Rising Salaries for Professional Athletes: It's Economics

Here is a quote I read that I found interesting:

“In college, they play for the name on the front but at the pro-level, they play for the name on the back.” This means that the athlete has lost the true love of the game.-- True or False????

I live in a household where sports have been a major factor for over 25 years. We talk all the time about the rising salaries. People complain all the time about how much a top notch professional athlete gets paid. I want to use this article to share my two cents on the subject, and possibly shed some light on those naysayers out there.

First of all, understand that in the marketplace the consumer is the ultimate boss. For example Stub Hub listed the average price of a Game 4 World Series ticket was $2800.00 (yes, I said average only) and with Wrigley Field holding 41,268 fans, you do the math. In one three game stretch (only three games) out of 162 in the season, the ticket sales alone exceeded $300 million dollars. In 2007 Alex Rodriguez of the Yankees signed a deal for $25 Million. Those people who complained the loudest about it were probably some who watched him play, bought Yankees garb, and even attended games at the stadium.

It boils down to economics. Did you know that professional athletes pay a tax called a "jock tax"? They are taxed not only by the state they live in, but let me tell you this: They pay taxes in every state they play. All states have tax laws regarding the jock tax. The professional athlete not only loses taxes from the state they live in, but states everywhere they play, then they pay city taxes, not to mention large union dues. All states have taxes for non-residents who earn income in their state. IT appears that athletes and entertainers get chased down for the taxes too. I know, they can't pay the tax if they don't make the money, but what is their worth? When an athlete turns pro, the best friend they need is a CPA. Just ask them, taxes are daunting.

Let's look at this contract:

Why does this seem like a crazy contract? Because a lot of people can't get over the idea of Mike Conley, a zero-time All-Star, getting the richest contract in NBA history. In the final three years of the contract, he'll be making over $30 million per season and will top out at $34 million in the fifth season. He's made one All-NBA Defensive Team (Second) in 2013. The most Michael Jordan made in one season is $33 million back in 1998 when the salary cap was $26.9 million. So how does Conley, who averages 13.6 points over his nine-year career, end up with the biggest salary in NBA history? How will he make 2.5 times what unanimous MVP Stephen Curry will make next season?

How is this actually a sane deal?

This is how the market works in a world with a salary cap and max contracts. Conley's max is a percentage of the cap based on his experience in the NBA and includes certain raises negotiated into the Collective Bargaining Agreement. Conley is a top 8-10 point guard in the NBA, an important position in today's league. Put any of these top point guards on the free agent market this summer and they'd get the five-year max offer from their incumbent teams. Conley is one of the best defensive point guards around. He put up 15 points and six assists, despite battling injuries this season, to go along with that defense. If you don't offer up the five-year max to these players, you risk losing them.

Memphis didn't want to lose Conley. That's how he got paid. It's not crazy. It just sounds funny because of the timing. You'll notice almost all of the biggest contracts in NBA history have happened this year.

The NBA players defend their earnings. They say it is supply and demand. Did you know that $720 million dollars will filter into NBA in additional monies to be split over 30 teams? The players get 51% of that while the owners get the additional 49%. Is it fair? Someone is paying to have the stadiums built, and the places to be sold out...

Let's also not forget what an athlete faces as well, such as extensive practice, routine, travel, risk of injury, and being scrutinized by the media. The number one issue that I believe to be a minus for them is their loss of privacy. Their entire lives open up to everyone. Some say they ask for it. Do they really? They have a talent, that talent allows them to play a game for a living, but does this mean their entire lives should be relevant to every household in America, or any other Country for that matter? And let's not forget that most of them spend countless hours and dollars giving back to the communities they serve for example:

Suh has been named the dirtiest player in the NFL multiple times, but that hasn’t stopped him from being one of the most charitable players in league history. In 2011, he donated a whopping $2.6 million to his alma mater, the University of Nebraska, and followed that up with a $250,000 donation to his former high school in 2013. The Detroit Lions defensive tackle also started the Ndamukong Suh Family Foundation, and has continued to donate millions of dollars throughout his five-year NFL career. and how about:

Eli Manning and his wife, Abby, were instrumental in raising $2.5 million for the the Eli Manning Children’s Clinics at the Blair E. Batson Hospital for Children, and also donated an additional $1 million to their alma mater, Ole Miss. Manning has also been an avid supporter of the March of Dimes, Red Cross, St. Francis Food Pantries and Shelters, and the Phoenix House.

