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Lintroduction To MSG Economics: Why Jeremy Lin Isn't A Big Deal For The Dolans
By
Jen Chung
Published Jul 16, 2012
Modified Jul 16, 2012
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Nick Bisceglia/Gothamist
By
Jen Chung
Published Jul 16, 2012
Modified Jul 16, 2012
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The Knicks have until tomorrow night, at 11:59 p.m., to decide whether to match the Houston Rockets' $25 million-over-three-years offer to breakout star Jeremy Lin. The Rockets' offer includes $15 million for the third year, and if the Knicks match it, they'll be hit with a big luxury tax, tens and tens of millions. Houston Chronicle estimates it would be "between $40 million and $50 million of salary and luxury tax in the third season of Lin’s contract." So the big question is whether Lin is worth it.
While Carmelo Anthony called Houston's offer "ridiculous", ESPN.com's writers think that Houston was smart to make that backloaded offer, because it helps them land Lin: Israel Gutierrez points out, "The Rockets need players, obviously, and overpaying is usually the only way to land restricted free agents. Again, this all goes back to whether or not Lin can play. If he develops into a top-15 point guard by the end of the third year, the contract won't look nearly as "ridiculous," to quote Carmelo Anthony," while Marc Stein says, ""They structured the deal in a way that has given the Knicks real pause after months of assurances from inside and outside the organization that matching Lin's offer sheet was an automatic at any price. The Rockets did that because they really want Lin, no matter what the paranoid Knicks think. And structuring the deal this way gave them the best chance."
CNBC's Darren Rovell was on ESPN Radio that, basically, if Lin were re-signed by the Knicks, the Lin-related merchandising wouldn't offset his huge salary for the Knicks (one reason: the NBA shares merchandising revenue across the league). He also Tweeted, "Many wondering why Knicks owner Jim Dolan wants to stop his free-spending ways. Possibility? Cablevision stock down 50% over the last year," adding, "For those pointing out MSG’s share rise since Linsanity, Jim Dolan has much more $ invested in Cablevision. Cancels out what MSG has done."
The other thing: That luxury tax. Here's how the NY Times explains it:
The well-intentioned rule is having unexpected consequences. The Rockets cannot outbid the Knicks, but because they are under the cap, they are permitted to give Lin a balloon payment — a so-called poison pill — in the third year of his deal. Houston originally set that figure at $9.3 million and then increased it to $14.98 million, close to the maximum allowed.
For cap purposes, Lin’s three-year salary would count as an average for Houston, or $8.4 million a year. But the Knicks would be charged the full amount in 2014-15, costing them $50 million to $60 million in a combination of salary and luxury taxes, rival executives said.
That said, Lin would arguably be undervalued in the first two years — at $5 million and $5.4 million — and the Knicks would have time to either rework their payroll or, as a last resort, to trade Lin by the third year, when his expiring contract would become a commodity. Those are considerations the Knicks are still weighing.
that the Knicks could be hit with a huge bill in three years, as high as $73 million (or "low" as $43 million).
A petition to keep Lin on the Knicks is at Change.org. One person wrote, "DON'T TELL ME HE PRICED HIMSELF OUT OF NEW YORK. I had coworkers who had never been into basketball working fast and leaving early to make it home in time for the game. I saw bars filling up with people during the Cablevision outage just to get a glimpse of this phenomenon. Every time my NY cynicism crept through the cracks, he surprised me by doing something amazing the next night."
Tagged
basketball
carmelo anthony
houston rockets
james dolan
jeremy lin
knicks
salary cap
Jen Chung
Jen Chung is a former WNYC and Gothamist editor.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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