The Cleveland Cavaliers are the NBA’s defending world champions and on top of the Eastern Conference this season, but LeBron James is frustrated with his bosses, according to ESPN’s Brian Windhorst. The reason: spending on the team's payroll.
(Photo by Ezra Shaw/Getty Images)
"I just hope that we're not satisfied as an organization," said James Monday night after the team lost its fifth out of seven games. The Cavs continued their slide two nights later with a home loss to a below-.500 Sacramento Kings team.
The reality is that owner Dan Gilbert has spent money at almost an unprecedented level. Last season’s $115 million payroll triggered a $54 million luxury tax bill. Add in benefits, cash involved in trades and the team’s share for total NBA player costs to reach the mandated 51% of leaguewide revenue and Gilbert spent roughly $185 million last season on his roster.
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It was the second biggest outlay in the history of the sport behind only the Brooklyn Nets' ill-fated $205 million 2013-14 season, which included a $90.6 million luxury tax. The Nets reached the second round of the playoffs that year before their recent plummet to the bottom of the league.
Gilbert’s massive commitment to spend whatever’s necessary to win a title led to a loss of $40 million last season by Forbes’ count in the sense of earnings before interest, taxes, depreciation and amortization. Forbes is wrapping up its annual look at the business of the NBA scheduled to be released Feb. 14, and the Cavs are one of only a handful of teams to lose money last season. Their loss was nearly four times greater than any other franchise, despite the windfall from hosting 10 playoff games.
Even with the massive influx of new national TV money this season, the Cavs are likely headed for another huge operating loss. Gilbert has raised the stakes this year with a cash payroll of nearly $130 million, including James’ $31 million salary. James is the NBA’s highest-paid player by more than $4 million this season after signing a two-year, $64 million deal this summer with a third-year player option for $36 million for the 2018-19 season.
Design: Nick DeSantis, Forbes Staff
It is not just players where the Cavs and Gilbert are breaking the bank. Tyronn Lue was rewarded with a five-year, $35 million contract this summer. It makes him one of the highest-paid coaches in the NBA despite only a half season under his belt as a head coach. Lue, of course, led the Cavs to the title in June over the Golden State Warriors, ending 52 championship-free years for the city of Cleveland. Gilbert still owes former Cavs head coaches Mike Brown and David Blatt roughly $8 million to not coach this season.
Gilbert has spent aggressively since James returned to the Cavs in 2014 and has been rewarded with a soaring franchise value. All NBA team values are up dramatically thanks to the league's $24 billion TV deal signed in 2014, but the Cavaliers' jump has outpaced the league by 18%. Forbes valued the team No. 19 in the NBA at $515 million before the return of King James and $1.1 billion last year, 12th highest in the league. The value of the team is up again this year after the 2016 title.
The operating loss by the Cavaliers last season is the fifth biggest since Forbes began tracking NBA team finances with the 1997-98 season (almost certainly no team lost $40 million before the 97-98 season as team payrolls didn’t top $25 million until the 1994-95 season).
Paul Allen lost an estimated $85 million during the 2002-03 season in his chase of an NBA title for the Portland Trail Blazers. Portland was a small market team, but Allen blew out his payroll, triggering a $52 million tax payment for the notorious Jail Blazers. The team lost $47 million the following year. The New York Knicks lost $42 million for the 2006-07 season. Blame a $45 million luxury tax and a $18.5 million settlement for former coach Larry Brown, who was fired after one season and signing a $50 million contract. Mikhail Prokhorov had the mother of all losses three years ago at $99 million with the Nets as the Russian oligarch attempted to make good on his promise of an NBA title within five years of buying the team in 2010.
Gilbert, who founded Quicken Loans, is worth $5.1 billion and can absorb the financial losses, similar to his fellow billionaires Allen, Prokhorov and the Dolan family that controls the Knicks. One big difference between Gilbert and the NBA owners above: he's the only one with a championship ring.