How the NBA salary cap jump made D-League investment a no-brainer
By Jared Wade
Just a few years ago, having a D-League team of their own didn’t make philosophical or financial sense to the Indiana Pacers.
Long-time lead executive Larry Bird didn’t see the value in sending down professional-caliber players to “develop” in a basketball system with no ties to the style or play that his head coach was implementing at the top level. And owner Herb Simon reportedly spent the better part of a decade operating the franchise as at a fiscal loss, so the benefits of purchasing even a cheap feeder team outright and running it as something closer to a minor-league mirror of the NBA squad wasn’t on the table.
Since the owners won a landslide labor victory over the players union during the 2011 lockout, however, that second part of the equation has apparently changed. The Pacers have not only bought the D-League’s Ft. Wayne Mad Ants this summer, but they also built a $50 million training facility. This will move them out of the small side court in their massive home arena and into a state-of-the-art building that includes advanced medical amenities for players and office space for team staff.
Bird credited Simon for pulling the trigger on the Mad Ants deal, per the Ft. Wayne News Sentinel. “Our owners stepped in and said ‘Let’s get this done.’ Knowing salaries are increasing and you have a player for four or five years, you have time to develop them,” Bird said. “I think we did a pretty good job the last few years of developing players. Now that we have the Mad Ants, that will make us much better and we’ll be able to do it quicker.”
This won’t revolutionize the franchise. There have certainly been plenty of D-League success stories, from Jeremy Lin to Troy Daniels, but most of the players in the minor league are there because they aren’t quite good enough for the big show. Getting some extra game reps at the lower level won’t turn Toney Douglas into Tony Parker or Shayne Whittington into Shane Battier
But this move by the Pacers shows that the financial math has changed in the NBA.
Payrolls are set to skyrocket once the new television broadcast deal kicks in next summer. The salary cap is projected to jump more than $30 million over a two-year period, from the current $68 million to more than $100 million for the 2017-18 season.
This summer’s free agent spending bonanza — Enes Kanter and Wes Matthews got $18 million per year and Reggie Jackson now makes $20 million a season — was the biggest evidence that teams are already preparing for this new reality.
The Pacers investment in development, however, shows that teams now need to also spend as much as they can outside of payroll to get an edge.
Adam Johnson of D-League Digest expressed this sentiment well. “Having a D-League team requires a cultural shift in the way an organization thinks about basketball and developing players,” he wrote. “It is the foundation for success that shows how much a team is willing to invest in its players and develop those role players at what some consider a more than worthwhile cost.
Teams with bigger pockets adapted this mentality a long time ago.
Mark Cuban dumps vast sums into cutting-edge medical knowledge, hoping that it will keep his players healthy. He also hopes this allows his executives to make better decisions about which players will bounce back and who isn’t worth the cost. On a recent podcast with Zach Lowe of Grantland, he said that this was a key reason he was willing to pay Wes Matthews $70 million in guaranteed salary despite him suffering an Achille’s tear just months earlier. Such an injury has been looked upon as a career ender — or at least a huge career setback-er — but Cuban was willing to roll the dice.
The Houston Rockets spent a ton to build an analytics wing of the front office — but the money is only a lot in relative terms of paying nerds to add and subtract. When you compare that investment to what teams now have to gamble in salary on the uncertainly of a player’s future, the costs of things like analytics are hardly a drop in the bucket.
Those Texas teams have always been ahead of the curve, however. Now, laggards like the formerly penny-pinching Pacers are getting on board. In a world where even an average starter may soon be making $15 million per year, it only makes sense to drop $50 million on a training facility. If the slight edge of a better environment to practice helps your players improve even by 1 percent, the cost/benefit math works.
And so it is with the D-League. Salaries are so large now that its worth it even for small-market teams with prior reservations about the entire endeavor to buy a minor league team.