Why bigger pie is not enough for all

LAS VEGAS -- Just about the time DeAndre Jordan sorted out his internal conflict, NBA teams had committed to players' contracts whose total compensation nearly equaled the $1.7 billion debt payment Greece failed to pay the IMF to avoid a default.

A person can drive himself crazy drawing parallels like these: The summer blockbuster budget versus the per capita earnings of a distressed nation. The cost of running a senatorial campaign versus the capital required to give homes to those who need them in that state. Or the salary of Enes Kanter versus the collective earnings of everyone on your block.

So you have to feel for NBA commissioner Adam Silver when he was asked whether he was concerned about the NBA's new reality, one being fueled by Monopoly money.

"I think most fans recognize that to the extent that these guys have a special and unique talent that are being rewarded by the marketplace," Silver said. "It's very difficult to make value judgments. I'm like any other fan when I say, oh, my God, I can't believe that compared to a teacher or doctor or someone else. But we live in a market economy. So that's how values are set."

Silver is right, the NBA doesn't create the rules that govern supply and demand. Anyone who has a Netflix account, sees first-run movies or watches pro sports is part of a consumer class that drives the entertainment economy where a league-average center makes more than a cardiologist. And the league merely reacts to this phenomenon like any other market entity.

Except that the NBA isn't a traditional market entity.

Silver is correct that NBA players have a special and unique talent, but he's not being completely honest when he says they're being rewarded by the marketplace. Even with the robust windfall the NBA is enjoying through the explosion of existing revenue streams, compensation for NBA players is not "the market rate." It's a dollar figure that's filtered through a complex, oligopolic system called a salary cap designed by a cooperative or cartel -- depending on your economic orientation -- to keep those salaries down.

From the perspective of an NBA owner, the salary cap is a necessity in a league where teams from Oklahoma City and Memphis must compete with teams from New York and Los Angeles. A week of Lakers broadcasts in Southern California can generate more revenue than a team such as the Charlotte Hornets draws from a broadcast season, which is why the league has instituted another revenue sharing -- and that's just local TV. Sponsorships, ticket sales, luxury suites, sweetheart lease deals and debt obligations can skew the scale even more.

This system of revenue sharing either isn't powerful enough or it needs serious recalibration because Silver said on Tuesday that "a significant number of teams are continuing to lose money." Silver explained that even in a world where teams on the receiving end of revenue sharing are drawing, in some cases, more than $20 million in handouts and often large public subsidies in the form of facilities, the expenses are too much.

"That in order to compete across this league with a relatively harsh tax, teams are spending enormous amounts of money on payroll -- some of the contracts we talked about." Silver said. "They still have enormous expenses in terms of arena costs. Teams are building new practice facilities. The cost of their infrastructure in terms of their sales people, marketing people, the infrastructure of the teams have gone up, and in some cases their local television is much smaller than in other markets. In some cases because of historical deals, and in some cases just because the market won't command the kinds of dollars that you can get in the larger markets."

It's true that capital investment can be really expensive. Spend 10 minutes with an NBA executive here in Las Vegas this week and you'll learn that there's an arms race for the best training facilities, medical services and branding campaigns. But it's not a coincidence that the first item on Silver's grocery list is the "enormous amounts of money on payroll -- some of the contracts we talked about."

The collective bargaining agreement between owners and the union stipulates that players receive a fixed percentage of the NBA's overall revenue -- roughly 50 percent. If the aggregate salaries committed to players fall short of that amount -- as they currently are -- the owners make up the difference.

As if to underscore the league's generosity under the current collective bargaining agreement, Silver emphasized on Tuesday that he expects ownership to cut a check for as much as half a billion dollars next year to cover the shortfall.

"There are projections that for next year we could be writing a check moving close to half a billion dollars to the [National Basketball] Players Association," Silver said. "That's not of course the ideal outcome from our standpoint. It's not something we predicted when we went into this collective bargaining agreement. Now it's happened because the revenue we generated was much higher than we had ever modeled. But we're also learning that when you have all that money coming into the system, team behavior isn't necessarily predictable either."

This sounds like a good problem to have -- so much money we have to give it away! But Silver understands that -- and we apologize for this -- Mo Money, Mo Problems in the NBA. For a small-market team or a mid-market one that is managed poorly, this escalation of the salary cap is going to put them on a treadmill far too brisk for their fitness level. Yes, owners will see a nice fat check in their mailboxes courtesy of the new national broadcast deal, but that amount likely won't be enough for some teams to keep up with the big spenders in free agency.

Charged with figuring out a way to keep expenses down for these sad owners who have to wear last year's salary cap to the ball, which budget line do you think the league is going to target in its negotiations with the players union as the only way to save the NBA from overheating?

Just take a wild guess.