LeBron James is going to be a free agent again. Exactly how much is the best player on the planet worth? Maybe more than you'd think.
Because the NBA has a max salary, this isn't quite like the Mike Trout situation, where the nerds are sitting there trying to grasp how projections that he will be worth north of $500 million can possibly reconcile with real world dollars. We know what LeBron will be paid, unless he takes another pay cut. And because of the way the maximum salary works, a "pay cut" to finagle something like the original Heat Big Three is asking even more.
But how much? Frankly, the NBA's salary structures are a mess. The "max" varies based on how long you've been in the league and the salary cap, which itself is based on a number of things, but mainly league revenue. When LeBron was a free agent back in 2010, the most he could receive was around $18 million. But for a player like the LeBron of today, who has 10+ years of service, the maximum is 35 percent of the cap—about $58 million last year—which would have been around $19 million for last season.
But the thing is, the maximum salary is completely artificial, in a league where a punishing luxury tax already keeps an artificial ceiling on total salaries. If players were truly paid what they're worth, even under a salary cap, you would see players like LeBron and Kevin Durant, who are transcendent, paid in scale with their production. Think of it as all the NBA player salaries going into a pool (that's essentially how a CBA works); now how much of that would you say LeBron should get? Probably more than the max, right? We thought we'd take a look.
To get a clear picture of the league's salary pool, we included not just the payrolls of the teams, but the total paid into the luxury tax. (If you're willing to go into the tax for players, reason stands that you'd be willing to pay them the combined weight of those additional tax dollars.) We came up with $2.38 billion, with about $276 million of that in luxury tax dollars. Yes, there are specific efficiencies and inefficiencies involved with navigating the tax, and we can't be sure if the pool would actually grow larger absent a maximum, but definitionally, this is the actual figure that teams paid for the right to have the players on their roster play for them.
From there, we have to figure out how much of that pool would go to LeBron in an unrestricted market. But how to judge LeBron's performance was a bit harder, especially since, as a rule, catch-all stats that belch out one number are kind of shitty, even the good ones.
We decided to run with WAR, and used ESPN's calculations. If you add up all the WAR in the league last year, you get 867.98. LeBron had 20.06 (the league average is just 2), accounting for 2.31 percent of all WAR. Apply 2.31 percent to the league's salary pool and James was worth $55 million. That's more or less what Mike Trout looks like on paper. But using a statistic with a replacement level is tricky, because it dips into negatives. At -4.53 WAR, Tim Hardaway Jr. owes the Knicks $12.38 million for last season by these figures; that does not seem exactly right.
The problem is that players under a certain threshold are shown in stats as being obviously harmful to their teams when they play, and generally very bad. This is true, but you can't fine poor Kendrick Perkins for being awful at basketball. That's why the veteran's minimum exists; at a certain point, GMs just say, Aw, shit, we just need a warm body. Anyone have Juwan's number? And if we aren't accounting for that in figuring out how an actually efficient NBA salary structure might work, we're missing a big part.
To correct for that, we took all players who were projected to be worth $1 million or less (a cutoff of about 0.45 WAR) and accelerated them to $1 million, which we're using as a proxy for the league minimum. The actual minimum salary rules are based on years of service, but generally settle around that million-dollar mark. The cutoff for our "replacement level veteran's minimum" was Hedo Turkoglu, if you were wondering. There were 209 players1 below that cutoff, so we subtracted $209 million from the league salary pool, leaving about $2.17 billion. This method essentially argues that the players who did not generate enough WAR to be at the veteran's minimum are all more or less interchangeable.
By this measurement, LeBron's 20.06 WAR is 2.06 percent of the new above-minimum total of 975.32 league-wide WAR. (The total went up because we zeroed out negative WAR performances like Hardaway's.) This means Lebron was worth $44.75 million for just last year, when he was paid $19 million.
Jose Calderon, at precisely 1 WAR, is our unit of measurement. (His 1 WAR was 0.1 percent of the new total of 975.32, or $2.17 million.) Kevin Durant's 17.59 WAR was worth $39.11 million, or just more than 18 Calderons. Of the free agent and trade bait class, Carmelo's 8.93 WAR would put him at $19.99 million, just short of the 21.49 million he made; Kevin Love and his 13.54 WAR were worth $30.2 million; Eric Bledsoe, in just 43 games (WAR is a cumulative stat), was worth $12.82 million, and can only make 25 percent of the cap ($14.5 million last year).
An interesting thing here is that unless you're in serious consideration for the MVP, once you're past your first deal, and especially once you've got six years in the league, you can more or less expect to make what you're producing. Carmelo is paid more or less fairly, as is Chris Bosh. Dwyane Wade was moribund for most of the year, but managed to put a dent into his salary. It's only when you get up to Chris Paul and LeBron James that you see where the league finds room to subsidize expensive, shitty benches.
There are other ways to do this calculation, of course. By Win Shares, LeBron came in second last year to Kevin Durant, 15.9 to 19.2. James accounted for 1.27 percent of the Win Shares in the league, and Durant 1.53 percent, which would net them $30.25 and $36.44 million, respectively. Using Real Plus Minus and the same replacement-level adjustments that we used for WAR above, LeBron comes out to $57,268,441. When the WSJ took a look back in 2010, it came up with around $43 million for that year; and Planet Money talked to some economists who figured it was around $40 million.
Because basketball projections aren't quite as mature as the ones out there for baseball, it's harder to say how much LeBron will be worth going forward. But to cut just a few corners and take his projected salary under WAR for this past year, $44,754,753.65, and add a five percent rate of inflation built in to account for a growing league, you'd see either a four-year deal for $193 million, or a five-year $247 million contract for LeBron. Which is to say, about half what the Knicks would end up offering, and a whole lot less than he's going to get wherever he signs.
Chart by Reuben Fischer-Baum
1Because we didn't take into account how many of these players were on 10-day or non-guaranteed contracts, this is probably a conservative estimate on the size of the remaining pool.
Correction: Post originally used the luxury tax figure instead of the salary cap figure to calculate max salary ranges.