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Sports Business

Two major factors drove Stephenson to Charlotte

July 16, 2014

Lance Stephenson’s agent said today the NBA player’s signing with the Charlotte Hornets instead of the Indiana Pacers was not all about the money.

“Reports throughout the negotiation process with Indiana have often strayed from the truth but suffice it to say that it was less about the money,” Alberto Ebanks said in a statement.

Well, if it’s not all about the money, then what is it about? Ebanks isn’t saying.

But it sure looks like it’s about the money.

Here’s what we know:

Everyone agreed that with a salary last season of just over $1 million, Stephenson—antics and all—was due a big raise. Heck, the Pacers paid Andrew Bynum about as much, and he barely played.

The Pacers on July 1 offered Stephenson a five-year, $44 million contract—roughly $8.8 million per year. Remember that figure—five years.

Stephenson thinks he’s worth more than that and sought a two- or three-year deal. The Pacers agreed to discuss it but sources familiar with those negotiations said the Pacers weren’t willing to pay him as much per year for a shorter deal.

So, after meeting with Charlotte owner Michael Jordan Tuesday night, Stephenson agreed to a three-year, $27 million deal—$9 million per year.

A lot of folks this morning were asking why Stephenson would spurn the Pacers’ offer when the Hornets offer paid about the same amount per year.

Two factors drove Stephenson to Charlotte.

First, Stephenson isn’t short on confidence. He thinks he’ll be an all-star next year. So he’s seeking all-star money. But what exactly is an all-star paid?

Let’s forget the five Eastern Conference all-star starters last season and look at the seven reserves.

The salaries of the seven bench players ranged from $7.5 million to $21.5 million. The average was $13.2 million. Paul Milsap and DeMar DeRozan each made $9.5 million. Roy Hibbert knocked down $14.3 million and Joakim Noah, $11.1 million.

It’s easy to see that if Stephenson can keep his nose clean and continue to improve, he’d be a bargain at $9 million. So he isn’t apt to accept less.

There’s another factor why Stephenson and his agent didn’t want him playing four and five years out for a little less than $9 million a year. That same reason is why the Pacers wanted to pay him less per year for a shorter deal.

Both sides are acutely aware that the NBA’s national television deal with ESPN/ABC and Turner Sports’ TNT—which pays the league a combined $930 million annually—expires after the 2015-16 season. Talks with various networks for a new agreement have already begun, and multiple sources in advertising and broadcasting believe the NBA will score a deal of $1.5 billion to $1.8 billion per year.

Does that sound optimistic for the NBA? Perhaps. But consider the NBA is the only big-time sports entity with a TV contract coming up for renewal in the next couple of years.

And with new national sports cable networks such as Fox Sports 1 and NBC Sports Network hungry for live game programming, the NBA should find itself in a very nice negotiating position.

So what does this mean for the Pacers and Stephenson?

NBA team salary caps are based on league-wide basketball-related income. The NBA and players nearly split basketball-related income, and TV revenue is included in the income. The higher the income, the more players can be paid.

The upshot is that the Pacers were looking to tie Stephenson down to a cheap, long-term deal, and Charlotte offered him more cash earlier and allows Stephenson to negotiate an even better deal later.

In a couple of years, Stephenson—especially if he makes good on his promise to become an all-star—could easily be looking at a contract paying $18 million annually, and possibly a lot more.

So while the nearly $9 million a year the Pacers were willing to pay him for the next five years looks like a solid raise, it could actually hamstring him in the long-run. Remember, Stephenson is only 23, and in four or five years, he should be in his prime.

If all goes Stephenson’s way, he could end up making $18 million to $20 million more over the next five years than the Pacers were willing to pay him.

It’s not clear what Pacers fans are thinking, though I’ve heard more than a handful say the loss of Stephenson—and the baggage he sometimes carries—is not a huge loss.

As the Eastern Conference stiffens up, those attitudes might change. And a contract that paid Stephenson $50 million to $55 million over five years might not seem like such a bad deal to Pacers basketball operations boss Larry Bird.

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