additional security -- including the 2018-19 player option in the event league revenues fall short of projections and it's larger than his maximum salary as a free agent -- and benefits from the time value of money.
Nonetheless, given James' past emphasis on recouping all of his value (in a truly free system, he'd be worth many multiples what he's getting paid now) by taking shorter contracts, this would be an odd place to start favoring security.
And remember, if anyone should have a good feel for how preliminary talks on a possible new CBA are going, it's James -- the first vice president of the players' association.
So while James' decision shouldn't necessarily be construed as a sign maximum salaries will stay the same under the next CBA, it's an indication that changes are no sure thing.
Implications for the Cavaliers
While Cleveland would sign James to whatever contract he wants, getting him locked in for at least the next two seasons has to be considered a win for the organization. While LeBron's future is always a topic of fascination, this contract means that questions about whether he will leave won't be quite so noisy if the team goes through a rough patch as it did this past spring.
The timing of James' decision is also interesting because Cleveland hasn't yet re-signed starting shooting guard J.R. Smith, far and away the best free agent on the market. Since few quality teams have cap space, Smith's best leverage for a new contract is sharing an agent (Rich Paul of Klutch Sports Management) with James.
Of course, James signed before Klutch client Tristan Thompson last summer, and Thompson and the Cavaliers were still able to come to a mutually agreeable deal.
James' announcement of his new contract via Twitter included a reference to Smith: "... let's get J.R. done. It's that time."
With James' contract complete, a new deal for Smith would be the last key piece of Cleveland's offseason as the defending champs prepare for 2016-17.
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