The Los Angeles Lakers’ decision to give LeBron James a two-year, $97.1 million contract extension is as much about the player’s brand as his ability, says sports finance expert Dan Plumley.
James was entering the final year of a contract worth $44.5 million. His new contract includes a player option for the 2024-25 season.
The extension takes the 37-year-old to $532 million in guaranteed career earnings, which would mean he’s the highest-paid player in league history.
Despite his growing years, James is still one of the best players in the NBA, averaging 30.3 points per game in the 2021-22 season.
Speaking to Stats Perform, Plumley admitted he was surprised by the short-term nature of the deal not typically seen in American sports, but understands the athlete brand is often as important than capacity.
“I think that’s now more the case than ever in all of professional sport,” said Plumley, lecturer in sports finance at Sheffield Hallam University. “Each team seeks to use its superstars in the respective sports.
“Of course it’s all about what they can do on the pitch, on the pitch it’s always about that.
“But the other side of it is what do they bring from a business side of things and what is the brand association, and what does the fit look like, and how does the club or the team can leverage it against the superstars they have?
“That’s absolutely the case with LeBron James. Of course it is. But I think that’s the case in all areas now for a lot of professional teams.”
With James approaching 40 at the end of the two-year contract and with a history of injuries, there appears to be significant risk in the investment for the Lakers, but Plumley thinks it will be worth it if he produces a championship or two.
“I think there’s a risk…but there was also the risk of losing it and losing the asset and losing the brand association and the value that someone like LeBron James brings with the Lakers. and all the personal life too,” he said.
“We know he’s linked with Liverpool. [Football Club, minority ownership] and the wider network in which it operates. So there’s that at play where you balance the risk.
“On the game side, yes, the risk of injury is there but I think the Lakers felt that was enough to get the next two years where they could potentially win something with LeBron again, and that risk was fine. less than losing it. I think that’s where they ended up.
“With the NBA, we know that careers can go a little later than other sports. I think when you balance that out, the Lakers obviously came to the decision that it’s better to keep him now for a few years than potentially losing him.”
As for the broader future of the NBA, Plumley understands there is a danger in seeing deals increase, but thinks basketball and other American sports will be safe from significant damage in because of their closed nature and draw system.
“I think there’s always the danger that you’ll see numbers like this, and we know the salary cap is there, and there will always be a limit to that,” Plumley added.
“But we’ve seen salary cap increases over time, which isn’t unusual when you think about the amount of money coming in. So if there’s more money coming in, then there’s has an argument for raising the salary cap.
“I think what teams will always suggest and the way that aspect has played out is that there’s an expectation that they’ll keep raising the salary cap. And it’s always good if you have the money to support it, so I think that will be the compromise.
“That’s always a risk in any professional team sport. They depend on broadcasters and commercial partners to generate that revenue at the league level. And while that’s okay and growing, those small increases in salary caps were acceptable.
“The question is always” where is the reference? And if the benchmark has gone up, because it’s the biggest contract we’ve ever seen, then others will start looking at that as the new benchmark And I think that’s just the risk in the background that you run.
“American sports are a bit more protected in that sense, due to the nature of their league systems.”