Does the NBA Really Need a Draft? - Wall Street Journal

By KEVIN CLARK

The New Orleans Hornets won just 32% of their games last season and ranked 24th among the NBA's 30 teams in attendance. The team has been such a financial mess that the NBA, which took it over last year, had to run its operations all season while looking for a buyer. They were, in short, not a well-run franchise.

So here's their reward: On Wednesday, the Hornets earned the right to draft one of the most surefire superstars in years, Kentucky's Anthony Davis.

The concept of a player draft isn't unique to the NBAâ€"it's a fixture of every major North American team sport. For the most part, drafts are a fair way to promote competitive parity between teams: They prevent rich ones from hoarding talent while allowing struggling teams to have the first crack at the best young players.

But when it comes to the modern NBA, the draft (and its much-ballyhooed "lottery" system) has created something unique to major sports leagues: A universe of perverse incentives for teams where apathy is encouraged, mediocrity is rewarded and many franchises are all but guaranteed to be kept in a state of chaos. To put the finest possible point on this: It's getting awfully hard to understand why the NBA holds a draft in the first place.

Joe Price, an assistant professor of economics at Brigham Young University, who co-wrote a study on the competitiveness of NBA teams, said the league's draft creates a "huge incentive to lose."

The NBA's draft is a pretty big deal to begin with. Since basketball teams put just five players on the floor, it's possible for one superstar to have a grossly outsized impact. The numbers support this: Of the 64 teams to make the NBA finals since 1980, 50% had at least one No. 1 overall pick on the roster. Over the same span, only 23% of teams that made the NHL Finals and 29% of World Series teams has a top overall pick.

Moreover, NBA teams that select first in the draft improved their winning percentages by an average of 20% in the third season after the pick. (By contrast, NHL teams that selected a player first overall since 1980 were actually 6% worse in the third season after the pick.)

Knowing this, it isn't surprising that when a sure-thing star like LeBron James or Kentucky's Davis comes available in the draft, this person has the potential to become the holy grail of sports: A magic potion that, when applied, instantly transforms a losing team into a winnerâ€"all while helping the team's owner make a tidy profit.

And because the NBA's labor rules place a cap on how much rookies can earn, this incredible boost comes to the lucky team at a cost that's less than what the market would bear.

In the case of James and the Cleveland Cavaliers (the team that drafted him in 2003) and possibly Davis and the Hornets in the upcoming June 28 draft, the first pick isn't just crucial, it's arguably worth more than the franchise itself.

The result of this system is that getting the first pick in the draft has become the indisputably best way to build a team. Teams that are bad, like the Hornets, have no better option than to do no real planning whatsoever, keep losing and keep praying they get the No. 1 pick.

Of course, there's a dark side to this savior-based economy: The saviors aren't always thrilled about their lot. Super talents who get drafted by these dysfunctional teams don't generally want to stay. As soon as they approach free agency, they often go to great lengths to flee. In recent years, a growing number of top-five picks have left their original teams, often acrimoniously, for teams in larger media markets. In the last two years, James (Cavaliers to Heat), Carmelo Anthony (Nuggets to Knicks), Chris Paul (Hornets to Clippers) and Deron Williams (Jazz to Nets) have all exited the teams that drafted them, leaving them in a state similar to when they arrived.

To lessen the temptation for teams to lose games in order to secure the top draft pick, the NBA in 1985 instituted a "lottery" system. Today the worst team in the league has only a 25% chance to get the first pick. This year's drawing, performed Wednesday, ended up with the Hornets getting the nod, even though they didn't have the league's worst record.

But even so, just having a small chance to get the top pick can be a huge distraction for NBA teamsâ€"one that prevents them from making any long-term plans. After all, if you get the top pick, that's your strategy. If you don't, you have to do something else altogether. But in any case, you're crazy to do anything before you find out.

All this points to one radical question: Shouldn't the NBA just eliminate the draft and allow everyone to enter the league as a free agent?

With just two rounds, there's not much of an NBA draft anyhow. And since teams operate under a salary cap, it would be impossible for a rich owner in a big market to hoard all the expensive talent. High draft picks might not be so eager to bolt if they were allowed to choose where they play.

It's not clear that killing the draft would change the distribution of players that much: It's likely that the same struggling teams would be more willing to pay top dollar for rookies. Jerry Hausman, an M.I.T. economics professor who studied Michael Jordan's impact on the NBA, said that even if there was no draft and players entered the league only through free agency, the salary cap (and the finite number of shots a team can take in a game) would still prevent teams from "stacking" superstars and creating dynasties.

Putting these rookies on the open market might also create cost pressure that would force teams to get better at scouting. If this season taught us anything, it's that NBA scouts are often blind to talent. Jeremy Lin of the New York Knicks, who caught fire this season, went undrafted out of Harvard.

There is absolutely no groundswell to kill the draft. The league and its players union didn't respond to requests for comment. Billy King, the general manager of the Brooklyn Nets, said the draft is necessary for franchises on hard times.

In some cases, the draft has worked: Top picks like Tim Duncan in San Antonio and Derrick Rose in Chicago have helped their teams rebound, all while seeming happy to be there.

But until the system changes, more hapless NBA teams will take the same approach to teambuilding: crossing their fingers.