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Fran Blinebury

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The Lakers will have to deal with new luxury tax and revenue sharing rules.
Noah Graham/NBAE via Getty Images

New rules will shake up economic landscape in free agency


Posted Jun 22 2012 12:55PM - Updated Jun 27 2012 5:41PM

By the time the clock strikes midnight on July 1, all that's left of the lockout season will be the scraps of confetti left over from the victory parade in Miami. But it will ring in the start of free agency for the first time under the terms of the new collective bargaining agreement that the NBA hopes will change the landscape of the league.

There will be significantly greater revenue sharing and also raised penalties for exceeding the luxury tax threshold that kick in for the 2013-14 season. Contracts will be limited to four years for free agents changing teams and annual raises capped at 4.5 percent, no sign-and-trade arrangements that helped facilitate the moves of LeBron James and Chris Bosh to Miami.

What does it all mean? In short, that this year's plum, Deron Williams, still gets to hit the jackpot and it's going to cost a whole lot more to keep being the Lakers.

"I think the new CBA is going to change the market," said Larry Coon, ESPN contributor and salary cap expert. "When you look at the financial model that's been put together, things will clearly not be the same as under the old agreement.

"Under the old system, everybody was trying to get three stars. And since there are not 90 stars available for the 30 teams, maybe you could get two and then another one that was the next notch down, but was still paid that way.

"That will definitely happen less and less. The first big sign we could see of the change happening was Tyson Chandler not getting re-signed in Dallas. The Mavericks won the championship and under the old model might have been inclined to keep that team together. But there they were saying, 'We just can't afford to pay that money for Tyson Chandler.' So they took their step back for this year. I think the rest of the league will spend a lot less on those types of player, too."

When even the high-rolling, spare-no-expense Mark Cuban is taking a different approach, the times are changing. But nowhere is the change likely to be as dramatic as in Los Angeles, where the Lakers, after consecutive eliminations in the West semifinals, are hoping to squeeze another championship run or two from the twilight of Kobe Bryant's career at price that could be going through the roof of Staples Center.

Due to the new terms of revenue sharing and luxury tax payments, the cost of the Lakers putting the same team with a $90 million payroll on the court next season would be roughly $140 million. Even for the perennially-flush Lakers, that's a big hit.

"I'm not saying there's going to be a lot of folks around the league shedding a lot of tears, but they're the Peter that was robbed to pay Paul in this whole thing," said one NBA executive. "If they thought they had a 1-in-4 or 1-in-5 chance at winning a title with what they had last season, maybe it's worth the risk at $90 million, considering their history and the demands of their market. But can you really justify those same odds when the price goes up by $50 million?"

Moves the Lakers made this season were already in direction of trimming the payroll. They tried to send Lamar Odom to New Orleans. But when that deal was shot down by commissioner David Stern, they sent him to Dallas for a trade exception and a future first-round pick. They shipped Derek Fisher and the pick they got for Odom to Houston at the trade deadline in a salary dump.

"I'm interested to see Kobe and how he reacts to this new reality and new world," Coon said. "Every one of the trades the Lakers made was for one thing -- to save money. They got a trade exception and didn't use it."

How is Bryant going to react if the Lakers need to fill a hole in their lineup next season and don't simply patch it as they have in the past with a wad of cash?

"I think there's no question that the (luxury) tax is much more punitive," said agent Mark Bartelstein. "It will give much more pause on long term commitments, especially from the teams that were perennially big spenders."

What the NBA owners' side maintained in the labor negotiations was that the new rules -- including raising the floor on team payrolls from 75 percent of the salary cap to 85 percent the next two years and to 90 percent in year three -- combined with the bump in revenue sharing and luxury tax payments would get the smaller-market franchises at the lower end to jump into free agency as one way of competing for championships.

"At the end of the day, your revenue is tied into winning, so teams have to make the decison that they are willing to compete," Bartelstein said. "Competing and giving your fans hope comes from assembling better teams with better players."

"The new system is definitely going to cool things at the top end of the market," said an Eastern Conference team official. "But I think it will still be frothy overall because of the bottom end. There's still lots of ways for the league to spend money and one of them is for, say, a bottom-feeder like Sacramento to start getting revenue sharing checks for $10 million and $20 million and spending them on players.

"That's what they have to do, since Sacramento is never going to be a destination like an L.A, New York, Miami or Chicago. Of course, they could just stick that money into their pockets, but I'm betting they'll spend it."

Coon doesn't believe that will happen, since the added income is not significant in the grand scheme of things.

"I believe the greater effect is in eventually bringing higher spending teams back to earth," he said. "San Antonio has always proven that you don't have to throw the wild money around if you do things right. I think now it could help smaller teams like Memphis, Indiana and Sacramento get in and stay in the fight."

From the players' standpoint, the likes of restricted free agents Eric Gordon and Roy Hibbert will get their big paydays, either from their current teams or bold offer. There are always outliers willing to break the bank. But there will also likely be more veteran players facing the Shane Battier choice from last summer -- getting the bigger payday of maybe $18 million to $20 million with a non-contender or choosing to chase a ring for three years and $9 million in Miami.

"Fewer and fewer guys will get to have their cake and eat it too," said the NBA executive.

The biggest stars will always get paid. It's the not-quite-stars who'll take the biggest pay cuts.

"It's going to bring the two extremes closer," Coon said. "A lot of teams will be helped a little and a few big ones might get hurt a lot. The intent was not that all 30 teams could manage however they wanted and throw money at anybody. The goal was to have 30 teams that, if managed well, can compete."

So the answers will only start to be delivered on July 1 with the new era dawns.

"To me at the end of the day the greatest way to increase the value of your franchise is by winning, which increases revenue," Bartelstein said. "If you have more revenue, there's so much more that you can do. That said, I would be really disappointed if teams at the lower end didn't make a much stronger effort to go out into the marketplace and compete for players.

"The one thing I have always believed is there are a lot of really competitive people in this business. I guess now we'll find out."

Fran Blinebury has covered the NBA since 1977. You can e-mail him here and follow him on twitter.

The views on this page do not necessarily reflect the views of the NBA, its clubs or Turner Broadcasting.

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