Have the Celtics Exposed a Problem in the NBA’s Salary Cap Structure?
After winning the NBA Finals this year, the Celtics front office got right to work re-signing all of their players who made their title win possible. However, many questioned how they would be able to re-sign all their starters given that each of them would command at least $30 million annually. The Celtics owner, Wycliffe K. Grousbeck, had a solution to retain all of his star players for the long haul. He decided to re-sign all of his primary guys to long-term deals no matter the cost and then sell the team which is valued at four billion according to Forbes. The Celtics have been a tremendous investment for Grousbeck as he bought the team for only $360 million back in 2002 and the evaluation of the team has especially skyrocketed the past five years growing by 62%. However, with the Celtics' moves this offseason, they may have exploited a problem the NBA has to deal with, or else the league could become uncompetitive in the future.
With sports teams' values rising like crazy in recent years, they are increasingly becoming a target for billionaires or investment groups to get involved with. The Celtics owner is counting on this because with the Celtics' front office re-signing all of their key players this offseason to massive deals, they will be so aggressively over the salary cap in future years that they will be losing tons of money annually due to the NBA’s luxury tax structure. In the NBA, the vast majority of teams are over the initial salary cap as it is the only way to assemble a competitive team, but the Celtics are venturing into uncharted waters with how much they are violating the salary cap restrictions. Most teams in the NBA currently spend about $190 million annually for a competitive team, but the Celtics for the next few years will be spending about $260 million annually for their team before the luxury tax is applied which will effectively double that number. The Celtics know they can’t pay nearly half a billion dollars annually for their roster with ticket sales, sponsorships, and other revenues, so what is the appeal for a billionaire or an investment group to buy the team if it will be losing money year after year for the foreseeable future?
Grousbeck has answered these concerns by telling potential buyers that they will be paid back with championships. The Celtics have proven that they have the pieces in place to dominate in the NBA and with that type of success the value of the team will dramatically increase. Therefore, although the Celtics may be losing money in revenue each year from fielding such a strong roster, the team’s success will cause the franchise’s value to soar, which will make it a worthy investment for a billionaire looking to create value for the long haul and to become immortal in NBA history with numerous championships.
The Celtics' new way of doing business in the NBA creates a problem for the league because, with the lack of a hard salary cap cut-off, teams may start to just try and pay tons of money to the best players no matter the cost in order to win championships. This is a problem that baseball faces which is why there are only a handful of teams that can reasonably compete for a championship in that sport. The NFL doesn’t have this problem as they have a hard salary cap which helps all the teams stay reasonably competitive with one another. If the NBA doesn’t create a hard salary cap then soon other teams may follow in the Celtics’ model which could create a league with only a few top-tier teams while the rest aren’t able to compete with them.
