This is fairly shocking news in my books, as we're not talking about the Columbus Blue Jackets or Phoenix Coyotes. The NBA is a league on the rise, with significant national TV rights and countless young superstars. If you're Lebron James' agent/business advisor right now, how can you not consider a bid for the Bobcats, or some other franchise in equally desperate financial straights (Memphis, New Orleans)?
The King could become a majority owner (perhaps with contribution from D Wade), sign himself to the team for a reasonable contract and INSTANTLY raise the value of the team from $200M to what... $300M? $400M? He would immediately recoup his investment capital before even playing a game! Forbes estimated the Cavs as the 5th most valuable NBA franchise in December 2009, at $476M*. What portion of this reflects Lebron's value to a franchise?
*Please note that the same article valued the Bobcats at $275M, which two months later has been shown to be grossly overstated. Perhaps an indication of over-valuing across the board?
There has been precedent established in the NHL, with Mario Lemieux playing for his own franchise, and signing himself to a below market salary for salary cap considerations. Also, MJ himself suited up for the Wizards as a partial owner. Both were past their primes, but precedent has been set and I cannot see how the league could refute the possible gains in rejuvenating a franchise such as the Grizzlies or Hornets.
While Lebron may not have the requisite capital to finance such a venture at an early stage in his career, I feel a saavy venture capitalist or sponsoring company (Nike anyone?) could bring some liquidity to the King in a partnership.
Lebron has little financial stake in whatever team he signs with. He is paid a salary, limited by individual player contract ceilings and team salary caps. I do not believe that he recoups anywhere CLOSE to the actual value of his services. In basic economics this is considered the excess rent for his services. Since the NBA is competing for the professional services of pro basketball players (especially stars) as a monopsonistic buyer (http://en.wikipedia.org/wiki/Monopsony), team owners capture the majority of the rents on their services.
My recommendation to Lebron would be to enter the NBA as a pseudo entrepreneur, to reclaim his true value as profit -- for himself. Buy a team, sign, play and use whatever influence you have with other players as negotiation leverage. Perhaps give D Wade a minority interest if he signs. A team with these two players shouldn't have much trouble attracting free agents willing to sign at or possibly below their market value as we see often with the best teams.
This argument is in its infancy, as I discovered the details of the Bobcats purchase less than an hour ago, but I think over the coming weeks I will investigate further into the arena of player ownership. I look forward to hearing responses and supporting or counter arguments regarding the discussion.
Until next time.
Orr
