This blows me away. Whether Kyle Lowry stays with the Raptors or gets a max deal elsewhere, the $41 million or $38 million average annual value contract he will get will make him one of the highest paid athletes in American sports history, along with Steph Curry, who will likely get that five-year max from the Warriors.
Those figures ahead of Zach Grienke ($34 million), LeBron James ($33 million), and every other athlete ever, not including endorsement deals of course. Not even Ronaldo or Messi earn that much in team salaries.
Why is it that 1) any player gets that much money, and 2) that one of them could be Kyle Lowry, a very good if not great NBA player but far from a transcendent superstar?
The sports bubble.
This isn’t a new concept or topic, but a quick primer: Over the last few years, networks have paid BILLIONS to lock up the rights to NFL, NBA and NCAA games, among others. This recent string of spending, which includes local and national MLB deals, represents networks’ last ditch effort to save traditional live TV viewing or at least delay its demise. All that money goes to the leagues, which passes it on to teams through some sort of revenue sharing, which passes some of it on to players commensurate with the salary cap. In short, the more money leagues make, the more players get paid. Most of that money comes from these TV deals. That’s how you wind up with Kyle Lowry, a beneficiary of the NBA’s player-friendly CBA, potentially becoming the highest paid American athlete of all-time.
Most of these contracts are in place for the next few years, but they will start to come up for renewal in the early 2020s. What happens then? You’ve already seen ESPN begin to prepare itself with its recent bout of layoffs. Networks rely on either or both of cable subscriber fees and advertising revenue to pay for broadcast rights, which in turn justify subscriber fees and drive ad revenue, either directly on the games themselves, or indirectly through promotion of other network shows which are highly profitable (CBS promoting CSI or 60 Minutes during NFL broadcasts). This is why so many networks are quick to embrace streaming packages like PlayStation Vue, YouTube TV and Hulu Live, and why those packages largely resemble basic cable packages– the bundle economics compel all subscribers to pay for content they might not want, which provides the ESPNs of the world a safety net against cord cutting. But the ramifications of the shift in viewing habits will impact all networks in some way. Example: ESPN will lose some amount of subscriber revenue, while CBS may lose ad revenue. The spending is unsustainable. Even if Netflix and Amazon come swooping in to bid on those sports rights using different business models to justify it, they likely won’t be spending as much since they can more accurately measure their return on investment and won’t be bidding farcical sums to ostensibly preserve their own existence. All that rolls up to the very high probability that the next round of sports rights deals will look nothing like the current ones, which allow guys like Kyle Lowry to become one of the highest paid athletes of all-time.