So to finalize this article, please understand that being a professional athlete has many sides to the story. Do they get PAID? Yes they do. Do the fans ultimately pay the price, yes they do. Realize it is about supply and demand, just like the price of gas and oil! Players do good works most of the time and large portions of that money come back into the communities they serve.

So the question becomes, whose side are you on, and who are you rooting for today?


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What Guys Said 16

  • 1mo

    One thing to add, specifically about Suh and other athletes doing charitable things, setting up foundations, helping out their old schools, etc:

    95% of the time, this has nothing whatsoever to do with the athlete, and everything to do with their handlers. It's the agent or the manager who makes these things happen. I can almost guarantee NONE of that was Suh's idea; it's just good PR because he has a poor reputation. The man-baby throws tantrums on the field by stepping on people's heads, so the obvious damage control is to give him a Mother Theresa image on the outside. And as the money involved isn't much of anything. In his world, $2.6 million isn't "whopping."

    Now, obviously, the athlete has to go along with the agent and manager recommendations, so Suh gets credit for doing that. And he could've donated less, certainly. But the whispering in his ear was to do more, guaranteed because of his reputation.

    Manning is a little different, however, as some athletes are personally invested in charitable activities for a variety of reasons. I think Drew Brees does a lot with autism charities because his son has autism, for example (was it Brees?). So you'll see lots of this, too. But in general, agents and manager exist for a reason and it's to essentially run the off-the-field lives of these people. And by the way, those statements issued to the press about any controversial activity? ... does anyone believe they were actually written by the athlete in question? This is PR, people. ;)

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    • 1mo

      I do think PR is probably 75%, however like you stated, there are very genuine guys out there too! My biggest support goes to guys like Tebow!!! Public Relations aside, he is a stand up kind of guy! My son played baseball against him in the day, he is real!

  • 1mo

    I have always found it so interesting that in any other business... if the company does well profits-wise, and the company management and owners wants to raise the pay of its employees (in a "trickle-down economics" type of fashion), this is encouraged.

    But when pro sports leagues does well in raising profits, and wants to raise the pay of its main employees (the players), many are not as supportive.

    There is always a jealousy factor when it comes to pro athletes and their salaries.

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    • 1mo

      I do agree with this, as well as individuals in the movie and music industry too! Let's face it, there are a whole lot of people who get rich off of a Jennifer Lawrence, a Carrie Underwood, and a Lebron James, wouldn't we agree?

  • 1mo

    for anyone who gets upset about athlete contracts i think they should read this and of course consider the economics of the pro sports business

    players earn what they do because they drive the revenues in a multi billion dollar business. it only makes sense and the same can be seen in the movie/tv industry. we as consumers really drive what athletes, celebrities, actors/actresses, etc make

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  • 27d

    They make that kind of money because people are stupid enough to pay big bucks to watch an overgrown child play a child's game, wear a clone of that child's jersey, or a shirt with a 'team' of children, etc.

    This is the "circuses" part of "bread and circuses".

    If people stopped paying disgusting amounts for tickets and crap (apparel, posters, etc), you'd see so-called 'professional' athletes get paid a sum more in line with their actual skills and usefulness.

    The contracts are another big thing. They can do whatever they want, act in ways that embarrass the team, and they still get millions because contract. If there was a clause that if the player embarrasses the team, he forfeits his pay the rest of the season AND remains on the team but sits on the bench, you wouldn't see children like the cocksucker that started the whole kneeling during the anthem thing. Fuckstick is one of T. H. E. most privileged people in the entire world, and he wants to cry and whine and throw a tantrum? And the coach can't do shit. I'd definitely throw a clause in the contract that covers that kind of thing. You make my team look bad, you'll ride pine FOR FREE.

