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NBA Salaries and Success

The NBA, like other pro sports leagues, has a wage limit, which will rise to $109 million per club for the 2019-20 campaign. However, unlike a hard cap that cannot be surpassed for any reason, the NBA's wage limit is soft, which means that there are loopholes that allow clubs to sign players or make transfers that exceed the limit.

Neither two players earn the same sum of cash, and individual pay can vary greatly across the spectrum. As a result, when it comes to calculating how much a team's wins truly cost, the figures may get out of hand, and we'll see how some organizations grossly overpay their players. We examined players and teams over the previous decade to discover how team wages correspond with how successfully they perform, and whether players are overvalued or undervalued depending on their achievement.

The Cost of Success

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We analyzed each NBA club's overall player compensation during the previous ten campaigns and split it by the number of victories during that time frame to determine what each franchise spent for every victory. The San Antonio Spurs topped the league in victories during this time span, with a 0.701 win % and a league-low $1.42M athlete wage per win. The Atlanta Hawks, Denver Nuggets, Utah Jazz, and Houston Rockets, and were among the other clubs with low spending per victory.

On the flip side of the coin, some franchises spent a lot of money on their players but didn't have as much success as the club (and supporters) would have wanted. Over this 10-season timeframe, the New York Knicks invested the most cash per victory, although they failed to reach the 0.500 mark in win %. The Brooklyn Nets, Minnesota Timberwolves, Philadelphia 76ers, and the Sacramento Kings were among the other clubs who overspent.

2016 – A media rights agreement had been enacted between Turner Sports, the NBA, and ESPN which had started during the 2016-17 season which had vastly increased the cash that flowed into the NBA by millions. This had resulted in a massive increase in player salaries over the subsequent years.

However, the Brooklyn Nets, Dallas Mavericks, Los Angeles Lakers, and the New York Knicks had the most overpaid seasons regarding overall team wages per victory before the 2016-17 season.

Beginning with the 2016-17 season, the NBA and a few sports networks struck a large media rights agreement, which resulted in a lot more money going into the league. This immediately helped the players, since their pay increased significantly. But there were a few clubs who stood out before this transaction, such as the Mavericks, Lakers, Knicks, and Nets. All of these clubs seem to be in the top eight in terms of valuation, so it's no wonder that they've always paid their players handsomely to keep fans engrossed in the game and stadium seats occupied.

Paying Well to Succeed?

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We examined each squad's total salary and victories over the last ten seasons. You'd expect that by compensating highly ranked players handsomely, the squad would play well enough to warrant their price. However, that isn't always the case.

The San Antonio Spurs had a somewhat high total payroll over the last ten campaigns (though not the greatest) and have performed well in terms of win %. They've gotten to the NBA Finals on two occasions (winning once) and have made the playoffs every season over the last decade, so it appears like the team made a wise expenditure that has returned quite well for the brand and its group of fans.

Other clubs, on the other hand, do not spend large sums of money and nevertheless do well throughout the NBA campaign. The Houston Rockets were another such squad, and while their playoff record hasn't been as impressive as the Spurs', their win % has stayed consistently high over the previous decade.

Also, there are exceptions, like the New York Knicks, that have a huge budget yet haven't really had success in the last decade. They've only made the postseason 3 times and also have a mediocre victory rate.

Teams That Overspend

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Following that, we identified the most overpriced teams over the last ten seasons by dividing each team's salary by the number of victories. Beginning with the 2007-08 campaign, the Miami Heat have held this unpleasant distinction, with stars such as Dwyane Wade and Shawn Marion commanding the upper echelons of their team's payroll. Unfortunately, the Heat did not make the playoffs that year, despite paying at least $5 million every win.

Although it may seem like a lot of money to pay for a win, it pales in comparison to what the 2011-12 Charlotte Bobcats, which is now known as the Hornets, spent per win that campaign — $8.27M. One of the factors they ended up overpaying was because the squad only managed seven victories all season, with Corey Maggette earning the highest player compensation of $10.26M.

