NBA agents are switching sides

When Magic Johnson was named the Los Angeles Lakers President of Basketball Operations it was breaking news. Yesterday, Rob Pelinka was hired as the new GM. An unusual move to say the least, but Pelinka is not the first agent to get hired by an NBA team. In fact, it has become a recent trend.

Here is a list of former NBA agents who are currently working (or have worked) for teams;

  • Minnesota Timberwolves Assistant GM – Noah Croom (Goodwin Sports Management).
  • Milwaukee Bucks Assistant GM – Justin Zanik (ASM)
  • Detroit Pistons  Vice Chairman – Arn Tellem (Wasserman Media Group)
  • Charlotte Hornets Vice Chairman – Curtis Polk (SFX)
  • Denver Nuggets President (late 90’s) – Todd Eley (now with Stratosphere Sports)
  • Denver Nuggets Director of Scouting – James Clibanoff (James Clibanoff Basketball Services)
  • Denver Nuggets – Pete D’Alessandro (PMA)
  • Memphis Grizzlies CEO (until 2014) – Jason Levien (Levien Sports Representation)

Aside from the executive positions, there are also lesser known agents who now work as scouts for NBA teams.

Why do NBA teams hire agents for front office positions?

There are a couple of reasons that make agents attractive to NBA teams. First of all, they are already part of the network of professional basketball. They know a lot of people. Secondly, many agents studied law and often specialize in a certain aspect of the NBA collective bargaining agreement. They are experts on salary caps and the inner workings of contract negotiations. If they also have enough experience, they would be familiar with the teams and what they would be willing to offer. Teams might be thinking that if you can’t beat them, then join them. But that’s only half of the story…

Why would agents prefer to work for an NBA team?

Does it make any sense for an NBA agent to switch sides and leave his agency for a team? Kobe Bryant made 25 million in his last season, so if Rob Pelinka got his 4 % agent fee, then that’s a cool million in revenue on one player alone. Keep in mind that the top NBA agents usually represent more than 30 NBA players worth hundreds of millions in annual salary.  But things are not always what they seem. That’s why there are several reasons why agents would find it to be more stable, lucrative, and advantageous to join a team’s front office than to stay as agents.

  • NBA agents are losing money on rookies.

In theory, the 4% agent fee is the maximum an agent is entitled to get, but in most cases, he receives much less. It starts with the draft and the rookie scale. Since there is a scale, there is not much to negotiate, and the agent is only entitled to a symbolic fee. That fee is so small that many agents waive their right and work for free for their rookies. It can take several years before there is something to negotiate and before the agent can make a significant amount of money. But even that is no guarantee. The player could again fall into another automatic salary scale. This time as a veteran. There is also the risk that an agent may get fired before he can make any money on the player. Many players are not very loyal and they are allowed to fire their agent at any time for any reason upon giving a 14-day notice.

  •  The NBA Collective Bargaining Agreement is a “straightjacket” forced on agents

But the restrictions on agent earnings don’t end there. The NBA Collective Bargaining Agreement has a lot more scales and salary rules. There are maximum and minimum salaries, and also a maximum with which a player salary can increase from year to year. When a player signs a minimum contract, the agent is entitled to a maximum agent fee of 2%. Superstar players know that they will automatically get the maximum allowed under the CBA rules. They don’t need an agent to negotiate that for them. It is not uncommon that these players fire their agent just before they sign the biggest contract of their lives. It saves them an agent fee. In other words, for an agent, it is not profitable to represent a rookie in the first couple of years of his contract, nor a superstar, or players who play for the minimum. So what’s left? Not much.

  • The hostile NBA Players Union that has secret ambitions.

Both players and agents are members of the NBA Players Union and both pay a hefty annual union fee, however, only the players have voting power. No wonder the most popular topic that is voted on is about lowering agent fees.

Here is another little-known fact; The policies of the NBPA have forced lots of agents out of business the last two decades. Some believe that this is intentionally so the NBPA can take over their role. Thus transforming the union into a commercial agency that has a monopoly over all player-team negotiations. Over the past two decades, the NBPA has used two tools that have negatively impacted agents. The first one is to constantly add more and more restrictive rules for the agents, and the other one is to limit and decrease the agent earnings. As a result, there are less NBA agents today than in the past, and they stay in business a lot shorter than they used to. Meanwhile, the NBPA proposed last year to raise the annual fee that they charge agents from $1,500 to $ 15,000! Most players in the NBA are represented by a small group of big-time agents. All the other agents, who have anywhere from zero to two players as clients, struggle to get by. A $15,000 annual fee would be more than what some of them would make in a year. The proposal for this increase will probably not pass, however, you can expect that whatever changes that will make through will mean a steep increase in fees; a move that will tighten the noose around the necks of the small, independent accredited agents. At the end of the day, we could see changes that could change this once-free market into an oligarchy, run by a select few.

The annual fee for players is already higher than what they have to pay their agent if he negotiates a minimum contract. Just to put things into perspective, the top executive of the NBPA receives a salary that would make many NBA players jealous.

  • Social Media is killing off all the middlemen.

While the struggle with the NBPA has hurt agents in their pockets and stripped them of power and influence, that is nothing compared to the carnage that is taking place on the internet. Social Media is killing all middlemen. Insurance brokers, real estate agents, travel agents, record shops and yes, also sports agents. Demand (teams) and supply (players) meet on the internet and talk directly. No need for a middleman to connect them. No need to negotiate either, because there is a Collective Bargain Agreement with scales, rules, and standard contracts.

Who needs an agent anymore? Agents will eventually disappear, and they know it. That’s why they are jumping ship. Some of them are finding sanctuary among NBA teams and now take a seat on the other side of the negotiating table. The influx of agents in NBA team front offices is not a power move, but rather a shift to an avenue that affords them more options and fewer obstacles. It will be interesting to see how this transformation plays out. Imagine Rob Pelinka, the new GM of the Lakers, having to negotiate with one of his former clients.

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