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  • 1mo

    Some of that money comes from their merchadise sells like jerseys, action figure sales, autograph sales, etc. You also have to blame the fans who support and buy their memorabilia stuff. But good take.

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    • 1mo

      I actually did say that about the fans however, three times through the article... that is the point... it is supply and demand... the prices are like they are, because we the fans pay the prices... supply and demand

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    • 1mo

      Thank you much @coolbreeze

    • 1mo

      Lol thank you. :)

  • 1mo

    I heard people that saying teachers and cops should make money than athletes. I always laugh at them a little.

    It's easier to become a teacher or a cop than become an professional athlete. Sports brings in billions of years each year. Also, no one want to watch teachers or cops. They bring zero dollars in terms of TV revenue. On the other hand, athletes bring in $$$$$ in TV revenue. People should take a basic Econ class.

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  • 1mo

    I think the biggest issue is that people see that many athletes want unrealistic things in their contracts.
    They want the job security of being locked in at a salary if they perform poorly, but they also want to increase their wages if they perform well.
    This is prettymuch what I'm talking about:

    https://www.youtube.com/watch?v=ihpe07LoOx0

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    • 1mo

      They want the security mainly in case an injury ends their career, dude. Not as a bulwark against "poor performance".

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    • 1mo

      @redeyemindtricks
      Not sure why you brought up Senior Executive buyout contracts that's basically the epitome of my counterargument... Not gonna get anyone to chime in in support of athletes by comparing their contracts to those of CEO's. I'm pretty sure most rational people would agree that they're out of hand as well...

      If a player performs poorly should they be able to have their pay reduced. Let's assume injury is not the cause, as while most professional athletes will experience a few injuries over the course of their careers, it's not an issue likely to come up every season.

    • 1mo

      I brought up the executives because THEY are the people that average Joes rail against, **in terms of unreasonable contract line-items**.

      Athletes take flak from people in general because they make a shit-ton of money, but, tbh, I don't think most people have clue #1 -- or even really care -- about the safety valves in their contracts.
      Even if they DID care... dude... professional athletes' pay is a pittance, compared to what Forbes 400 executives make. It's not even *close*. The only athletes who are even on the same order of magnitude -- like, the only ones whose net worth is even the same power of 10 in scientific notation -- are the ones whose endorsement contracts are so lucrative that their sports contracts are almost irrelevant.

  • 1mo

    Your analysis is totally correct just to flip it, the US womens soccer team got a lot of grief for asking for more money than their male counterparts yet they are more successful and economically viable. Yes the figures all had up but it just comes across as slightly immoral that someone earns that much in any function.
    You are receiving telephone numbers of dollars every week, you pay for your house, look after your family, lead a comfortable life more than likely you are left with 100k/200k a week what do you do with it.
    I remember reading a biography about an Irish soccer player, he was the main player at the club and if anybody joined club on higher wages, he had a clause in his contract that he could renegotiate his contract back to highest wage and he said in the biography that he didn't need the money, it was just about respect.

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    • 1mo

      See the points in my opinion.

      You may still think of the salaries as excessive, but, hopefully the stuff I pointed out will add some perspective.

  • 1mo

    Im from the UK but my American cousin was ranked in the top 10 college women's tennis players in America once she does have a full scholarship but can't make any money of it it costs money to go to matches buy expensive rackets etc
    Knowing that winning a match gets you more money motivates you. People shouldn't pay what they do to watch sports in my opinion it's just not worth it but if they do it's only fair for the athletes to see that money!

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  • 1mo

    One thing I know for sure is that this is only at the highest professional level. Minor league (still professional) baseball players don't make jack.

    Now, keep in mind, these salaries are only for the months that they play. which short season is only 3-4 months, and 5-6 months for the rest.

