How the NBA's Uncertain Salary Cap Could Impact Contract Extensions
The NBA's salary cap means something different to everyone.
To the league's owners, it's a friend. It protects from wasteful spending by penalizing that behavior, all the while keeping down their labor costs.
To the players (and their agents), it's an enemy, if not the enemy. It's a barrier that artificially limits how much money the best basketball players on the planet can make.
To front-office executives, it's yet another obstacle to navigate while attempting to build a winner. The most recent collective bargaining agreement, ratified by the players and the owners in the fall of 2011, brought with it more restrictive rules governing the cap and the luxury tax and, in turn, headaches and ulcers for general managers around the league.
That task might only grow more exhausting within the next few years, albeit for the opposite reason: an exploding cap, the expected expansion of which remains somewhat speculative on multiple fronts.
As it happens, the league is due for a windfall. The NBA has, for some time, been in the process of renegotiating its national television contract with ESPN and Turner Sports (the latter of which owns Bleacher Report) before the current eight-year deal expires in June 2016. According to Sports Business Daily's John Lombardo and John Ourand, that new pact could net the NBA upwards of $2 billion per year—more than double its current take of $930 million.
Per the terms of the collective bargaining agreement, the amount of money that teams can spend on players (i.e. the salary cap) is tied to the amount of money made by the teams and the league they comprise (i.e. basketball-related income, or BRI). The former rises and falls with the latter.
Once the new TV agreement kicks in, there will be significantly more dough for owners to dole out to the players. How and when that dough can and will be spent remains something of a mystery, as Grantland's Zach Lowe explains:
"One problem: No one knows when, or how, that cap jump will happen. It’s at $63 million for this season, and teams are projecting it could leap as high as $80 million for the 2016-17 season—the first under the new TV contract. Depending on how the league and its TV partners structure the inflow of cash, there could be one or two more mini-jolts before the cap settles into a new normal around $90 million.
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Not that uncertainty is a new phenomenon for the NBA. If anything, it's a familiar state of affairs, particularly for front-office folks. "No one can predict the future, but you take your best shot at it," Dallas Mavericks GM Donnie Nelson told Bleacher Report. "We’re in the industry of prediction. We’re in the industry of calculated risk."
Getting Ahead
Why worry about this now? Free agency doesn't begin in earnest until next July, right?
Not exactly. A significant swath of what should be a vibrant free-agent market in the summer of 2015 is subject to negotiations that must either be settled or disbanded by Halloween. Prior to Oct. 31, organizations have the exclusive right to work out extensions with those rookies of theirs who are entering the final years of their respective contracts.
Kyrie Irving worked out a super-max extension, worth $90 million (and possibly more) over five years, with the Cleveland Cavaliers back in July, before LeBron James announced his return. Kawhi Leonard, the reigning Finals MVP, figures to fetch a similar fee from the San Antonio Spurs.
John Wall and Paul George came to similar agreements last summer with the Washington Wizards and the Indiana Pacers, respectively. Blake Griffin and James Harden preceded them in that regard two summers ago.
Had these and other players not been extended, they would've been ticketed for restricted free agency the following offseason. Unlike their unrestricted counterparts, their incumbent clubs would've had the right to match any offer sheet they might've fielded.
But these guys were all going to get paid well before restricted free agency. There's no way their teams would've balked at paying them like superstars when they were already well on their respective ways to achieving such lofty status when contract negotiations began.
The problem that the NBA as a whole has long had and continues to have is figuring out how much to pay the league's middle class of talent. It's the mid-level free-agent deals for role players—not the massive pacts for franchise cornerstones or the minimum contracts for hangers-on—that can and so often do clog teams' cap sheets and hamper GMs in their quests to for roster improvement.
The same goes for the rookie-extension crowd. Irving has his money. Leonard will get his. Klay Thompson will probably cash in as well, especially given the dearth of talent at shooting guard these days.
But what about Irving's teammate, Tristan Thompson, who's eligible for an extension? Or Enes Kanter, who's seen two of his Utah Jazz teammates (Derrick Favors and Gordon Hayward) get paid over the last two summers? Can Kenneth Faried count on stuffing has bank account, courtesy of the Denver Nuggets, after a strong showing at the FIBA World Cup?
What about Jonas Valanciunas, Nikola Vucevic, Kemba Walker, Jimmy Butler, Iman Shumpert or any of the other notable players taken in the 2011 NBA draft? Or Ricky Rubio and Patrick Beverley, who were both drafted in 2009 but didn't come over until 2011 and 2013, respectively?
If the past is at all predictive, most of those guys won't be set for life financially within the next month or so. Last summer, only six rookie-scale youngsters (Wall, George, DeMarcus Cousins, Derrick Favors, Larry Sanders, Quincy Pondexter) signed extensions. The year before that, there were seven (Griffin, Harden, Stephen Curry, DeMar DeRozan, Jrue Holiday, Ty Lawson and Taj Gibson) who dodged restricted free agency.
Past as Prologue
Those years, though, weren't clouded by an impending deluge of money like the one the NBA is anticipating from its renewed TV rights. Shorter contracts—another hallmark of the current CBA—have also made cap space a more abundant commodity from summer to summer.
With more resources at their disposal, owners and the front-office executives they employ would, hypothetically speaking, seem more inclined to hand out extensions like candy corn, if only to avoid the messiness of restricted free agency. Just look at what happened in that regard this year.
On the one hand, there was Gordon Hayward—a good player, but hardly a budding superstar—taking home a four-year, $63 million deal with the Utah Jazz. According to Yahoo Sports' Adrian Wojnarowski, Hayward had sought (and the Jazz had balked at offering) a contract in the neighborhood of four years and $50 million prior to last year's extension deadline.
