Imagine for a moment that you are John Wall and you’ve just completed a phenomenal freshman season at the University of Kentucky. You’re routinely projected as the number one overall pick in the upcoming 2010 NBA Draft in June. You have just officially declared yourself eligible for the draft. Selecting an agent however is not as simplistic. Then there’s this question: If you’re John Wall, do you even need to hire an agent?
In a recent story written by Gary Washburn of The Boston Globe, ex-Celtic Bill Walker proclaims that he doesn’t have an agent and does not intend to hire one once he becomes a free agent (possibly as soon as this summer). Walker believes that it’s unnecessary for an agent to take 4% of his earnings. With the current collective bargaining agreement being what it is, is he correct in his assessment?
For an incoming rookie like John Wall, his NBA salary is already pre-determined based on where he gets drafted. Basically, the higher a player is picked, the more guaranteed money he receives. But every pick is scaled so there isn’t much wiggle room to work with here. But what about for second round picks like Walker where it’s not as clear? What about all of the pending superstar free agents this summer (LeBron, Wade, Bosh, Stoudemire, Joe Johnson, etc.)? Do they need an agent? Do any clear cut “max players” need an agent? How much of a role do endorsements play in negotiations? What about holding private workouts, and attempting to steer a playing to a certain team?
There are several interesting questions regarding this very topic. None of which I am professionally qualified to answer. However, I discussed some of these issues with Robert Lucas, who has experience as an NBA agent. He has also worked in the front office for the Sacramento Kings and has interviewed many top tier NBA agents himself. Below is the Q & A:
Me: Is
an agent needed for rookies (especially 1st round, scaled contracts)?
RL: Yes, the general public does not see all
of the work that is put in behind the scenes for 1st round players. I
watched Bill Duffy work with Michael Olowokandi who was virtually an
unknown coming out of the University of the Pacific and position him
into the first round and the number one overall pick. Many agents who
represent these first round picks have chosen to lower their commission
or even elect to forgo commissions during these slotted contracts. The
contract commission percentages can range usually anywhere from 1-4%.
For instance: NBA Player Agent Lon Babby charged Grant Hill only
$100,000 on his first 6 year, $45 million dollar deal. He could have
charged 4% which would have been $1.8 million in commission.
Me: How do endorsements work in terms of percentages a player
makes, and how much the agent gets for a finder's fee? Or is it
typically, say a flat 3% across the board?
RL: Player agent's can
typically receive up to 20% on marketing deals, but from what I
understand it averages somewhere between 10-20%.
Me: What is the potential gain from endorsements to recoup
agent fee?
RL: This is the only reason an agent can offer
to take a smaller commission because there is a bigger upside on the
back end. In addition the follow up contracts are generally much larger,
assuming the player has performed well during the initial contract.
Me: What can an agent negotiate that would A) make up the
fee B) get them a better contract that they wouldn't get without an
agent?
RL: There are two considerations. The first
one is marketing a player prior to the draft to the potential teams that
could draft the player. The second consideration is marketing a player
coming off of a rookie contract. These are both difficult to negotiate
because a player agent has to position a player not only in the right
contract but with the right team. Many players think they can just take
the best deal that comes their way, but good agents are able to think
long term and find the best fit for their clients. Good examples are the
players that have signed large contracts but end up not playing.
Me: Is an agent needed for true max players (LBJ, Wade, Kobe,
Durant), or more for 'surprise' max players (Rashard Lewis)? Especially
with the current CBA structure that has a maximum amount of dollars
defined for which the top tier can earn?
RL: This question is similar to the one above, but there are players who are choosing to pay an attorney/agent on an hourly basis to negotiate a max deal for them. Good agents are also advisors and have the ability to place their players on teams that position them for the future. Young players do not often consider the market they are playing in, or what their goals are as a player. Teams today also have more economic concerns because of the CBA, potential for lockout, and luxury tax.
Me: In reference to recent stories about ex-NBA stars losing millions of dollars: Is it a typical practice for agents/lawyers to do some minimal level long-term financial planning for their clients? Meaning, do they devise a 401(k), Roth IRA plan, etc.? Or do players typically choose that on their own? It just seems like doing something relatively simple as CD Laddering would alleviate many of these financial problems, or is it merely a case of players "not being smart" about it?
RL: Most agents utilize a trust worthy financial advisor or firm they work with or refer players to. The NBA has a retirement plan in place through the NBA Player's Association, but just like any retirement plan there is a maximum amount you can invest in these plans. So long term saving and planning should always be recommended, especially when the average playing career lasts only 3-4 years. The issue here is the same; every young athlete or entertainer has which to save something. However many of these players as you know have never had anything so this becomes an almost impossible task.
Me: With the potential of another lockout as well as a new CBA, what are the biggest changes that need to be made for long term growth and success for all parties involved?
RL: I was working for the Sacramento Kings during the last lockout and know first hand how difficult it is for the average player to get through a long lockout with the potential of losing a season. Both sides will have to be willing to compromise due to the current economic times and the amount of money NBA team owners are losing. If you study lockouts in professional sports you will find that most of the time the deals are made for the existing players and veterans without consideration for future players.
Me: When players are free agents and are looking at all of their options, what are the most important factors for them? Money? Location? Potential of team? I assume it all depends on the player/situation.
RL: You are correct. Every player is in a different situation, but in most cases every player should consider how they may fit on each team, how will their team impact their playing career, what kind of marketability will the player have in their respective city and finally a consideration for team chemistry (i.e. Marbury, etc.).
Me: Finally, any thoughts on where LeBron, Wade, Bosh are headed?
RL: I don't know where they are headed but they are all opportunists so don't be surprised if LeBron ends up with a bigger market team despite Cleveland’s efforts to make him happy. I don't see Wade leaving Miami because like they say there can only be one captain of a ship and it won't be hard for Wade to recruit a couple more big named free agents to Miami.
Mr.
Lucas is writing a book which is scheduled to get released towards the
end of this year. It is entitled: "Basketball Gods, & Power
Brokers." The book is designed for the aspiring sports
management professional and those interested in the NBA. The book
discusses his experiences as an NBA/FIBA agent, and includes detailed
interviews from the top NBA agents and players. It also talks about many
stories related to becoming successful as an NBA agent today, the
pitfalls to consider as well as sports management business models. Mr.
Lucas will be giving away the first 100 copies to those who email him
with interest in the book.
You can email Mr. Lucas to this address: [email protected]
You can also follow him on Twitter at: @NBASportsAgents
