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Why LeBron James is about to get a lot richer
LeBron James will hit the NBA free agent market Wednesday after reportedly opting out of his contract for the second-straight year. Though scrapping the deal gives James freedom to sign with a new team, all signs point to his staying with his hometown Cleveland Cavaliers for years-and making a lot more money than he makes now.
James and other basketball superstars have increasingly agreed to deals that allow them to choose whether to stay on their contract or become a free agent to control when they will next negotiate. This summer, they are setting themselves up to bargain for record-shattering salaries when the league comes into a lucrative new TV deal in the 2016-17 season.
"The impending increases are having an interesting impact on free agency this off-season. Players are more willing to take the calculated risk of less security through a short-term deal for the bigger payday down the road," said Courtney Brunious, associate director of the University of Southern California Sports Business Institute.
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The NBA last year extended its broadcasting partnership with Disney (NYSE: DIS)'s ESPN and Time Warner (NYSE: TWX)'s Turner Broadcasting. When the new deal kicks in, the league will receive nearly $2.7 billion per year in TV rights, about three times its current haul, according to multiple media reports.
That cash pile will filter down to teams, increasing their salary caps, or the maximum amount they can shell out to their roster before receiving a penalty. The cap could jump to $89 million in the 2016-17 season, up from $63.1 million last season, according to league projections obtained by USA Today and ESPN.
When James signed with the Cavaliers last summer, he agreed to a two-year contract, with a choice to opt out after the first season. By dropping his deal after one year, James can structure his new contract the same way this summer, earning more money next season and possibly becoming a free agent as the league comes into its windfall the year after.
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Though James will almost certainly stay with the Cavs, the tactic would make him a lot richer than if he signed a long-term deal now. Fellow Cavalier Kevin Love and former Miami Heat teammate Dwyane Wade, among others, could take similar routes to mega-contracts in the next two summers, even if they stay with their teams.
The NBA already leads major sports leagues with an average salary of $4.6 million, and that will only increase moving forward, Brunious said. The league's so-called max players-the ones who earn the largest annual amount possible under its collective bargaining agreement-will get an enormous salary boost with the cap increase.
"The salaries for max players are set to skyrocket, which is having a significant impact on this year's free agency class," Brunious said.
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James-who made more than $20 million last season, not including endorsements-will likely see his pay spike.
And the average player likely will not have to worry about pay inequality, however. They will get a boost from the increased cap, as well, Brunious added.
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