Without a new deal in place, Hayward entered into restricted free agency this July, wherein he garnered a max offer sheet from the Charlotte Hornets. Utah matched Charlotte's bid but might've saved itself more than $3 million per year in cap space had it acquiesced to Hayward's demands before.
At the other end of the spectrum are the curious cases of Greg Monroe and Eric Bledsoe. Monroe didn't so much as field an extension offer from then-GM Joe Dumars last offseason. This time around, Stan Van Gundy, the team's new head coach and team president, made clear his desire to retain Monroe from the get-go.
"Greg Monroe is a very important piece of the puzzle in Detroit and we want him back very, very much," Van Gundy told the Pistons' official website in July. "We’ll see what happens over the next weeks, months, whatever it takes."
According to the Detroit Free Press' Vince Ellis (h/t Pro Basketball Talk's Dan Feldman), Monroe turned down a five-year, $60 million offer from Detroit, though Monroe himself refuted that report:
Whatever the truth of the matter may be, the two sides ultimately failed to agree to a long-term extension. Instead, Monroe settled for the team's one-year qualifying offer, worth $5.5 million, and will be an unrestricted free agent next summer, at which point he can walk without any recompense for the Pistons.
Bledsoe's future with the Phoenix Suns seemed destined for a similar fate. Like the Pistons with Monroe, the Suns made no secret of their intent to match any and every offer sheet that came Bledsoe's way. None did, perhaps because Phoenix's foes didn't want to tie up their cap space for the 72 hours the Suns would've had to match—certainly not for a player they weren't going to get anyway.
With seemingly all of the leverage on its side, Phoenix offered Bledsoe a four-year, $48 million deal that appeared to be fair, given Bledsoe's talent and troubling history of knee injuries.
But Bledsoe's camp, led by Klutch Sports' Rich Paul, declined, insisting that the point guard deserved a max contract. Their attempt to find other suitors for Bledsoe's services, including the Minnesota Timberwolves, fell flat.
However, their threat to take the one-year qualifying offer didn't. Per Woj, Bledsoe's now the proud owner of a five-year, $70 million pact. As NBA.com's David Aldridge noted, Phoenix's acquiescence in this case might make plenty of fiscal sense:
Money For Nothing?
Still, these teams could've saved themselves plenty of acrimony, anxiety and, in some cases, money had they struck accords much earlier. So, naturally, extensions are going to be more the norm than the exception this time around...right?
Not so fast. Remember, nobody knows just yet what the final terms of the league's national TV contracts will be, much less how those terms will affect the salary cap going forward. There's also the usual matter of whether organizations are comfortable committing beaucoup bucks to the players in question.
This year's class is particularly tricky, insofar as there aren't as many obvious choices as there might usually be.
| Patrick Beverley | Tenacious defender | Injuries, offensive limitations |
| Alec Burks | Explosive athlete | More sixth man than budding star |
| Jimmy Butler | Lockdown defender | How will he mesh with Derrick Rose? |
| Kenneth Faried | Ferocious on the glass | Undersized, defensive shortcomings |
| Tobias Harris | Athletic, productive | Too many young wings in Orlando |
| Reggie Jackson | Athletic, can play either guard spot | OKC's financial constraints |
| Enes Kanter | Big bruiser | Not much range offensively |
| Brandon Knight | Versatile, hard worker | What is he, exactly? |
| Kawhi Leonard | Finals MVP | When will Pop feature him? |
| Markieff Morris | Productive, skilled PF | Too many good PFs on the market |
| Ricky Rubio | Tremendous passer | Can't shoot |
| Iman Shumpert | Good defender, great hair | Injuries, post-rookie regression |
| Klay Thompson | Soon-to-be-elite 2-way 2-guard | Streaky shooter |
| Tristan Thompson | Productive player when properly deployed | Not a true center, LeBron and K-Love already at PF |
| Nikola Vucevic | Double-double machine | Injuries, defensive issues |
| Kemba Walker | Leadership, ball skills | More small scoring guard than pure point |
As Zach Lowe points out, all sides are eminently aware of what could be at stake here:
"People on all sides of every negotiation know the salary cap will rise over the next few years, though no one knows exactly when it will jump—or how high. There is a nagging impulse that it might be OK, just for now, to shrug and toss a few million more than you’d like at one of your own free agents...They could continue along their upward trajectory without alienating Walker and scrambling for a sexier replacement in free agency.
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By and large, such an approach jibes with the conservative mentality that often permeates NBA front offices. They'd rather err on the side of caution by sticking with a quality player they know, warts and all, rather than eschewing him in favor of what could be a failed attempt to find an upgrade, all the while risking the team's collective growth.
It's possible, then, that the fear of one unknown (new players) and the anticipation of another (a fast-rising cap) could combine in such a way that owners and GMs will be more inclined to swallow the extra money needed to get new deals done with rookies on expiring ones. Maybe the T-Wolves will up their $48-million offer to Rubio (per The Minneapolis Star Tribune's Jerry Zgoda) because they want to avoid any additional acrimony, they'd rather not go through the trouble of eventually finding a replacement and, well, because they can.
That effect may take a stronger hold in 2015, when the rookie-scale talent will be better and the terms of the cap's rise clearer. Next year's class—which features, among others, Anthony Davis, Damian Lillard, Bradley Beal, Dion Waiters, Andre Drummond, Harrison Barnes, Terrence Ross, Terrence Jones, John Henson and Miles Plumlee—looks to be a better barometer by which to measure the effects of the NBA's exploding cash flow on the operation of its front offices.
In the meantime, GMs will simply have to do their best to balance their teams' wants and needs with the desires of their recent draftees and the swirling uncertainty that surrounds them all.
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