Michele Steele – the Sports Business reporter at Bloomberg Television – e-mailed on Monday with the following question: Who are the least efficiently run teams in basketball (i.e. the teams who spend the most wastefully above the luxury tax threshold)?
The answer to this question was reported by Michele this morning on Bloomberg TV.
And here are some details behind my analysis.
My answer began with 2010-11 payroll data from HoopsHype.com (this data – I believe – reflects the trades from this past weekend). This data was adjusted for the luxury tax (which was set at $70.307 million for this season). I then took each team’s efficiency differential (offensive efficiency minus defensive efficiency) to project each team’s final won-loss record for the 2010-11 season (numbers were as of games completed on Sunday). With data on payroll and final projected records in hand, I then determined how much money each team is projected to spend on each regular season win in 2010-11.
Here are some observations on this data:
- Although the initial question focused on the least efficient, the team that Michele focused upon in her report was the Miami Heat. This past summer the Heat committed millions to acquire LeBron James and Chris Bosh. Yet, despite this expenditure, the Miami Heat is currently the most efficient teams.
- This is a combination of a surprisingly low payroll and nearly 68 projected wins. This also reflects the fact that very productive stars – like LeBron James and Dwyane Wade – are really bargains. The NBA limits how much money a team can pay a player. For example, LeBron will be paid $14.5 million this year and is on pace to produce 18.3 wins. So LeBron’s cost per win is less than $1 million (below the league average). A similar story can be told about Dwyane Wade. He will be paid $14 million and is projected to produce 18.7 wins. So again, Wade’s cost per win is less than $1 million.
- If we project wins from current won-loss records, then the San Antonio Spurs – with a cost per win of $0.931 million –lead the NBA. Using current won-loss records also raises the cost of Miami’s wins to $1.139 million, a mark that would rank the Heat 4th in the league (behind Oklahoma City and Chicago).
- The Knicks – who have been wasting money for years — are not over the luxury tax threshold this year. And currently the Knicks are ranked fifth in cost per win (using efficiency differential to project wins). Part of this is due to the amazing Landry Fields (a very productive and cheap second-round draft pick).
- There are only seven teams that are supposed to be paying the tax according to HoopsHype. These include the LA Lakers, Orlando Magic, Dallas Mavericks, Boston Celtics, Denver Nuggets, Utah Jazz, and Houston Rockets. When we consider how much money teams spend per win in the NBA this season (about $1.71 million when we consider the luxury tax) and how many wins these teams are projected to get (given the team’s current efficiency numbers), the Magic are currently the least efficient luxury tax team. Right now the Magic are projected to spend about $2.1 million per win (the salary numbers are after the trades this weekend, the on-court numbers though are somewhat inflated since the recent trades probably left them worse off).
- Following the Magic on the list of inefficient luxury tax teams are the Nuggets, Mavericks, Rockets, and Lakers. The Jazz and Celtics — despite paying the luxury tax — are actually projected to get more wins per dollar spent than the league average.
- If we consider all teams, the least efficient (in terms of cost per win) are the Washington Wizards, Cleveland Cavaliers, Detroit Pistons, Golden State Warriors, and Charlotte Bobcats.
To add some perspective to this story, here is the same analysis for the 2009-10 season (payroll data taken from the website of Patricia Bender; the luxury tax threshold last year was $69.92 million).
And here are three observations regarding the analysis of the 2009-10 season:
- Last year the Knicks were one of the least efficient teams. Per projected wins (quick note: I am using projected wins because I am repeating the same analysis I did for this season) the Knicks spent $3.3 million. Of all the teams that surpassed the luxury tax threshold, the Knicks were the least efficient.
- As inefficient as the Knicks were last year, the Nets and T-Wolves were even less efficient. Washington — the least efficient team this year — ranked 27th in efficiency in 2009-10.
- The Trail Blazers were the most efficient last year, but not as efficient as the Heat are projected to be in 2010-11.
Let me close by thanking Michele for sending along the question. I certainly didn’t think Miami was the most cost effective team when I started looking into this yesterday afternoon. However, as noted, given how salaries are determined in the NBA this result isn’t that surprising.