Basketball: Why Josh Childress Traded Dollars for Euros

by Hayden Alfano

Following one of its better season in recent memory, the National Basketball Association (NBA) is at a crossroads. The reason: Josh Childress, a 6-foot-8 small forward who posted per-game averages of 12 points and five rebounds for the Atlanta Hawks last season, his fourth as a professional.

However, Childress’ contribution to NBA history could extend well beyond what he does on the court. Last week, he spurned the Hawks and the rest of the league and signed what is believed to be the most lucrative contract in European basketball history, a three-year deal with the Greek club Olympiacos worth in the neighborhood of $20 million, post-tax.

Childress isn’t the first established player to decide to ply his trade in Europe, but he’s definitely the player with the highest profile to do so. He’s also American; up until now, most of the players who have gone from the NBA to Europe have been Europeans. The Americans who have made the switch have been easily replaceable role players.

It’s a devastating blow to the Hawks, and in order to understand why they let him go – and why this signing has the potential to shake up the NBA – it’s necessary to learn a bit about the admittedly complex finances of the NBA.

The collective bargaining agreement between the NBA and the players’ union establishes a strict pay scale for rookies. Under the terms of his rookie contract, Childress – like all other first-round draft picks – became a restricted free agent after his fourth and final year under his rookie deal. This means that while he could receive contract offers from other NBA teams this summer, the Hawks had the right of first refusal: for example, they could match any offer any NBA team tendered to Childress.

Due to the vagaries of the NBA salary cap, which are too involved to describe in this space, the most that any team would realistically offer Childress was around $5.5 million, what is known as the “mid-level exception.” (To learn more about why, please visit this page.)

Relative to other players in the league, a player producing at Childress’ level is probably worth $1 to $2 million more than the mid-level exception. The Hawks figured that they’d wait for a team to offer Childress the mid-level, then match it, retaining him on the (relative) cheap. Realizing that Childress was unhappy with this, Olympiacos swooped in and offered Childress an amount more commensurate with his true worth.

Up until this point, European clubs have lacked the resources and willingness to throw NBA-level money at American players. If Childress is a bust next year, they almost certainly will go back to largely ignoring the American market, at least in terms of players of Childress’ caliber.

If, however, Childress becomes a star in the Euroleague, Olympiacos’ signing will likely embolden other European clubs to follow suit. NBA franchises have been aggressively courting the best European players for several years now, and NBA commissioner David Stern recently took it to the next level, publicly announcing his dream of establishing NBA franchises on the continent. This has raised the profile of the sport across the pond, bringing more money to the big European clubs (many of which, like Olympiacos, are owned by larger organizations that also own successful soccer clubs). Given the large salaries paid to European soccer stars, it’s reasonable to think that the resources are there to sign basketball players to bigger deals.

Childress is representative of an NBA “middle class” that won’t be disappearing any time soon. The compulsory rookie guidelines and the salary cap all but guarantee that there will be players coming off of their fourth year who are worth more than what they might garner on the open NBA market.

The NBA – the premier basketball league on the planet by a wide margin – isn’t likely to lose any superstars to Europe; there’s too much money in the league and Stern and the league’s front office would find a way to revise the rules if it ever came to that. But the NBA can’t afford to lose too many players of Childress’ caliber, and they are in real danger of doing so.

If he plays well, Childress could be the catalyst for a significant increase of the level of play in Europe, and could bring the Euroleague closer to the NBA in that regard. If other players follow his lead, it will almost certainly spur changes to the NBA’s salary structure.

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