NBA Competitive Balance: Numbers Prove Spending Matters

By Seth Pollack - Emeritus Regional Editor

Detailed analysis of NBA salaries over the last five years as compared to team wins and playoff appearances. Not surprisingly, the more teams spend the more they win. The NBA wants to level that gap while the players are willing to blow up the season to avoid it.

Nov 14, 2011 - The NBA lockout has reached a critical juncture. The owners revised their proposal and issued another ultimatum and the players meet to discuss their options and in the end decided to fight it out in court. You probably know all that already and if you need to get caught up on the details and latest on the labor situation, go here.

Prior to the blow up, the players had already agreed to a 50/50 split of revenue with the NBA and claim that their objection to the latest proposal was over freedom of movement issues. They new deal would have made it (slightly) more difficult for some free agents to choose their teams.

The league claims the proposed rule changes -- a combination of increased luxury tax and reduced availability of salary cap exceptions -- were needed to address competitive balance issues.

This fundamental disagreement about which players get paid and by which teams is why the league is facing a lost season. It's completely ridiculous but that's where it is.

So while the league and players will now be spending some quality time in courts of law, we still wanted to explore the key issue that is fundamentally separating the two sides.

The owners insist that they need to level the playing field between all 30 teams so the big markets teams (or those with deep pockets) can't continually outspend the rest of the league. They believe that more equal spending will give more teams the chance to be competitive.

The history is clearly on the owners side.

We looked at salary data (via Shamsports.com) for the entire league for the last five years and found a clear correlation between spending and winning. The numbers also show a large gap between a few wealthy teams and the rest of the league.

Here's what the numbers show.

1) Top heavy spending

Over the last five years combined, eleven teams had an average payroll over the luxury tax. Several teams bounced over and under the tax line like the Phoenix Suns who paid the tax two out of the last five years. Here's some key points about spending.

Over the five year period, the luxury tax was exceeded 44 times out of a possible 150. 13 teams never exceeded the tax in that time, 18 teams did.
There were two teams, the Lakers and Mavericks who were tax payers all five years and another two teams, the Knicks and Celtics that paid the tax four out of five years.
As the chart below shows, the league's biggest spenders were the Mavericks and Knicks who averaged payrolls more than $22m over the tax. The Lakers were next at $13m over and then a group of nine teams who ranged from $6m to $160k over.
The five teams with the smallest payrolls were the Nets, Sonics/Thunder, Grizzliers, Clippers and Bobcats

2) Payrolls and regular season wins

We tallied the total wins for each team over the last fives years and ranked them. We then compared this to teams based on payroll. The chart below shows the correlation between the two.

The upper right quadrant are teams with both above average spending and wins. The lower left is below average spending and wins.
The was a fairly tight grouping between wins and spending with an obviously trend showing a correlation between spending and winning.
The Mavericks logged both the highest total payroll and the most wins. The Lakers were third in payroll and third in wins. The Raptors were 18th in payroll and 18th in wins.
Four of the five teams with the smallest payrolls also had the fewest wins. The exception was the Thunder who had 50+ wins seasons in the last two years but still have their best players on rookie deals.
The Knicks who ranked second in spending and 25th in wins and were the biggest outlying team.
The Bulls and Hawks ranked 24th and 25th in spending but 12th and 14th in wins which was the "best" performance relative to spending versus results.

Here's another chart looking at spending and winning. This chart simply plots the ranked order of teams for both total wins and total spending over a five year period. The linear trend line for wins closely matches the spending line and certainly shows the relationship between spending and winning for the NBA over the last five years.

3) Payrolls and playoff appearances

In this analysis we looked at team payroll over the five year period as compared to the number of playoff appearances a team made. We assigned one point for each round of the playoffs a team reach, so a first round appearance earned one point while a finals appearance earned four points.

We totaled these playoff appearance "points" and compared them to spending rank in the chart below.

The mid-point of the graph is the intersection between the halfway point in team spending and the average number of playoff appearances for all teams over the five years.
Teams to the right and above the mid-point spent more and had more playoff appearances while teams to the lower left spent less and had fewer appearances. 22 of 30 teams fell into these quadrants showing a correlation between spending and playoff success.
Three teams (Bulls,Hawks, and Pistons) had above average playoff success while maintaining below average spending.
Five teams (Bucks, Rockets, 76ers, Trail Blazers, and Knicks) had below average playoff appearances and above average spending.
The team with the smallest correlation between spending and playoff appearances was the Knicks (of course). They were were 24th in playoffs appearance "points" and second in spending.
On the other side of the ledger, the Hawks were 24th in spending but sixth in playoff "points".

Does all this mean anything? Probably not.

The players rejected the owners' proposal and threw the lockout to the courts where we will likely see months of battles leading, hopefully, to an eventual resolution.

The point for fans is this: The players are opposed to limits on team spending even though the players as a group are guaranteed to always get their share of total revenue. If the top end of the spending comes down and the bottom end of spending goes up (as was part of the previous offer) the salaries should be compressed towards the middle.

Individual players might be losers in that scenario but other players would also benefit. Once the BRI agreement was reached, it stopped being about player vs. owner and become player vs. player.

For fans of teams outside the biggest spending markets, the higher luxury tax and limits on tax paying teams acquiring more and more talent (as the Mavs did when they spent their way to a title) would be a good thing.

The talent level would be more evenly distributed which would make the league more competitive. More, better teams means a strong league which leads to more revenue for the NBA to split with the players.

David Stern is a lot of things (condescending tyrant comes to mind), but under his watch the league has dramatically expanded it's popularity which earned the players a lot of money over the past decade. There's no reason to think that his plan for spreading the talent across the league is anything more than a good idea for everyone outside the biggest three or four markets.

For the players to destroy the season and risk permanent damage to the league so a very small number of players can pick to live in Miami instead of Milwaukee is an entirely different lunacy.

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Seth Pollack

Emeritus Regional Editor

Not quite born in Phoenix but moved here in 1972, I consider myself a nearly-native Arizonian. That, plus a passion for sports and a modicum of other assorted talents started me writing about sports... Read full bio

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