A is for Average Player Salary

Welcome to the first in a series of posts designed to continue to provide information on the Collective Bargaining Agreement between the Player’s Association and the NBA.  There will be 26 of these posts, as I work my way through the alphabet.

A is the first letter in the phrase “Average Player Salary”, which is a very important number in the current CBA.  Not only does it provide financial insight into how much money the average NBA player is making, but the figure is used in setting several financial limits.  But before I get to all of the applications, let’s review how the figure is determined each year.

During the first 7-10 days of July, the league has implemented a moratorium on most player transactions each year so that the bean counters can crunch the financial numbers.  One of the calculations that they make during this time is the creation of a figure known as the “Average Player Salary”.  What the auditors do is take the total amount of salary paid to players in the previous season, divide that number by 13.2 and then further divide by the number of teams in the league.  Finally, they take that number and multiply it by 108% (the assumption apparently being that salaries will increase by an average of 8% from one season to another).  This final figure is declared to be the “Average Player Salary”.

So, for example, in 2009-10, the total amount of salary paid to players was about $2,113,833,000.  If you take that number and divide it by 13.2, then divide it by 30 and then multiply it by 1.08, you come up with the 2010-11 “Average Player Salary” figure of $5.765 million.

The importance of the “Average Player Salary” comes, though, in how it is used to set some limits as to player signings for teams that are over the salary cap.  For example, many teams use the Mid-Level Exception to sign one or more free agents each year.  Did you ever wonder how the amount of that exception is determined each year?  It’s the amount of the “Average Player Salary”, calculated using the formula listed above.  Or what if a team wants to use Early Bird Rights to sign a player?  They are limited to signing that player to 175% of their previous salary or the “Average Player Salary”, whichever number is larger.  And what if a team applies for a Disabled Player Exception?  If they are granted an exception, it’s amount is half of the disabled player’s salary or the “Average Player Salary”, whichever is less.

For example, back in 2009-10, Trevor Ariza was signed by Houston using a Disabled Player Exception, Ron Artest was signed by the Lakers using their Mid-Level Exception and Marcin Gortat was signed by Orlando using Early Bird Rights.  Each one of them made $5.854 million in 2009-10.  Why?  Because that was the amount of the “Average Player Salary” last season.

In short, the “Average Player Salary” is one of the most important figures that the league calculates every summer because of how it impacts how much teams can offer to various free agents.

About these ads

Leave a comment

Filed under contracts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s