Lebron James is kind of a big deal.
When Lebron James decided to return to the Cleveland Cavaliers after winning two NBA titles in four years with the Miami Heat, Sports Illustrated made sure they got the scoop. When he decided he would wear number 23 again in Cleveland this season, it not only made headlines — it kick-started a conversation about whether any NBA player should wear number 23 after Michael Jordan. Reporters even asked Jordan himself if he was okay with it. (He was.)
There’s a far more interesting number attached to James, though, than 23. That number is 21.5.
Why 21.5? Because that’s how many pennies every cable subscriber that gets both ESPN and TNT will put toward James’ salary this season.
Here’s how that works:
ESPN and TNT currently pay the NBA $960 million per season for broadcast rights. That money is split evenly among all thirty NBA teams, giving every team $32 million — save for the four former ABA teams (the Brooklyn Nets, Denver Nuggets, Indiana Pacers, and San Antonio Spurs) that had to pay 1/7th of that $32 million to other former ABA owners as part of a 1976 merger agreement, though that fascinating story appeared to come to an end this year.
But I digress.
So the Cavaliers will get $32 million this season from the NBA’s national TV deal. The team will also gets an estimated $25 million from Fox Sports Ohio for local TV rights. That $57 million currently covers the Cavaliers’ entire player payroll for the 2014-15 NBA season, including James’ league maximum salary of $20,644,400. Here’s what the Cavs’ payroll looks like as of July 30, 2014:
(This payroll could climb above $57 million once the Cavs finally complete a proposed trade that sends Andrew Wiggins and Anthony Bennett to the Minnesota Timberwolves in exchange for Kevin Love, though not by very much.)
As you can see, James’ salary is covered entirely by the Cavaliers’ share of the NBA’s national TV deal with ESPN and TNT. According to Nielsen, 96,173,000 pay TV homes receive ESPN as of July 2014. Slightly more homes receive TNT, but it’s a pretty safe bet that all the pay TV customers that get ESPN also get TNT, as both channels are part of many standard cable packages.
ESPN receives $5.75 per customer per month from your pay TV bill. With 96,173,000 paying customers, that adds up to more than $6.63 billion over the next 12 months. TNT gets roughly $1.28 per month from those same 96,173,000, which adds up to $1.477 billion. From those billions, ESPN and TNT pay the NBA that $960 million for broadcast rights. The Cleveland Cavaliers then receive $32 million of that money, which they will use to pay Lebron James his salary of $20,644,400.
So $20,644,400 divided by 96,173,000 cable TV subscribers equals $0.214659 — or, rounded up, about 21.5 cents. That’s how much of your annual cable bill Lebron James will get this season.
Of course, this isn’t limited to Lebron. Based on this formula, with top players’ salaries covered by pay TV money, Kevin Durant and Chris Paul will each get roughly 20.8 cents from your annual cable bill this year. Carmelo Anthony will get just under 23.4 cents. Kobe Bryant would theoretically get almost 24.5 cents, except the Los Angeles Lakers’ payroll is covered entirely by the team’s obscene $150 million-per-year local TV deal with Time Warner Cable, a deal which ensures that the now-struggling Lakers can afford to pay big-name players in the future and, thus, won’t be struggling for very long — so long as Log Angeles residents don’t cut the cord en masse.
None of this is to suggest that Lebron James, as arguably the best player in basketball right now, does not deserve his salary. Since 2007, James’ teams have won two NBA titles, five Eastern Conference titles, and two Olympic gold medals. Top results always get top dollar. So do popular entertainers. Robert Downey Jr. can make $50 million a movie to play Iron Man, and nobody bats an eye at that.
Still, this is a prime example of the insidious nature of the cable bundle. Only a small fraction of that 96,173,000 actually watch the NBA — regular season games attract 1-2 million viewers on average, and the 2014 NBA Finals averaged 15.5 million viewers per game — but all of them still pay for the NBA’s TV deals with ESPN and TNT. Two years from now, even more of those growing cable bills will get funneled to the NBA; the league’s next TV deal with ESPN and TNT could be worth between $1.5 billion and $2 billion per year. If true NBA fans were the only ones paying for this deal, how much would it be worth? And how big would James’ salary really be?
But that’s not how the cable bundle works. The bundle ensures your TV bills will increase every year — by 6.5% on average — and more of it will cover the salaries of NBA players, NFL players, MLB players, and so on. Meanwhile, all that money from ticket sales, merchandising, in-arena advertising, concessions? Much of that ends up in the pockets of team owners. Little wonder former Microsoft CEO Steve Ballmer is willing to pay $2 billion for the LA Clippers. He seems to be getting in at the right time.
The bigger question, though, is when and how many of those 96,173,000, for one reason or another, finally decide time to get out.