Michael Jordan Gets Ready For a Financial Slam-Dunk
Issue for Reinsdorf: What's it worth to not be Chicago's pariah?
Even as the NBA finals rage around him, Michael Jordan has alighted from his slam-dunk heaven long enough to initiate another jaw-dropping feat.
This time his exploit is on paper.
Mr. Jordan, who tonight aims to lead the Chicago Bulls to their fourth NBA title in six years, is trying to win a new contract for as much as $18 million and $25 million annually, according to sports analysts. His soon-to-expire Bulls contract is for $4 million a year.
At first glance, His Airness appears to be merely the latest high-paid athlete to fuel a soaring trend in pro sport salaries. But this contract haggle involves such an exceptional talent and purse that it opens a unique window on the economics of pro sports.
Even Jordan - a player elevated by fans and sports pundits to the status of artistic Great Master or Olympian demigod - might bump into a salary ceiling, sports economists say.
Both Jordan and team owners have far more to lose from parting than from compromising. The sheer weight of fan adulation and past financial success pushes both sides toward a deal. Consequently, the chance that Jordan will quit the Bulls is remote, say the economists.
"I would bet the ranch that Jordan will be with the Bulls next year and the negotiations will not be very acrimonious," says Allen Sanderson, a sports economist at the University of Chicago.
But point-hungry Jordan might have to curb his appetite for greenbacks. Although there are apparently no limits to what Jordan can do athletically for the Bulls, he has already accomplished almost all he can for team coffers. In economic terms, his "marginal revenue product," or what he contributes financially, is low compared with five years ago, says Robert Baade, an economist at Lake Forest College in Lake Forest, Ill.
The Bulls have already granted radio rights for the next five years and are negotiating a similar TV contract. Also, the team has sold all its club seats and leased all its skyboxes. More than 17,000 fans have signed the waiting list for season tickets.
Jordan's absence would stem neither broadcast nor ticket income. Indeed, fan fascination did not flag when Jordan stepped away from the Bulls in 1993-94 to pursue a career in baseball.
Should Jordan stay, he is unlikely to boost the value of the Bulls franchise much further. Since the current owners bought the team in 1985, its value has ballooned from $9.2 million to at least $165 million.
"In a financial sense you could make the case that Jordan is dispensable, but emotionally it's hard to do and I'm certainly not saying it should be done," says Alan Friedman, executive editor of Team Marketing Report, a Chicago publication.
If Jordan quits the Bulls he would alienate fans and slow down his heaviest gravy train - endorsements annually netting $40 million. Including retirement, Jordan's lifetime endorsements could yield a total purse nearing $1 billion, according to an estimate by Mr. Sanderson.
BULLS Chairman Jerry Reinsdorf could rebuff the bid for a salary hike by noting how Jordan would bring limited gains in financial growth and strain team finances. The total player payroll this season is $23.4 million, below the upper end of Jordan's possible asking price.
But Reinsdorf is unlikely to take a hard line against Jordan. By retaining the player, he protects his investment in the team. More important, he avoids the stigma as the man who lost for Chicago one of the greatest athletes ever.
"Economics probably don't rule here," according to Mr. Baade, who specializes in the economics of sports. "It is really a question of not what Michael Jordan is worth but what is it worth to Jerry Reinsdorf not to have the city of Chicago treat him as a pariah," he says.
Probably few team executives could defy the avalanche of adulation for Jordan among both executives and ordinary fans around Chicago. The Bulls generate $100 million in economic activity during the regular season and $8 million during each playoff game, according to the Chicagoland Chamber of Commerce.
"We could not give Michael Jordan enough money to reward him for what he has done for this city," says chamber president Jerry Roper.