LeBron James is the most underpaid player in the NBA. Though he will make a reported $17.5 million this season, according to Shamsports, every team in the NBA would gladly pay him several multiples of that salary if it were permitted to under the league's collective bargaining agreement.
He simply brings that much value. But exactly how much is he worth?
Well, with a $17.5 million salary, LeBron is "getting hosed," Kevin Grier, a University of Oklahoma economist, told Taylor Tepper of NPR. According to Grier and the other economists interviewed, James should be making more like $40 million.
Looking at all the ways LeBron can bring value to a franchise, even that number sounds low, and this isn't just economist mumbo jumbo.
LeBron himself knows his salary is being artificially restrained.
"If this was baseball, it'd be up, I mean way up there," said LeBron, according to Brian Windhorst of ESPN.
Forbes calls James the world's fourth-highest-paid athlete and puts his annual endorsement revenue at $40 million. Given the profit margins of brands like Nike, McDonald's, Sprite, Powerade and Bubblicious, they probably aren't overpaying for his services.
In fact, the seven-year, $90 million endorsement deal that Nike gave James out of high school, according to USA Today, was likely one of the better deals the company has ever made. While it sounds like an astronomical sum, it turned out to be a bargain, and that is exactly how a team would feel if it was allowed to pay him $40 million per year to play basketball.
If we use the Nike deal as a conservative baseline for the amount an NBA team would pay simply to have LeBron's image associated with its franchise, James would make $15.6 million per year when the 2003 contract figure is adjusted just for inflation.
The year before LeBron James signed to play for the Miami Heat, the team ranked 15th in the league in attendance, according to ESPN. It then finished fifth and fourth the two seasons after he arrived and is currently third overall this year.
Meanwhile, the Cleveland Cavaliers seemingly lost a lot of fans after he left.
During LeBron's seven years in Cleveland, the team ranked (from 2003-04 to 2009-10) ninth, sixth, fifth, third, third, fifth and second in attendance. The year after he left, the Cavs still managed to draw, finishing third in the league in attendance in 2010-11. But they finished 19th last season and sit at 19th again right now.
And in case there was any confusion about how much LeBron had to do with the temporary passion for professional hoops in Ohio, just look at the the attendance numbers the season before LeBron showed up: Cleveland ranked dead last.
According to Team Marketing Report, the average ticket price for a Heat game is $67, while for a Cavs game it's $48.62. For the sake of comparison, let's just use the average ticket price of an NBA game, which is $48.48.
The 3,565 extra fans that the Heat have welcomed per game this year compared to the Cavaliers equates to an extra $172,831 per game. Multiply that by the 41 home games Miami will host this regular season, and team owner Micky Arison will gross $7.1 million more than Cavaliers owner Dan Gilbert this season due, in large part, to LeBron.
Based on the latest figures from the league, as reported by Tom Rotunno of CNBC, James has the NBA's top-selling jersey, and only the New York Knicks sell more jerseys than the Heat. His effect on merchandise sales appears even more pronounced when you look at all the other products the team puts his name, number and face on.
There are no public reports listing the actual number of jerseys sold, but if you look at all the alternate versions available and see just how many people at the average Heat game are wearing LeBron jerseys, it seems reasonable to assume the team is selling 10,000 per year.
With a retail price tag of $89.99, that makes $899,000 per year. Throw in the headbands, iPhone cases, T-shirts and bobble heads, and we can probably round that up to $1 million per year.
National Television Contract
It may be a leap to say that any one player could inflate the price that television networks would pay to broadcast national games. But both league insiders and reporters routinely credit Magic Johnson and Larry Bird for saving the NBA in the early 1980s, and Michael Jordan certainly brought the league to new heights of popularity as he captivated the world throughout the 1990s.
We may be able to pencil in LeBron as the next person who belongs on that list.
Because the national television contract, which is the biggest source of revenue for most teams, expires in 2016, one of the major networks is going to pay a King's ransom for broadcast rights to the NBA.
The current deal with Disney and Turner pays the league $930 million per year, according to Rachel Cohen of the Associated Press. Mike Ozanian of Forbes predicted that the next deal is likely to be for at least $1.2 billion per season—and that estimate came before the league survived major backlash against the lockout.
In short, the NBA is only getting more and more popular by the year, and LeBron has clearly been the driving force.
With an 11.8 rating, according to the Sporting News, the opening game of this year's NBA Finals drew the most viewers since the Shaquille O'Neal/Kobe Bryant Los Angeles Lakers played the New Jersey Nets in 2002.
This is the continuation of a multi-year trend of double-digit ratings for the Finals after a down stretch throughout the mid-2000s. The NBA will likely never match the 18.7 rating posted during Jordan's final title run, according to Scott D. Pierce of the Deseret News, but there is only one player who could come close to enthralling the masses in a similar way over the next three seasons.
If LeBron continues to lead his team to the Finals in subsequent years, and his popularity continues to rise, the entire league may have him to thank for ABC or NBC shelling out an extra couple of billion dollars to broadcast the league.
If we use Ozanian's conservative estimate for the next broadcast deal ($1.2 billion per year), the league as a whole will be bringing in an extra $270 million per season beginning in 2016-17 compared to the current contract. If we give LeBron credit for 10 percent of that total, we can add at least another $27 million per year to his value.
This is highly unscientific, but it might be the figure that best shows how much value LeBron has; by 2016, he may add almost a $1 million per year in revenue to the teams he doesn't even play for.
Salary to Play Basketball
Obviously, LeBron deserves some compensation for, ya know, playing basketball. We are presuming free-market conditions, so an owner like Mark Cuban who wanted to win a title badly enough could conceivably pay even $100 million per season for the best player in basketball even if it doesn't make sense financially. Maybe Mikhail Prokhorov would even pay five times that amount.
It's impossible to say.
So, for this factor, we could just use the highest current salary in the NBA, which is Kobe Bryant's $27 million. Obviously, that number already factors in much of the financial considerations already discussed, so to avoid double counting, I will arbitrarily drop it down to $15 million owed to LeBron purely for basketball reasons.
He produces on the court at historic levels, according to ESPN, and $15 million is a nice, round number that sounds to be in the ballpark of what he deserves for getting his team wins.
Total Worth Per Year
If we add up all the numbers ($15.6 million in endorsements, $7.1 in ticket sales, $1 million in merchandise, $27 million in television rights and $15 million in salary for on-court production), we are talking about a player who is "worth" upwards of $65.7 million per season.
The estimates and logic used here are rough, and revenue sharing means that some of these profits would not wind up in the vault of a single team owner, but just the fact that a final total this high seems reasonable shows just how much LeBron James is worth.