Lacob willing to spend what it takes to keep title squad intact
Joe Lacob has always said he’d pay what it takes for championships, and this is what it took last week:
Andre Iguodala’s $48 million over three years.
Plus Steph Curry’s $201 million super max contract
Plus Kevin Durant’s two-year, $53 million deal with his own super max contract coming next year.
Plus the $24 million contract for Shaun Livingston, $18 million of which is guaranteed.
Plus the $3.5M Lacob spent to buy the secondround pick that netted Jordan Bell in the draft.
Now factor in luxurytax payments, and this is going to be quite an expensive payroll.
Looking down the road, the Warriors wanted to avoid the third-year full guarantee to Iguodala for the 2019-2020 season because Klay Thompson’s
deal is up in July 2019 and the Warriors will be facing some immense financial challenges at this point.
If Klay gets a monster deal at that point, the Warriors could be looking at a payroll, including luxury tax, that pushes $300 million, and even Lacob and Peter Guber would have to gulp at that number.
But here’s why they can afford to take a larger view of this, at least for now:
• The Warriors have a $2.6 billion franchise value, according to the latest Forbes estimation, and that is up from the $450 million price Lacob and Guber paid in 2010.
• Forbes estimates an annual $74.5 million profit, which is only going up due to the playoff-ticket bonanzas, and probably will hit $90 million this year.
• Chase Center is scheduled to open in San Francisco in November 2019 and I don’t think it’s reckless to predict $120-million annual profits once the new arena is taking in the big bucks. Or else why build a new arena in the first place?
• The Warriors’ local TV deal with NBC Sports Bay Area, which currently brings in about $30 million annually re-set in a few years.
If you know their local ratings and what the top NBA teams collect annually, you can see that this number is going to go much, much higher when the Warriors get a new deal, probably near or above $100 million annually.
So Lacob and Guber have tons of money. And they’ve made a commitment to ...
1) Go deep into the luxury tax this coming season for the second time in franchise history (the first time was two years ago);
2) Set up the possibility for massive tax implications into the near future, when “repeater“rules come into play;
They’re paying what it takes to keep this run going for as long as they can.
The Warriors don’t do anything blind. They don’t ever get locked into things year in advance, and yes, the prospect of a $300 million payout in 2019-2020 isn’t something they want as a fixed expense.
So what flexibility do GM Bob Myers and Lacob have as they look at the potential 2019 payroll and tax explosion?
It’s two years from now. A lot can happen between then and now, but I think you have to realize how aggressive the Warriors have been in adding and shedding in recent years.
They blew out Andrew Bogut, Harrison Barnes and Festus Ezeli in a blink when they needed to make room for Durant.
They will have the maneuverability to do it again in 2019, or 2020, if they think it’s necessary.
Here are some options that would decrease the financial liability at that point and I’m sure went into their thinking now:
• They could use the “stretch provision” on Iguodala’s final season — 2019-2020 — to reduce the $16M (or so) hit on their luxury-tax number and stretch it to $5.3M in each of the next three seasons.
In the luxury-tax repeater climate, that could be a $30M savings. And Iguodala would still get every penny, which I’m sure Iguodala knows going into this.
• They could trade Iguodala in July 2019 — he’d be an expiring contract then-and, if they add in a draft pick or two, could get back little or no money in return.
This is how they cleared the decks for Durant last summer, and I would imagine the Warriors know they could do a version of this again in two years.
• They could decide not to re-sign Klay Thompson in July 2019, or, if he’s agreeable, sign him to far less than $30M a year.
• They could trade Klay before that.
I’m not saying the Warriors are planning to do ANYTHING with Klay other than re-sign him for what it’ll take in July 2019, but that’s two years from now and you don’t know what his value will be at age 29 and you don’t know what kind of season the Warriors will have going into that.
• They could take the big financial hit in 2019 and then decide a year later about Draymond Green, who will be a free agent in July 2020, which presents even larger tax possibilities.
Same as with Klay, the Warriors could try to sign Draymond for less than massiveness -- Draymond will be 30 in the summer of 2020 -- or they could trade him or they could just swallow a potential tax bill that would dwarf all others ever conceived.
The Warriors have options. None of them will be cheap paths to walk, but they’ve collected a vast array of talent and there is a value and obligation to that.
Warriors ownership knows that the best plan is to try to keep as much of it together for as long as it is worth it, and if you have to start pruning it off, you keep yourself flexible enough to do that, too, and for now, they don’t have to consider any of that while trying to win as many titles as possible..