Breaking Down LeBron James' Options in Next Contract with Cleveland Cavaliers

Greg Swartz@@CavsGregBRCleveland Cavaliers Lead WriterAugust 1, 2016

TORONTO, CANADA - MAY 27:  LeBron James #23 of the Cleveland Cavaliers speaks at a post game press conference after a victory in Game Six of the Eastern Conference Finals against the Toronto Raptors during the 2016 NBA Playoffs on May 27, 2016 at the Air Canada Centre in Toronto, Ontario, Canada.  NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement.  Mandatory Copyright Notice: Copyright 2016 NBAE (Photo by Nathaniel S. Butler/NBAE via Getty Images)
Nathaniel S. Butler/Getty Images

LeBron James will re-sign with the Cleveland Cavaliers; we just don't know when or on what type of contract.

James can follow his customary route of signing another one-and-one deal and opt out again next summer. He could also end all doubts about his long-term commitment to Cleveland and agree to a multiyear max extension with the world champion Cavaliers.

Should James, who is already the world's third-highest-earning athlete in 2016 according to Forbes, continue to wait and cash in next summer to reach his max value? Or should he sign a salary-cap-friendly deal now to help the Cavs save money for future outside help?

    

Money Breakdown

Since Cleveland doesn't own James' full Bird rights yet, signing a one-year deal would net him $27.5 million in the 2016-17 season. If he were to sign a four-year max extension, his beginning salary would actually be higher, starting at $31 million.

This is because the Cavs don't have the cap space to sign James outright and can only increase his 2015-16 salary of $23 million by 20 percent, giving him the $27.5 million figure. Since he's played two consecutive years in Cleveland, James does qualify for Early Bird rights. This means he can sign a four-year deal beginning at $31 million with 7.5 percent annual raises, per Bobby Marks of The Vertical.

While James stands to collect an extra $3.5 million in 2016-17 if he signs a multiyear deal, he can make much more by continuing to stay patient.

Here's how the next four-to-six years shake out with a one-year deal versus a max extension.

LeBron James' Contract Options (in millions)
Contract Type2016-172017-182018-192019-202020-212021-22Total
1-Year w/ 5-year Max$27.5$33.5$36.0$38.5$41.0$43.6$220.1
4-Year Max$31$33.2$35.7$38??$138
Eric Pincus/Basketball Insiders & Bobby Marks/The Vertical

After reaching a record-high $70 million this past season, the new salary cap will jump to $94.1 million in 2016-17. It's expected to make one more significant leap up to an estimated $102 million in 2017-18, per Eric Pincus of Basketball Insiders.

This means a salary north of $40 million by 2020-21 for James. As of the end of the 2015-16 regular season, only Michael Jordan and Kobe Bryant have recorded salaries of at least $30 million.

Anything after this season is purely a projection, of course. While the current collective bargaining agreement runs through 2020-21, either the league or player's association can opt out by December 15.

A new CBA could add a "super-max" provision, specifically for players like James who deserve to earn far more than the current max that many above-average players are getting today. It may behoove James to sign a one-year deal for the sole purpose of waiting to see if the new CBA contains a super-max contract.

Regardless of whether he chooses to sign long-term this summer or next, James' newest max contract will have the richest annual value in NBA history.

    

To Sign an Extension Now...

James' preference to sign two-year deals with an opt-out clause is unprecedented in major professional sports.

Before him, star athletes maxed out their values when they could for fear of injury or dip in production. James fears neither and knows he ultimately calls the shots in negotiations with the Cavaliers.

OAKLAND, CA - JUNE 12: General Manager David Griffin chats with LeBron James #23 of the Cleveland Cavaliers during practice and media availability as part of the 2016 NBA Finals on June 12, 2016 at Oakland Convention Center  in Oakland, California. NOTE T
Nathaniel S. Butler/Getty Images

His tardiness in signing a new deal this summer helps put pressure on Cleveland's front office to keep improving the surrounding roster, even if it did just win the first championship in franchise history.

By signing a four-year, $138 million deal now, James would be doing the Cavaliers a huge favor. The average annual value for such a contract would be $34.5 million, starting at 35 percent of a $94.1 million salary cap.

If he waits until next year, Cleveland will have to max James at 35 percent of an expected $102 million cap. This computes to an average annual salary of $38.5 million over the course of a five-year extension, chewing up nearly an extra $4 million of the Cavs' potential cap space.

Since the majority of James' income is earned away from the basketball court ($54 million in endorsements in 2016, per Forbes), his livelihood clearly doesn't depend on a few extra million bucks in annual salary.

STEVE DYKES/Associated Press

There's also his new lifetime deal with Nike, the largest in company history. James' business partner Maverick Carter hinted in an interview with Mark Anthony Green of GQ that the total value is north of $1 billion (warning: link contains NSFW language).

And James has to consider what happened to Kobe Bryant, who spent his final seasons maxing out his own contracts, leaving the Los Angeles Lakers with little cash for star-caliber help. He doesn't need to take drastic Tim Duncan-level pay cuts, but it would benefit the Cavaliers if James would ink a four-year max this summer.

    

...Or Wait One More Year

Who wouldn't want to be compensated more for the same amount of work?

Regardless of his paycheck amount, he'll still participate in the same number of games, practices and workout sessions. Why not reap more financial rewards in the process? Isn't that what the rest of us would do?

This strategy of opting out was put in place years ago, all with the design of waiting until the summer of 2017.

Matt Sayles/Associated Press

When Green asked why Carter and James had set his contracts short, Carter responded, "Because...um...money."

James, like Carter, is a businessman. They're both visionaries as well.

"People are just now starting to catch on to our planning a bit," Carter said. "I saw an article in Business Insider the other day that said LeBron's gambling with one-year contracts is about to pay off. It's like, Yeah, we thought about that, like, three years ago."

James is set to turn 32 this December and already has 13 pro seasons under his belt, so it's unclear how many more years his body will allow him to play. Life after basketball seems unlikely to lead to coaching, but rather ownership.

For those who claim James doesn't need any more money, they're wrong. That is, if James wants to one day become the majority owner of the Cavaliers or another NBA franchise.

CLEVELAND, OH - JUNE 16:  LeBron James #23 of the Cleveland Cavaliers addresses the media following the game against the Golden State Warriors in Game Six of the 2016 NBA Finals on June 16, 2016 at The Quicken Loans Arena in Cleveland, Ohio. NOTE TO USER:
David Liam Kyle/Getty Images

Team values are on the rise. Steve Ballmer purchased the Los Angeles Clippers for a record $2 billion in 2014. According to Forbes, franchise values vary between $650 million (New Orleans Pelicans) and $3 billion (New York Knicks). The Cavs are ranked 12th in total value at $1.1 billion. Even with his salary, endorsements and now acting, James isn't close to comfortably joining Jordan as the only former player to become a majority owner. Yet.

Although viewed as a team player, it's highly unlikely James will take a pay cut to help the Cavs, especially when the past three summers have been orchestrated for the sole purpose of maximizing his earnings.

Expect James to sign his $27.5 million deal this year, opt out one more time and finalize an unprecedented five-year, $190-plus million pact in 2017.

After finally delivering a title to a starved Cleveland fanbase and heading toward one of the greatest careers in NBA history, no one can say he isn't worth it.

    

Greg Swartz is the Cleveland Cavaliers Lead Writer for Bleacher Report. Follow him on Twitter @CavsGregBR. Chris Trenchard contributed to salary numbers in this report.

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