Although some people think basketball players are overpaid, I think they are underpaid. The top 50 Fortune 500 companies pay their highest-paid employee (the CEO) $25-50 million per year. They even get multiples of that if they get fired. But here is the key – most of their compensation is in equity. How much equity do NBA players get? The players from the Atlanta Hawks that made the franchise what it was in the 80s and 90s – how much equity did they get? In every other industry, employees have stock incentive programs. If companies don’t offer that, they need to pay a lot more cash. However, because there are no other leagues to compete for basketball in the US, they get to collude and negotiate caps, withhold equity, etc.
Damian Lillard just signed a four-year, $196M Supermax Contract extension: $50M per year. Sound expensive? Well, the company is worth $1.5B, they do $250M in revenue annually and only pay players around half of that. Do the players bring half that the value of that revenue? Who brings the rest? By the way, they generate $40M in operating income each year. What revenue and profit would they make if Lillard left?
Players who only depend on team salaries are missing 90% of the value they bring to the market. Ownership is the name of the game. Look at the wealthiest athletes today (MJ, Kobe, Lebron, Junior Bridgeman, Magic) and see how they used their brand to start businesses and invest in businesses to grow their net worth. You don’t need the teams, you need your own team! You guys think they are overpaid, or do you think they should build wealth outside of sports? Sound off in the comments!