FanPost

Cost-Benefit Analysis: Knicks are Cray for Letting Lin Go

Every sports team should have two goals:

  1. Win championships
  2. Maximize profits

Management often sacrifices one goal for the other (often is an understatement), but should ideally achieve both. A decision to resign Jeremy Lin should then be analyzed under these two directives.

Winning Championships:

Lin’s non-monetary costs can be viewed as a reduction of playing time from other point guards on the roster (Raymond Felton, Jason Kidd, and Pablo Prigioni) and an inability to acquire better players. Lin’s non-monetary benefits include better production in every facet over Felton (http://espn.go.com/blog/truehoop/post/_/id/47791/felton-over-lin-are-the-knicks-lin-sane ), the potential to develop into an All-Star at a young age, and a tradable expiring contract in year three of the deal.

Unless MSG management has the ability to draft and develop better players (oh wait… the Knicks have no draft picks for the next 100 years) or to sign Chris Paul due to Lin’s absence, I find it hard to argue that the Knicks will be a better basketball team without Jeremy Lin.

Maximizing Profits:

Resigning Lin has a very clear financial cost. Not only do the Knicks have to pay a three year, $25.1M contract, but they are also on the hook for massive luxury tax payments. It is worth nothing that management had the opportunity to prevent Lin’s restricted free agency by signing him to four year, $24M contract ( http://espn.go.com/new-york/nba/story/_/id/8168735/ian-oconnor-new-york-knicks-match-houston-rockets-offer-jeremy-lin ). Instead, management allowed him to test the open market and is now appalled by the sticker shock. This shock should be dismissed; Linsanity is a cash cow.

With Jeremy Lin on the roster, the Knicks have access to a far larger customer base (Asians, Asian-Americans, Harvard alumni, anyone that appreciates a Cinderella story, etc.). MSG can then monetize these customers through jerseys, tickets, televised games, etc. At the same time, Lin boosts attendance at away games in small-markets. This decreases the revenue sharing burden for big-market teams such as the Knicks. After last year’s tussle with Time Warner Cable, MSG management should be well aware of these financial benefits. As an investment, Lin might be the MVP of the NBA.

Conclusion:

Arguments against the Knicks resigning Jeremy Lin usually center on notions of greed and honor as Lin leveraged the Knicks to increase the Houston Rockets’ offer. I find this criticism humorous as 99% of people, including Stephen A. Smith, would gladly accept higher compensation (it pains me to say this, but in some ways Chris Bosh, Lebron James, and Dwayne Wade should be commended for accepting less money to win a championship).

Was Lin deceptive? I guess this depends on one’s perspective. I would call it a clever negotiation strategy. As for trickery, I do recall MSG not fully disclosing Lin’s injury until all playoff tickets were sold last season. If management needs a refresher on negotiations, they can take a course at NYU Stern or simply watch HBO’s Game of Thrones. DO NOT TIP YOUR HAND UNTIL THE OFFER SHEET IS SIGNED, SEALED, AND DELIVERED.

Honesty, these complaints should be of little concern given MSG’s two main responsibilities: winning championships and maximizing profits. The bottom line is that the Knicks are a better team with Lin on the roster and the financial return per dollar is unrivaled. MSG management would be violating their fiduciary duty to fans and shareholders by not resigning Lin.

Fans should trade the Knicks for another team (Brooklyn Nets?) and shareholders should sue. I am serious.

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