Don't worry, he'll be back.

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LeBron's Contract Crossover Is Good for Cavs

Kavitha A. Davidson is a former Bloomberg View columnist.
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LeBron James has opted out of his contract, and Cleveland Cavaliers fans might be thinking, "Not this again." But fret not, Ohioans -- it appears James is still home, at least for now.

ESPN's Brian Windhorst reported Sunday afternoon that James had informed the team he would decline his player option for the 2015-16 season, making him an unrestricted free agent after July 1. According to Windhorst, the move was expected, and all signs are that James will re-sign after the Cavs take care of other pressing free agent needs, including Kevin Love, Tristan Thompson and Iman Shumpert. 

James is expected to sign another two-year deal -- with a player option after one year -- worth $22 million per season, a slight bump from the $21.5 million under his current contract. James is continuing to smartly sign short-term deals to give himself and the team flexibility in future negotiations. The Cavs now have room to navigate the free-agent market, while James is setting himself up for a huge payout in a year.

Because 2016 is when the NBA will receive a huge influx of money from its new $24 billion television deal, which will in turn raise the salary cap and max contracts. The cap currently sits at $63 million and is expected to increase to nearly $90 million by some projections. James was smart not to take a maximum-dollar deal when he returned to Cleveland last year: The nature of max contracts means superstars are inherently playing for less than they're worth -- less than they'd garner on an open market, that is. 

Of course, there is some risk for both sides in repeatedly striking short-term deals. If the Cavs somehow bomb in the offseason, James would be free to flee Cleveland (again). But that seems highly unlikely; James is reportedly not even meeting with other teams, and it would be a public-relations disaster for a native Ohioan whose hometown fans have finally forgiven and forgotten the first time he scorned them.

James in turn is taking a calculated risk in forgoing millions in guaranteed money, betting that his production and his health will hold up for another year. There's no reason to believe that won't be the case; he doesn't have a troubling injury history, and he single-handedly carried his team to the NBA Finals this season. Other players would be wise to take the guaranteed contract and run, but James isn't just any other player. If he continues the pattern of two-year deals with one-year options, Yahoo Sports' Dan Devine projects, he could top Michael Jordan's record $33 million salary for the 1997-98 season, potentially pulling in $35.5 million in 2017-18.

It might not be that simple, however. Either the league or the players' union can opt out of the current collective bargaining agreement in 2017, and the NBPA has already rejected the NBA's "cap-smoothing" proposal, which would have avoided a huge spike in salaries by gradually increasing the salary cap. Contentious labor negotiations seem inevitable, especially with the players' push to regain some of their share of basketball-related income, relinquished in the last round of bargaining. And James will play a prominent role in that fight -- he was recently elected vice president of the union, and has been vocal about not letting the owners cry poor to deny players their fair share.

According to Windhorst, James might also push for eliminating max contracts altogether, which would clearly benefit him and other superstar free agents, such as Kevin Durant, who hits the market in 2016.

In any event, it's evident that James knows he's underpaid relative to his value and is on a clear mission to increase salaries. For now, that means opting out and putting some pressure on the Cavs to make smart offseason moves. In the near future, that could mean instituting major changes to the business of basketball.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Kavitha A. Davidson at kdavidson19@bloomberg.net

To contact the editor on this story:
Tobin Harshaw at tharshaw@bloomberg.net