Jon M. Huntsman School of Business

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Thursday, December 1, 2011

The Effect of the New CBA on the Utah Jazz & Small Market Teams

Did the Jazz and small market teams get any “wins” in the deal?

Yes. The new deal includes an increasingly painful luxury tax for teams that habitually stray into taxpayer territory, which should keep the Lakers and Celtics of the world from going significantly over the luxury tax line (as the Lakers, Dallas, Celtics, Bulls and several others do nearly every season). This should – at some point in the future – begin to level the salary playing field between the big-market, high revenue teams and the smaller market teams. However, the new luxury tax doesn’t begin to kick in until the 2013-14 season, so until then, it’s business as usual. It will be five years before the real effects of the new, steeper taxes manifest themselves.

Eric D. Schulz
An immediate win the Jazz have available to them is the new “amnesty” clause, which allows each team to waive one player prior to any season and have 100% of that players salary removed from their team salary for cap and tax purposes. This new clause will allow teams to dump players that they signed to big contracts and then had buyer’s remorse – as would have been the case with Andrei Kirilenko and his $17 million dollar annual contract the past couple of seasons. The team still has to pay anyone they dump (unless he’s picked up by another team, in which case they have to pay a portion of the contract instead of all of it). On the Jazz radar for using the amnesty clause this season is Mehmut Okur and his $11 million salary. If somebody shows up to camp way-out-of-shape, they also could be on the radar.

Will the new deal allow small market teams to compete for the NBA championship more effectively?

No. The big market teams will continue to be the only ones you’ll see hoisting trophies at the end of the year. The new deal does nothing to address the “Miami Effect”, with players leveraging their way to the big markets to play with their All-Star buddies. Before this year is out, you will see Dwight Howard, Kobe Bryant, and Pau Gasol as the “big three” in LA; Amare Stoudamire, Carmelo Anthony and Chris Paul headlining the Knicks; Derrick Rose, Carlos Boozer and Tim Duncan on the Bulls; Dirk Nowitzki, Deron Williams, and Brook Lopez headlining the Mavericks; and of course, LeBron, D-Wade and Bosh in Miami. Nothing has changed. The haves will continue to have. The smaller market teams will continue to be have-nots and be in continual rebuilding mode.

Will the Jazz have an easier time signing big-name free agents under the new deal?

No. Utah is not a destination where players want to come and form their “big-three’s”. Once players get to Utah they like it, but it is not a preferred destination, and any free agent player that’s top-tier has multiple options from which to choose. Major markets, with big opportunities for incremental cash from personal sponsorships and endorsements -- along with nice weather and beaches -- win every time.

Will the Jazz be able to make a profit under the new deal?

Only if they keep their player salaries at or near the salary cap – in the $50 - $55 million dollar range. As it stands today, the 2011-12 roster is at about $59 million, and they have to sign at least two more players.

Will the new CBA keep owners from handing out outrageous contracts?

No. In fact, they can give out MORE outrageous deals. The maximum that any single player can make under the old CBA was 25% of the salary cap. Under the new deal, a max contract can be up to 30% of the cap.

The free agent signing period starts next Wednesday, and it will be interesting to see the feeding frenzy. The New Orleans Hornets only have five players under contract. Most teams need to add two-to-four players. It will be a crazy week next week!

- Eric D. Schulz

Eric D. Schulz is the co-director of strategic marketing and brand management at the Jon M Huntsman School of Business at Utah State University. Prior to joining the University, he spent five years as vice-president of marketing for the Utah Jazz (NBA); he previously was VP of marketing with the XFL Football League, and served as a General Manager in minor league baseball. He can be reached at

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