    Until a minor league player is placed on a 40-man roster (40 man roster are players that are eligible to be added to mlb active 25 player roster), monthly salaries are $1150 for the short season teams, $1300 for low A and $1500 for high A. For players repeating a year at the same level, the salary goes up $50 each year. For AA, the monthly salary is $1700 and it goes up $100 per month for subsequent years. For AAA, the monthly salary is $2150 per month and it goes up to $2400 the second year and $2700 the third year

    Salary for first year on 40-man roster:
    2013: $39,900
    2014: $40,750
    2015: $41,400

    Salary for second year on 40-man roster or if one or more days of Major League service time:
    2013: $79,900
    2014: $81,750
    2015: $82,700

    So, until they make it to the bigs, professional baseball players have to find a job in their offseason.

    So, I disagree that players no longer play for the love of the game. Even the ones that are making bank, they still play for the love of the game, but they are also business men. They love what they do and are willing to negotiate their worth to profit from what they love doing.

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    • 1mo

      Spot on! And you know they say if you Love What You Do, You Never Truly Work a Day in Your Life. But if you have the talent, I say go forth and do Good, make the bank while you can!!!

  • 1mo

    Yup, disgusting how much their paid for doing nothing other then running around a field or court, actors and celebs too

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  • 1mo

    A very important point that you didn't mention is that a professional athlete (most) has about 10-15 years to earn as much as possible. How many players had the careers ended before they made the big bucks by injury or spent years watching their career slide down the toilet as they are plagued by injuries or never got to play in the big games and just sat on the bench like a horse rotting in the stable or never quite made it to the big timr or just never made enough money before they retired. More athletes fail to make it thsn actually make it.

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    • 1mo

      I did mention injury in their (or risk there of) however your points are spot on!!! Thanks for the mention. They do have shorter careers that is for sure, however some (not all) are at least fortunate to use their fame to go on to do other bigger and better careers such as broadcasting, coaching etc... and still make bigger bucks then me (LOL)

    • 1mo

      Very true. I just always think what would have happened if someone like Usain Bolt had have broken his leg at his first big race.

  • 1mo

    Pretty much Jocks get GOAT. Women want to smash them and fuck them all the way back in high school and unlike nerds they don't have to wait until they get a nice job for women to begin showing interest.

    Fun college life in high school, memories all the way out of college and then continue with good life until the grave. All in all it's good to be an athlete.

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  • 1mo

    There's a ton to get to and each league works differently. NFL contracts aren't garunteed. On top of that, while there are stupid big contracts, it's only negated by the fact that about 33% make base minimum. And they have way more players than the NBA so they can make more collectively, but distributed less. As for the NBA, they didn't do cap smoothing, so all the money being brought in isn't being distributed or adjusted proportionately. The crazy thing is it's going up next year. As for the tax thing, that's true. Also, there are way more external fees, like paying 3% to agents, financial planner fees, paying family, etc. they also make even more money through stupid lucrative shoe deals and advertising outside the sport than their actual contracts for sports. As for your question about money and not loving the sport in the beginning, you have to love the sport to be good at it. While money is a big plus, you can't be the best in the world at something and not love it... it just so happens that getting paid is a huge insentive

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    • 1mo

      @Other_Tommy_Wiseau- great opinion, thank you for sharing. So True too!

    • 1mo

      Yeah, people don't really understand contracts and the difference between garunteed and the amount with the signing bonus. Usually the total amount (with signing bonus) gets included. Like Anthony Davis last season lost out on 24 million because he got hurt and didn't make the all-NBA team or some shit. Or if you average a triple double, you get 5 mil. A 1000 yd season for an RB is 1.5 mil. A 4K yd season for a qb is 2 mil. Batting a.250 gets you 10 mil. Steph getting 5000x 3s/season is 5 mil. That shit adds up

  • 1mo

    I get the sales pitches but about on par with cable bills when free HDTV is out there for the cost of a $35 (one time pay) antenna.
    Employ this same pitch for our soldiers, how about it?
    Entertainment is just THAT over rated/priced compared to other essentials to life.

