The NBA’s crazy season is upon us. And this time around, as many as 14 teams could have at least $10 million in cap space.1 This would normally be a recipe for hilarious overpays, given the lack of true superstar power in this class after Dwight Howard and Chris Paul — and especially since that group with potential gobs of cap room does not include either Los Angeles team.
But this will be the third offseason under the league’s new collective bargaining agreement, and perhaps the first when some long-term market trends might start to cement. The luxury tax rates go up dramatically for the first time under the new CBA, and after the rush of the lockout offseason and some internal adjustments, teams have finally had time to breathe and absorb the league’s new reality. Executives are paying closer attention than usual to how the other 29 teams behave and to how the market for player talent evolves. That market, which is not really a free market, moves in unpredictable and sometimes contradictory ways, and its long-term evolution can change the way teams seek to construct championship rosters. Keeping all this in mind, here are a series of questions for the league’s busy time, with help from more than 20 executives league-wide:
1. Where do the big dogs eat? And how fast?
The big dogs, of course, are Howard and Paul, and the collective bargaining agreement gives the Los Angeles teams a major home-court advantage in re-signing them. The Clips and Lakers, respectively, can offer one extra season (a fifth year) and larger annual raises than any rival suitor, an edge that creates nearly a $30 million gap between in-house and outside max offers. That $30 million figure is a bit misleading, since any rival suitor that snares these guys could sign them down the road to a second max contract, erasing some of that gap. But both Howard and Paul are in their late 20s, with lingering health problems, and they’d be justified in trying to lock up as much guaranteed moola as possible right now. Both L.A. teams can also sign-and-trade these players, transactions that broaden the market a bit and bring at least some compensation in return.2
We know the other suitors. Houston, Dallas, and Atlanta will pursue both, and though none of the three has anything close to the sort of cap room required to actually sign both stars outright, both the Rockets and Hawks have a combination of cap room and intriguing potential sign-and-trade assets.3 The Texas teams will leverage their appealing cities and the lack of any income tax, while the Hawks will dangle something — their hometown ties to Howard, the promise of playing with at least one other talented player, the fantastic “screeching Hawk” sound effect the in-house public address system plays after some baskets, and, I dunno, strip clubs.
A few other teams, including the Jazz and Pistons, could theoretically enter this derby, but even executives on those teams would chuckle if you suggested it to them. Needless to say, where these players go, and when, will have a giant impact on the league’s landscape and this summer’s free-agency market. The faster Paul and Howard resolve their situations, the faster the second- and third-tier players can suss out their market worth and let free agency proceed. The Clippers and Lakers are back near ground zero if these guys walk, with the option of keeping their powder dry for the more starry free-agent classes of 2014 and 2015.4 Things are much sunnier if the stars stick around, especially for the Lakers, who currently have only one player — Steve Nash — under contract for 2014-15, and could thus be major players in free agency a year from now even if they re-sign Howard to a max deal.
And if the stars stay in Hollywood, these other suitors will be left with unused cash in the secondary market. The Hawks are in an especially sticky situation in this regard. It has come up over and over that Atlanta has something like $35 million in cap room, but that’s not actually true. Josh Smith, probably no. 3 on most free-agent lists, has a massive $16.4 million cap hold, and Teague, a very solid option at point guard, carries a hold of around $6 million. Those two charges leave Atlanta with only about $11 million in cap space — well short of the approximately $20 million both Howard and Paul will command. And this doesn’t even factor in holds linked to Kyle Korver and Zaza Pachulia, valuable backups and passable starters on the right team.
But the Hawks can get around all of this stuff by filling out some quick paperwork once the league reopens for business if they get word that either Paul or Howard wants to come to the A-T-L. Getting a clear picture of the market early is key, so that the Hawks — or any other team — have the appropriate mechanisms in place to sign the players they want.5
2. What is the new free-agency landscape like?
Talk to executives around the league about the upcoming free-agency period and two names usually come up within the first five minutes: David West and Monta Ellis.
West is almost certainly staying with the Pacers. They took the Heat to seven games this season, his cap hold erases all of their (fake) cap room, and they’d have only about $6 million in space without that cap hold anyway. West remains a very good player, and the Pacers have no ready replacement on hand (nor the means to get one). Dealing Danny Granger’s expiring deal for minimal salary in return would change things, but that’s a tough task without attaching a serious sweetener.
