How the CBA incentivizes LeBron to opt out next summer

When news emerged of LeBron James’ contract details, most of Northeast Ohio was likely surprised and caught off guard. “He just committed to a long-term future in Cleveland, why only two years? Why an opt-out?” The clear-cut answer lies within the NBA’s Collective Bargaining Agreement, signed back in 2011.

LeBron is dead-on with his Cavaliers contract. If he truly wants to maximize his earnings – and as the best player in the league, he certainly deserves to – then he absolutely set up the right deal and his management team did a great job. Let’s start with the basics, all found via the fantastic Larry Coon CBA FAQ website.

Cleveland signed LeBron to the maximum possible salary for two years with a one-year opt out. They signed him as a free agent to their available cap space from the Miami Heat, meaning they signed him without owning his Bird rights. This is important when it comes to future raises.

Max deals signed without Bird rights carry only 4.5% annual raises from the first year’s salary. When signed with Bird rights, the annual raise is much higher at 7.5% (and contracts can include a fifth year, hence why players turn down money when signing away from their team). However, as a free agent, LeBron would guarantee himself at least a 105% increase on his previous year’s salary. Huh? Check out the math below.

lebron opt out info

By opting out, LeBron guarantees a minimum 5% raise, not the set 4.5% raise for max deals signed without Bird rights. The added 0.5% of his salary guarantees him of at least $100K more for the 2015-16 season. But that’s not the only reason why this is advantageous for LeBron. He’s thinking bigger.

The NBA salary cap actually increased by 7.5% this summer to approximately $63.065 million for the 2014-15 season. If the cap increases by more than just 5% for next year, LeBron would be advised to re-work his deal in summer 2015 and make more money with a new maximum contract based on that year’s cap number.

It is expected that the cap number will increase to at least $67 million next season and perhaps skyrocket even further. With the NBA’s new TV deal taking place for the 2016-17 season, the cap could go over $80 million in summer 2016. If the year-over-year cap increase is larger than 7.5% (LeBron’s annual raise with a new max with Bird rights), then again LeBron would be advised to re-work another deal.

So yes, it makes a ton of sense for LeBron James to go year-to-year for now1. It’s not necessarily an indictment on the Cavaliers by any means. It does mean that the circus of LeBron’s future will continue to be a topic and the Cavs will spend more money on his salary than if he had signed for the long term. But this is a pretty clear business decision.

William Perlman/The Star-Ledger

  1. It’s possible the cap’s growth will stall somewhat after summer 2016 and thus, LeBron might finally sign a long-term deal. []

  • dimoko

    Don’t worry, ESPN has cited this as “uncertainty for Cavaliers future”

  • Wow

    I’ll just ignore the fools in the media who already were wrong about his decision.

  • stryker1121

    Already heard from the nat’l media that this will complicate any deal for Kevin Love, i.e. him signing an extension. Wheee!

  • mgbode

    I was wrong too 🙂

  • mgbode

    I think that it is not ONLY about the money, but also about the control. Having shorter contracts forces the FO to include LeBron on what is going on. I sincerely hope that it is just a communication status report (other than him recruiting guys like Mike Miller for cheap), but LRMR can easily force an ear in the room, if not a voice.

  • maxfnmloans

    Does anybody remember all the ESPN stories on Michael Jordan his last few years in Chicago when he signed one year deal after one year deal and all the uncertainty? Me either. If something doesn’t neatly fit into one of their prescribed narratives, then it’s a controversy. Screw ESPN

  • The_Real_Shamrock

    No doubt but at least you admit it!

  • The_Real_Shamrock

    Forget them just watch how many times they air Cavaliers games this season now. I wish the Cavs could bypass them entirely just like LBJ did this time.

  • The_Real_Shamrock

    I think an extension would take work regardless Irving’s deal kicks in next year as well the nice thing is I have to believe both sides, the Cavs and LBJ’s are fully aware and working in concert. Otherwise the essay, lets call it that it wasn’t a letter it was an essay, rings hollow.

  • The_Real_Shamrock

    They are trying to get back some attention the problem is they are doing it the only way they know how and that’s by stirring the pot i.e. creating controversy. That network should start producing 1 hour dramas and movies.

  • stryker1121

    Right on..not worried, just found it interesting that the nat’l folks couldn’t see the long game at work here.

  • The_Real_Shamrock

    They are still stinging from taking a beating from the coverage, more like gossip, of the LBJ free agency.

  • Steve

    Of course, ESPN existed in quite the different format then compared to now.

    But yes, I did hear every summer about Jordan being able to hold Reinsdorf’s feet to the fire.