Once again the phenomenon known as “Linsanity” has taken the basketball community hostage. It’s been an action-packed week on the hardwood with news rolling in from all directions about NBA megastars Dwight Howard, Steve Nash and Joe Johnson. Howard is looking for a new home, Nash is getting a one way ticket to Hollywood, and the former New Jersey Nets officially announced their name change--the Brooklyn Nets--and their latest addition, Johnson, a six time all-star. Yet the only name that’s trending in Google this week is that belonging to a 23 year old basketball player from Harvard namedJeremy Lin.
Over the weekend, it seemed as if the only report worth hearing about on ESPN’s SportsCenter was whether or not the New York Knicks would play ball with Lin and match an outrageous 3 year, $25.1 million offer made by the Houston Rockets. On Sunday, Stephen A. Smith said that his sources inside the Knicks organization assured him that they would not be matching the offer, thus letting Lin go to Houston.
My first reaction was—Are the Knicks insane? They’re letting arguably the most marketable player since Michael Jordan slip through their fingers. But perhaps the Knicks have given this some thought. Is Jeremy Lin really worth the money?
The Jeremy Lin hysteria, or “Linsanity” as it became known, officially took the world by storm on February 42012. The Knicks had just dropped 11 of their previous 13 games, and all hope appeared to be lost for the season. Enter the 6’3 Asian-American, Jeremy Lin, who had 25 points, 7 assists, and 5 rebounds in a 99-92 win over the Nets. Two nights later, Jeremy Lin’s fan base grew along with his totals. In a victory over the Utah Jazz, Lin scored 28 points while dishing 8 assists.
With Lin running the point, the orange and blue would win their next five games, highlighted by a buzzer-beating win at Toronto, bringing New York back into the playoff conversation. His jerseys and other apparel flew off the shelves, and ticket prices skyrocketed, as fans wanted any piece of Linsanity they could get their hands on.
According to Forbes, Lin was poised to boost the Knicks’ revenue by $10-20 million last year due to merchandise and playoff revenue. In addition, Madison Square Garden has seen its market cap grow by $600 million since Linsanity began. Some may look at these numbers and say of course the Knicks should keep Jeremy Lin. But, the Houston Rockets, with their outrageous offer, have changed the money game in regards to Lin.
The Rockets offered Lin a three year deal worth an outrageous $25.1 million, which Lin signed as a restricted free agent, meaning the Knicks would have a chance to match the offer, which they declined to do. According to the terms of the offer sheet, Lin would be paid $5 million in the first year, over $5.2 million in the second year, and then a whopping $14.8 million in the third year.
The Rockets can afford to spend this money as they don’t have any huge superstar athletes on their team. The Knicks, on the other hand have got a handful of megastars including Carmelo Anthony, Amar’e Stoudemire, and Tyson Chandler, whose contacts combined are costing the Knicks over $60 million. Adding Lin’s contract to the mix would push them over the NBA’s new luxury tax threshold of $70.3 million and they would have to pay the NBA $1 for every $1 their player payroll exceeds the threshold. The Knicks would have $75 million tied up in just four players for the 2014-2015 season. Business Insider estimates that keeping on Lin could cost the Knicks anywhere between $17.5 million and $68 million in tax penalties on top of what they actually pay Lin, depending on what other roster moves the Knicks make in the next three years.
According to the Forbes story, Lin would have boosted the Knicks revenue in the coming 2012-2013 season by $25-$50 million above what it would be without the Lin affect on merchandise and ticket sales. Over the course of his contract, that comes out to roughly $75 million to $150 million in value. So, yes, Lin’s off the court value exceeds the massive luxury tax hit the Knicks would face. But what about his on-the-court value?
The Knicks organization recently signed veteran PG Jason Kidd, and this past weekend welcomed back former Knicks guard Raymond Felton to the fold, in what is perhaps an attempt to fill the hole that could be left by Lin. In the 35 games Lin played before injuring his knee he averaged 14.6 points, 6.2 assists and 3.1 rebounds. Felton, meanwhile, fell apart after being traded to the Denver Nuggets, and ultimately going to play with the Trail Blazers. He briefly lost his starting role and scored 11.4 points per game on 40.7% shooting. The veteran Kidd was arrested this weekend on suspicion of drunk driving after crashing his 2010 Cadillac Escalade into a pole after partying in Southampton, New York. Perhaps the Knicks really are making a mistake letting Lin go.
Regardless of Lin’s stats, the Rockets offered Lin a $25.1 million deal, which is incidentally how much NBA great Kobe Bryant makes in one year, for more than just his shooting skills. The Rockets, who famously drafted Asian big man Yao Ming, have a big Asian-American fan base and the deal is for Jeremy Lin the commodity, not for Lin the athlete.
The Linsanity, however, isn’t just marketable to the Asian American community. Lin is marketable to people from all walks of life because we can all see a bit of ourselves in him. People gravitated towards the unlikely success story of an undersized basketball player who was offered no athletic scholarship out of high school, went undrafted out of college, was sent to the NBA Developmental League three times, and was cut by two NBA franchises.
It is this popularity that is at the heart of the current Jeremy Lin controversy and for the Knicks this business decision may prove to be a marketing disaster. If Lin stays healthy and continues to put up just a fraction of the numbers he posted last season, all indications are that his marketing value extends his worth well beyond the hardwood.