West’s name has come up, if not necessarily because he’s a player teams are lining up to sign. (Though some will kick the tires.) It comes up because of the nature of his latest contract — a two-year, $20 million deal that just expired. Teams under the new collective bargaining agreement are more wary about taking on long-term salaries, but they also need to spend money. Some teams need to spend because they’re actually interested in winning, or at least in competing. The Mavericks, Bucks, and Pistons come to mind as examples of such teams, and you could also probably lump the Blazers and Cavaliers into that group. Dallas loaded up last season’s roster with one-year deals around Dirk Nowitzki in an attempt to stay relevant and lean, and both the Pistons and Bucks are tired of losing and have incentives to avoid it. The Bucks dealt a valuable asset in Tobias Harris to secure a playoff spot last season, and Detroit faces the very scary prospect of sending an unprotected first-round pick to Charlotte in 2015 or 2016.6
Other teams will have to spend because the league mandates they do so. The new collective bargaining agreement increased the minimum amount each team must spend on players. The so-called salary floor is now set at 90 percent of the cap level, which means in 2013-14, the minimum team payroll will be around $52.65 million — about $3 million higher than it was this season. Teams rarely have any problem punching their fists through the floor, but seven teams were within $6 million of that $52.65 million figure last season, and five — Cleveland, Charlotte, Phoenix, Houston, and Sacramento — were quite close to it. The Kings in the dying years of the glorious Maloof era famously flirted with the salary floor, and even fell below it after the 2011 trade deadline.
Bottom line: Teams are going to have to spend just a bit extra to fill out rosters, whether they actually want to or not.
Anxiety about the new CBA and excitement over future free-agency classes will change the market in ways we don’t yet understand. That’s where West’s contract comes in. A lot of executives view that deal as a potential model for second- and third-tier free agents going forward: “We’ll offer you a nice annual salary, provided you sign a very short contract.” We already saw a bit of that last season, with the Celtics (Kevin Garnett), Clippers (Jamal Crawford), Hornets (Robin Lopez), Suns (Michael Beasley), and Rockets (both Omer Asik and Jeremy Lin) either pushing for non-guaranteed years on the back end of contracts or signing desirable young players (Lin and Asik) to three-year deals instead of longer ones.
Teams will push hard for shorter deals, even with quality players, and if they win that battle, it will have profound implications for team-building each summer. Guys like Andre Iguodala and Josh Smith are probably above this treatment, but lesser light veterans such as Ellis, Tiago Splitter, Carl Landry, Al Jefferson, and many others provide interesting test cases. All have flaws, but all could help in the right context, and those teams might overpay for that help if they know it becomes expiring help almost upon signing.7
Midtier veterans in their late twenties or thirties stand to lose the most under the new CBA, with teams hoarding cash for superstars and emerging players coming off rookie contracts. But where does “midtier” start, and how much do such players have to lose? And if that crunch happens, how does that affect roster construction strategies? We’ll see.
3. How smart are all these new GMs?
This is where Ellis comes in. I can’t tell you how many times I’ve heard some variation of “Monta Ellis is in for a rude awakening” from team executives over the last six weeks. Ellis declined a two-year extension almost a month ago that would have paid him an average of $12 million per season, and let’s just say the league is skeptical he’s going to get anywhere near that amount as a free agent.
The league is getting smarter, with new thinkers in positions of power. Eight teams will have their lead or co-lead decision-maker entering his first free-agency period with that team this summer, and many of those GMs — Ryan McDonough in Phoenix, Tim Connelly in Denver, Sam Hinkie in Philadelphia, John Hollinger–Stu Lash–Jason Levien in Grizzville — are young and progressive thinkers. Six other teams will feature lead decision-makers entering only their second free-agency period in their particular market, and that group includes fellow relative youngsters Bob Myers (Golden State) and Rob Hennigan (Orlando).
A lot of these folks are skeptical of a guy like Ellis — a creative scorer who, despite some prodigious drive-and-kick skills, hamstrings his team with poor shot selection and godawful defense. If the new CBA is going to force more judicious spending, players like this — veterans who really only contribute on one end of the floor — could see massive, O.J. Mayo–style pay cuts.
And though this isn’t a star-studded free-agency class, the wing group will provide a fun window into whether the league will talk the talk about trying to value defense properly. Look at these wing free agents: Ellis, Korver, Kevin Martin, Tony Allen, J.J. Redick, J.R. Smith. These are intriguing names, and they each contribute nearly all of their value on one side of the floor. Martin and Ellis are coming off eight-figure contracts; Allen made $3.3 million last season. Will the specialist salaries flatten out as the league gets a better grasp on the value of defense? When a free-agent Matt Barnes routinely provides solid production for the minimum, or just above it, how much more should a team really spend on a player who might be only marginally better — or actively worse?
Context, again, is everything here. Ranking free agents in a vacuum is not a very useful exercise. Suitors have very different needs, both because of their leftover roster and their goals for the following season, and thus value individual players much differently than other teams might.8
4. What is the impact of TANKAPALOOZA 2014?
A lot of teams that were bad last season will be more than happy being bad again in 2013-14, with a loaded draft on the way. Some teams on the tanking bubble, including Philly, Phoenix, Utah, and even Toronto, could easily enter the derby by breaking up their rosters and focusing on the development of young players. Going this route would obviously eliminate any desire to spend on free agents who might help win actual basketball games over the course of several seasons, perhaps further depressing the cost of midtier veteran talent.