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  • 1mo

    Ridiculous

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    • 1mo

      Ridiculous what? The money they make, the article, what do you find ridiculous? Just curious?

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    • 1mo

      Not a problem. I should have said more earlier :-)

    • 1mo

      You wouldn't say that about anyone else who is good at their job and drives profits at a multi billion dollar business. You only have disdain because he/she is a pro athlete, instead of an engineer, financial adviser, salesperson, etc

What Girls Said 4

  • 3d

    good post

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  • 1mo

    It's demand and supply. Plus sports is a billion dollar industry and not everyone can be a top notch professional athlete.

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  • 1mo

    The state tax thing isn't the issue you're making it out to be.
    NO ONE is "double-taxed" by different US states on the SAME income. Income is taxable in the state where it's actually earned, at the marginal rate for THAT state... Only income actually earned in someone's home state is taxed in the home state.

    This can actually BENEFIT the players, if they live in higher-tax states!
    I'm in a similar situation -- I live in California, but I make about 10-20 percent of my income in Texas. California has a VERY high marginal state tax rate, while Texas has no state tax at all. So, I pay 0 state taxes on the income I earn in Texas -- which was enough of a difference to reduce my tax bill by almost $10,000 last year.

    __

    There are 3 other things to realize, here, on the other end of the equation.

    1)
    People focus on the EARNINGS of SUCCESSFUL pro athletes -- mostly because they're jelly af -- but they TOTALLY disregard the RISKS taken by those trying to GET INTO the big leagues.
    For those who DON'T make it -- and that's at least 95-99 percent of serious contenders, depending on the sport -- that usually means a life of relatively low-paying jobs, since they've sacrificed the chance to earn real work experience to chase the dream.
    For those who BEAT those odds... why shouldn't they reap the rewards?
    Most of the people bitching the loudest are people whose well-manicured path through life was paved by their parents' wealth, anyway. Fuck that.

    2)
    Athletes' careers are REALLY SHORT. They usually don't last beyond mid-30's, unless they have exceptional talent AND play relatively low-impact positions.
    After that... It's a matter of making that money last as long as FIFTY OR SIXTY YEARS.

    The superstars can leverage their name recognition in future business ventures (like Dan Marino's steak houses, or John Elway's car dealerships). Some players with leadership acumen can get into coaching. But most have to just live on their pro earnings FOR THE REST OF THEIR (and their families') LIVES.

    3)
    This is hard for some people to believe... but... Lots of players don't KEEP any of that money for a few YEARS.

    The league minimum salaries are well into the 6 figures, but, in California a $500k salary leaves less than $300k after taxes.

    Okay, you say... That's still 300k a year, liquid, for a guy who's probably single and unattached...

    ... Well yeah. I've been partying with NBA and NFL players, and, lemme tell ya. You know who pays for EVERYTHING? The rookies do.

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    • 1mo

      The new guys.

      You know how much it costs to shut down Encore on a Saturday night, especially if the big boys are ordering top-shelf champagne and cognac like it's diet coke? It can EASILY add up to seven figures IN ONE NIGHT.
      And the new guys -- and, often, the fresh trades -- are paying for ALL of it.

      Bankroll THAT shit enough, and these guys might not pocket any money for 2-3 years. If they get traded enough, could be 4-6 years till they have any positive dollars in the bank.

      I shit you not.
      And it's not like they have the option of snubbing their teammates and being "tightwads". Oh no. You think peer pressure is bad in YOUR social circle? Ahahahahahhahaaaaaa

      And remember, a lot of these guys are gna have to fund THE REST OF THEIR LIVES with what's LEFT.

      4)
      And that's not even getting into the fact that they date and marry women who love dat #FastLife and dat #Bling... and they have to fund THEM, too.

      Sure, this is kinda their fault... but how many modest, low-key

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    • 1mo

      You don't have to say names but have you ever slept with one?

  • 1mo

    Oh wow , this gave me a lot of insight. Good Take 💗

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