The 2015-16 Philadelphia 76ers were another club with a very high expenditure per victory during a single season, with a total player pay of $6.46 million per win. This is also probable owing to the team's lackluster season-long effort, which resulted in only 10 victories, which raises the rate per win significantly. The 2015-16 season was an unusual one for the 76ers since they gave their biggest paychecks to athletes who had previously signed contracts but did not play for the franchise that year.

As per basketball-reference.com, a win share is a figure that distributes credit each athlete in the NBA contributes to their team regarding the wins. One win share is the equivalent to a single win, and the higher a win share, the more a player contributed to their team to win games.

The win share is calculated using player, team, and league-wide stats. When all teammates’ win shares for their team in a season are added up, the number typically falls within +/- 3 points of the team’s total wins for that season.

Big Bank Accounts

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For the 2017-18 NBA season, we examined which players were most overpaid and underpaid. We got to this number by splitting each player's compensation by their victory percentage. Dion Waiters, who competes for the Miami Heat, was named the season's most overpaid player. He appeared in 30 games that season (missing games due to an injury) and also had a win percentage of 0.1, converting his $11 million compensation to a $110 million pay per win ratio. Dragan Bender of the Phoenix Suns is just behind him. With a 0.1 victory share, his compensation per win was $44.69 million, and he appeared in 82 games.

On the other hand, we have numerous athletes whose wage per victory share is far lower than others who are raking in the wealth. Tyler Cavanaugh, having played 39 games with the Atlanta Hawks, received $41,670 per victory percentage (his pay that season was only $50,000). Although he did not show up in each and every game throughout that season, another such unpaid player got near. Nikola Jokic, who is in his fourth NBA campaign with the Denver Nuggets, earned a very low compensation per win share in 2017-18 — $137,510 spread across 75 games. As he was the third-highest underpaid player at the time, he's doing extremely well in 2018-19 and is presently third in the race for NBA MVP.

Emmanuel Mudiay, Caleb Swanigan, Jason Smith, and Malik Monk all had win shares of 0.0, meaning they neither contributed nor took away wins. However, each of them were paid at least $1.47M.

Closing

It may be hard to manage a basketball team while adhering to a soft salary cap and retaining fan favorites while giving everybody a fair wage. Nevertheless, paying a lot of money does not automatically ensure success (take the New York Knicks for example). So, it might be difficult to keep fans pleased while making sure your top talents are paid what they deserve, as our findings show.

Methods and Limits

We gathered teams and players' salary information from Hoopshype.com, along with teams and players' data from basketball-reference.com. This includes information such as win shares and total victories. The information was gathered from the 2007-08 season to the 2017-18 season. The analysis eliminated players who played fewer than 27 games (one-third of the season). Athletes with a win percentage of 0.0 in 2017-18, such as Emmanuel Mudiay, Caleb Swanigan, Malik Monk, and Jason Smith were removed from overpaid and undervalued player analyses since dividing player income by zero would result in huge numbers that would inflate conclusions.

Athletes with low win shares also were omitted from overpriced player analyses since their salary per win share interpretation would not be comparable to athletes with good win shares. As shown in the graph, the top-paid players for the top overpaid clubs per season might or might not be on that player's squad throughout that season. Athletes may have signed deals stating that they'd be paid for a set number of seasons, despite not actively participating on the squad each campaign.

Because player wages for all NBA athletes over the last ten campaigns were not available, players with no information were omitted. All statistics are based only on means, and no statistical approach was conducted. This data is experimental, and future studies should handle this issue in a more thorough and scholarly fashion.

Sources

https://www.basketball-reference.com

https://www.si.com/nba/2018/09/17/nba-109-million-salary-cap-2019-20-season-118-million-cap-2020-21

https://www.statista.com/statistics/193696/franchise-value-of-national-basketball-association-teams-in-2010/

http://www.cbafaq.com/salarycap.htm#Q2

http://www.espn.com/nba/salaries

https://www.spotrac.com/nba/rankings/

https://www.basketballinsiders.com/nba-salaries/

https://www.cnbc.com/2019/05/30/how-much-money-the-winners-of-the-nba-finals-could-take-home.html