You mentioned LeBron, which got me thinking about payments under constraints. Superstars like LeBron are subject to max contracts, suggesting that they are underpaid. Rookies are subject to fixed contracts based on draft order. They are generally underpaid because they can't vote in the union until they sign their contract. That leaves veteran non-max players whose comp. Is the remainder of the 50% of revenue paid to players under the CBA. They would appear to be overpaid relative to others, although the 50% may undervalue the marginal product of the players as a whole as collectively they are close to monopolistic since they are the best roughly 500 players in the world. Your thoughts?
Planet Money did and episode on LeBron James about 11 years ago. Based on the value he was bringing to the NBA, it was pretty clear that his salary was lower that his marginal product for the team or the league. But they went on from there. The purpose of the salary cap is to keep small market teams competitive with big market teams. That makes NBA games more valuable to fans, because they are more exciting. So the television contract is bigger and there are more fans, which makes sponsorship deals more valuable to the companies that pay for endorsements. Which leads to the reality that LeBron made much more from endorsements than he did as the highest paid player in the league in 2013. In summary, by accepting a salary far below his marginal product for his team, LeBron allowed the NBA to create more total value by way of higher fan engagement. From this LeBron, through endorsements, was able to capture the largest individual piece of the total value pie.
You mentioned LeBron, which got me thinking about payments under constraints. Superstars like LeBron are subject to max contracts, suggesting that they are underpaid. Rookies are subject to fixed contracts based on draft order. They are generally underpaid because they can't vote in the union until they sign their contract. That leaves veteran non-max players whose comp. Is the remainder of the 50% of revenue paid to players under the CBA. They would appear to be overpaid relative to others, although the 50% may undervalue the marginal product of the players as a whole as collectively they are close to monopolistic since they are the best roughly 500 players in the world. Your thoughts?
Planet Money did and episode on LeBron James about 11 years ago. Based on the value he was bringing to the NBA, it was pretty clear that his salary was lower that his marginal product for the team or the league. But they went on from there. The purpose of the salary cap is to keep small market teams competitive with big market teams. That makes NBA games more valuable to fans, because they are more exciting. So the television contract is bigger and there are more fans, which makes sponsorship deals more valuable to the companies that pay for endorsements. Which leads to the reality that LeBron made much more from endorsements than he did as the highest paid player in the league in 2013. In summary, by accepting a salary far below his marginal product for his team, LeBron allowed the NBA to create more total value by way of higher fan engagement. From this LeBron, through endorsements, was able to capture the largest individual piece of the total value pie.