Effective contract negotiations require careful consideration of the multitude of factors that may be involved in reaching a successful contract agreement. There has been significant discussion as of late concerning LeBron James leaving Miami to return to Cleveland and play for the Cavaliers. James was to sign a two-year, $42.2 million, contract with the Cleveland Cavaliers. Contract negotiations included a four-year contract option that would have included more than $88 million in compensation.
The decision to go with a two-year deal gives James more contract negotiation options, including the ability to re-negotiate the contract next summer as player options can only be negotiated a year prior to the final season of the contract. While James does not seem interested in free agency, the deal may also give him the opportunity to take advantage of that option.
According to sources, the deal also allows him to take advantage of the NBA’s upcoming television deal. The NBA and players share T.V. income (as well as other basketball-related income) according to a fifty-fifty split. Because proceeds from T.V. are included in basketball-related income, the television aspect of the deal may be important. The NBA’s current T.V. deal expires following the 2015-2016 season the NBA is expected to be able to negotiate a more lucrative contract following the expiration of the current deal.
James will have several options to consider following the first year of his deal. Expected upcoming changes to salary caps, which impacts max contract deals, and television contract opportunities may allow James a variety of options to negotiate and re-negotiate the best contract possible. Both the contract and contract negotiations James has been engaged in are providing him exposure as the current face of the league and may ensure he is fairly compensated for the position he holds in the league. Effective contract negotiation in the sports and entertainment fields will strike a balance in negotiations to benefit both the exposure and compensation of the contracting party.
Effective, solid and beneficial contractual agreements underpin the success of many individuals in the various entertainment industries. Knowing how to maximize each of the goals the party has for the contract negotiation process can lead to the best contract available in the unique circumstances the party enjoys.
Source: USA Today, “LeBron James only takes 2-year contract with Cavaliers,” Jeff Zillgitt, July 13, 2014