This has been a year for record NBA contracts, thanks to the $24-billion TV deal the league signed in 2014 and the subsequent increase to the baseline salary cap from $94.14 million for the 2016–17 season to $102 million for 2017–18. Players who aren’t household names are receiving staggering offers. Grizzlies player Mike Conley scored a whopping $153 million, five-year deal—the biggest in basketball history—while DeMar DeRozan netted $139 million over five years with the Raptors.
Worth spoke with Steven Olenick, a New York-based partner in law firm Loeb & Loeb’s Sports and Entertainment Practice, about what mega salaries mean for pro players and sports. Olenick represents athletes in a number of professional leagues, including several first-round picks from the 2016 NFL draft.
NBA players are seeing record contracts. Is this trend limited to basketball, or will we see it across pro sports?
What the NBA’s doing and what Major League Baseball has been doing is really going to impact the next set of negotiations. In MLB, if you look at it statistically and from a historical standpoint, you’re seeing some relief pitchers making more money than [better known stars]. You’re like, “Wait, he makes how much more than this guy?” It’s an ongoing theme.
So in salary negotiations in baseball and football, you’re going to have people saying, “Well, they get paid this much in the NBA.”
Look at basketball. This off-season and going forward, it’s like you’re evaluating a company like an investment banker. A sports agent is looking at players in terms of setting the market for them on a going-forward basis. In basketball, players are making four or five million dollars more just because of how the market’s been set, how the salary cap has been adjusted and how the cap has gone up.
Does this put more pressure on agents to maximize their clients’ contracts?
I respect the sports agent for what they do because to land a client, you’re pretty much trying to chase around a grown man. Sports agents do a fantastic job in terms of negotiation and getting the best deal for their client. But for some of these deals, there’s really no negotiation. You’re negotiating small, fine points. Steph Curry’s available? Chris Paul’s available? LeBron James is available? I don’t know if there’s much negotiation that goes on.
You pay them what they want.
Let’s say that I’m one of these low- or mid-tier guys who really has just seen my earnings skyrocket. I’m moving from the ranks of the high net worth to the ultra high net worth. What do I have to be thinking about? What are you advising your clients?
When I get approached, whether it’s as a legal advisor to the team, to the agent, the CPA, the wealth manager [or] the individual player themselves—we build a plan to make sure we have every aspect, from the legal perspective, checked-off. You’ve probably seen the statistics. The ongoing theme is that there’s a lot of impropriety, but also a lot of guys are misspending or having advisors misappropriate funds.
What goes into this plan?
We build a checklist of what needs to be accomplished. It can be as simple as reviewing a real estate lease. Why? Because some people—whether it’s a sophisticated client or a client who doesn’t get it—say, “Oh, the real estate agent told me it was month to month,” so they sign it. I get sent over the document: “Hey, did you know this is a yearlong lease and you signed it?” It’s often something as simple as that. We also try to build out something such as an estate plan because we start seeing sudden death. It’s sad.
Do athletes, who have spent their lives focused on sports—and often don’t come from backgrounds where they learned about money management—face unique financial or legal risks? Is there a knowledge deficit there?
I think there’s a deficit in society in general. I don’t want to make professional athletes a subset because this applies to anybody. More often than not, your job as an advisor, a legal advisor, is to educate, walk through the various problems and try to solve them.
How do you approach that educational process?
We’ve come up with a three-step program in terms of what you should be looking at. Do you have kids? Are you single? Are you taking care of your parents? Who else is part of the equation? Just like anyone—a professional athlete or a well-established, wealthy client—they have needs.