The Rockets gave Lin, an unrestricted free agent, a contract worth $30 million, according to ESPN. The report states that the deal is for four years, and Lin would receive roughly $5 million in the first two years and $10 million in the last two. He will officially be able to sign the offer sheet on July 11.
From a business standpoint, it does not make much sense to match the Rockets' deal.
Lin is an immensely popular player. Last season, his jersey was more popular domestically than everyone except Derrick Rose, according to NBA.com. While the marketing opportunities are limitless with Lin, it is difficult to see this making any sort of real impact on the overall value of the Knicks franchise.
According to Kurt Badenhausen of Forbes.com, behind the Los Angeles Lakers, New York is already the second-most valuable NBA franchise. As Badenhousen’s article notes, the Knicks' value rose by 19 percent after the 2010-11 season, which was the first time in 10 years that the team finished above .500.
This was before Linsanity started. Winning basketball games is much more important to a team’s profitability than putting marketable players on the floor.
New York will always be one of the most valuable franchises due to its location. If the team wins more games, more tickets will get sold.
The point guard’s meteoric rise to stardom certainly did cause ticket sales to spike last season, but the fans will start staying home again if the team cannot win games.
If the Knicks match the Rockets' offer to Jeremy Lin, will it be a good basketball decision or a good business decision?
Lin’s impact as a cultural ambassador, an internet sensation or an inspiring underdog may be important to some fans, but his true value to the team will always be his ability to win basketball games.
Another business-related angle that the Knicks front office will have to consider is how Lin’s new deal will affect the team’s salary cap. As the ESPN report notes, “With the new collective bargaining agreement employing a more punitive luxury tax beginning in the 2013-14 season, the Knicks are concerned about the financial ramifications of such a deal.”
In order to keep Lin around, the Knicks will have to pay a premium both to the point guard and to the NBA.
Ultimately, re-signing Lin will be an expensive endeavor that will not bring major financial benefits to the team. Having said that, if Lin can help the Knicks to a winning record and a deep playoff run, it will certainly be worth it.
The Knicks must evaluate whether Lin can continue to build on his success from last season and help the team contend for a championship, and then base their decision on that assessment.