5. Is restricted free agency immune to all of this?
As usual, some of the juiciest names on the free-agent list are restricted free agents: Brandon Jennings, Teague, and Nikola Pekovic. And on the next tier down, Gerald Henderson, Tyreke Evans, and Chase Budinger all carry some intrigue. Restricted free agency is just a different animal. Most players are young and coming off rookie deals, meaning they have upside yet to realize. Teams have much firmer ownership of these players since they can match any competing offer for them. And when teams have ownership of something, they are loath to let it go for nothing — even if they don’t really want a particular player at a particular price. The Raptors, for instance, may not have viewed DeMar DeRozan as a $9 million player, but if they were confident he could grow into a $7 million player, they had to ask themselves: Is that $2 million worth letting this asset go for nothing? What might we do with that extra $2 million down the road?
This is how restricted free agents sign contracts that look at first like overpays, and sometimes end up as overpays.9 Executives are curious to see if the new CBA will touch this portion of free agency or if it will carry on as a money train.
Some think the new CBA might have enlivened restricted free agency a bit. Teams now have only three days to match a competing offer from a rival. The old CBA gave them seven days, and incumbent teams could milk that seven-day period to tie up the rival suitors’ cap room as long as possible. And in the fast-paced hothouse of free agency, tying up your own cap room for a week chasing a player that probably isn’t coming to your team can ruin the whole process.10 Rival suitors might be a bit bolder, some executives say, in tossing around offer sheets if they know the offer has a 72-hour shelf life at most.
An interesting possibility: Beefy contracts in the restricted free-agent market, at least when it’s crowded, could also work to depress spending on midtier veteran free agents approaching 30 — or on the wrong side of it. If teams are going to be more generous overall, but not in this one area, the cuts have to come somewhere. Food for thought.
6. Which teams outside the spotlight are worth watching?
A few suggestions:
• Utah and Milwaukee: The two teams who could swing most dramatically between “we have a ton of cap room” and “all of our room is tied up in cap holds linked to outgoing free agents” — Redick, Jennings, Jefferson, Ellis, Paul Millsap, Mo Williams, and on and on. They are not destinations, but they will have a lot to say about how the summer works itself out.
• San Antonio: Don’t sleep on the runners-up. Giant cap holds linked to Manu Ginobili and Tiago Splitter eat up all of San Antonio’s cap room for now, but the Spurs could change that and get near-max room in a pinch if the opportunity strikes. Ginobili might retire, and if he doesn’t, he’ll surely be amenable to re-signing on the cheap in order to help the Spurs stay flexible. And Splitter, as a big, might command a price on the open market that makes San Antonio uncomfortable; he’s already 28, so he is what he is, and if the Spurs don’t think he’s worth something in the $9 million to $10 million range, they might be bold in chasing someone else.
• Portland: The Blazers can snag around $11 million in cap room after July 1 if they renounce both Eric Maynor and J.J. Hickson, and in the meantime, they have three second-round picks in addition to the no. 10 spot. Lots of directions to go.
• New York and Brooklyn: The Big Apple teams are hopelessly capped out and yet in clear need of fairly significant roster upgrades in order to contend. Teams are valuing first-round picks more highly under the new restrictive CBA, hoarding their own or asking sky-high prices for them, but it wouldn’t shock me if one of these teams made its pick available.11
• Washington: Ditto for the Wiz at no. 3, as I’ve written before. Washington wants to make the playoffs next season, and though the Wizards gave up their cap room in the Emeka Okafor–Trevor Ariza deal, both of those contracts morph into expiring deals once the calendar flips to July.
• Toronto: A new GM, Masai Ujiri, has no sentimental attachment to anyone on this roster. Expect all options to be on the table, including a potential move into this year’s first round.
• Chicago: The Bulls are in no hurry to make any dramatic changes with Derrick Rose on the way back, but Luol Deng has always made the most sense as Chicago’s potential big-money trade chip. Carlos Boozer’s deal runs a season too long, and he remains an amnesty candidate for the summer of 2014. Joakim Noah is worth his long-term money. Deng is a fine player, worth his deal, but the emergence of Jimmy Butler at least makes things interesting. Deng’s name has started to burble up in trade rumors, though it’s unclear whether Chicago has any real interest in dealing him.
We could go on — the Cavaliers with a ton of space and an endless supply of picks; the Warriors, looking to take the next step but without any apparent flexibility with which to do it; the Sixers, with that big dude who likes bowling; and more. The silly season is here. Enjoy!