A great number of new developments have unfolded this summer with influx of the new TV revenue, resulting in several head-scratching “it wasn’t supposed to work that way” outcomes that just might force a work stoppage next summer.
The most top of mind head-scratcher for the owners is how to prevent, or better control, the opportunistic creation of “unbeatable” super teams that could tamp down interest in the 5-month regular season schedule and even the opening rounds of the playoffs. Owners don’t want fans tuning out until June.
Owners will likely want to collectively bargain percentage increases and decreases in the cap year over year to prevent the 35% we saw this summer that allowed Golden State to sign Kevin Durant.
The players likely have identified dozens of “areas for improvement” in the next Collective Bargaining Agreement (CBA), only one of which will be the focus of this article.
Rookie Scale Contracts
In today’s article, we will delve into a part of the CBA that hasn’t been fundamentally touched in 22 years.
Beginning in 1995, salaries for first round picks were set according to a strict scale, determined by their draft position. The salary scale is determined for all picks in all seasons when the CBA is written. Rookie scale contracts are always for two seasons, with team options for the third and fourth seasons.
Prior to 1995, rookie first round contracts were not salary-controlled, so players who had never stepped onto an NBA court could hold out for huge contracts with enormous guarantees.
So the league and players decided to set those salaries at the beginning of every CBA, intentionally giving players on rookie contracts less money than their veteran counterparts as part of a “seniority” concept. For many years, mid-career players like Matt Barnes could command more money than the most talented 19-25 year olds.
But that was okay with both sides. Player union reps from teams WERE the Matt Barneses of the league, so they developed a concept that ensured money would be available to those kinds of players.
But over the years, and especially this year, the % of the cap dedicated to rookies has gotten smaller and smaller.
In 2012, Anthony Davis’ $5.144 million contract as the #1 pick represented 8.7% of the Pelicans’ salary cap, or 1/11th of the cap on a 13-man minimum roster.
Bayless > Simmons?
In 2016, Ben Simmons’ $5.903 million contract as the #1 pick represents only 6.2% of the Sixers’ salary cap. That’s just 1/16th of the cap on a 13-man minimum roster. Next season, career journeyman guard Jarryd Bayless, who might not ever start full time for the Sixers, will make more money than Ben Simmons.
Carrying the Bayless example a bit further (or you could alternately insert Cole Aldrich), a career journeyman on their 3rd or 4th or 9th team likely will make two to three times as much as a late lottery pick.
Where am I going with this?
Where I’m going is that, while the owners still have this incredible mechanism to control salaries on their youngest and potentially most talented players, they’re going to use it to its maximum extent.
It’s because players like Bayless and Aldrich and a dozens of others can command top dollar on the open market that owners want as many low-dollar contracts as possible, and for as long as possible.
While in prior years, teams would wait until the second round to stash their international prospects, this year they drafted them in the first round so they could control that pick’s salary for at least three years.
While the Suns pick of Bogdan Bogdanovic in 2014 with the 27th overall pick was, at the time, considered unusual because he wasn’t going to come to the NBA for 1-2 years, that method became more commonplace than ever before this summer.
This year, a whopping 6 of the 30 first round picks were given to likely draft-and-stashes, from Georgios Papagiannis #13 overall on down to Furkan Korkmaz at #26. All are now salary-controlled for the next three years at low, low rates compared to open market.
Guaranteed contracts to second round picks
Another way to control salaries is to lock in your lowest-paid players for as many years as possible, even if it means guaranteeing more of it than ever before.
NBA teams have done this for many, many years with non-guaranteed years tacked onto the end of minimum offers. That way they give the player some modicum of comfort while giving themselves even more.
Historically, second round picks are considered in the same class of player as the hangers-on who try to fill that 11th-15th roster spot on a team. The typical NBA team can only play a regular rotation of up to 10 players in a game. Any more than that, and the execution gets even more ragtag than it already is.
Generally, roster churn is high among the 11th-15th men on the roster. The more fungible the contracts, the better.
But this year, teams have seen the value of locking up second round picks for even longer than the traditional two to three years.
The Suns, for example, gave 34th overall pick Tyler Ulis a full 2+1+1 contract to lock him up for at least two but up to four full years at an absurdly low rate under team control.
Other teams have promised multiple guaranteed years to entice their second round picks to commit to longer contracts.
Because there is no rookie scale on second round picks. If they are good enough to play in the league, they can jump right into the semi-open market (at least as a restricted free agent) as early as year two. But they are still rookies in year one, so logic holds true that no second round rookie should make more than the lowest first-round pick.
But with the salary cap continuing to rise, I’m sure many player agents have threatened to sign only a one-year tender and get their guy back on the market in 2017.
While lots of second-round picks aren’t worth more than a one-year non-guaranteed tender, one of them famously turned down a 2-3 year deal to get back on the market a year later.
K.J. McDaniels famously took a one-year deal with Philadelphia in 2014, and was rewarded with a 3-year guaranteed deal for $10 million a year later with Houston.
In a more traditional route, Allen Crabbe took a non-guaranteed second round deal and made himself a rotational player with Portland. He was rewarded with a $18.5 million per year salary three years after he was drafted.
Crabbe and McDaniels’ first-round contemporaries from their drafts, 2013 and 2014 respectively, are still under team control for at least one more season.
Back to Ulis for a second. While it may seem generous of the Suns to have given Ulis the long-term contract of a first-round rookie, it really is in the Suns’ best interest to have done so.
Now Ulis is under team control for four full years, as opposed to the standard 1-3 years generally attributed to second round picks that you want to sign anyway.
If 2014 first-rounder Bogdan Bogdanovic had been a second round pick, for example, he could have commanded $5-10 million per year this offseason. Alex Abrines just signed with OKC last week for $6 million per year, and Bogdan is a better prospect.
Other second round picks have been given largely unprecedented guaranteed money this summer too.
Ulis, Isaiah Whitehead (#42, Utah) and Paul Zipser (#48, Chicago) are the only teams to negotiate four year contracts so far, but a whopping 12 of the 30 second round picks have already signed deals for 2+ years (with 10 of those 12 being 3+ years).
All of them are in the $800,000 to $1 million per year range, a smoking deal considering the $94-110 million salary cap that teams will commit to just 13-15 players each season (an average of $6-7 million per roster spot).
The next CBA
The widening gap on rookie contracts has become too large, especially this summer. When negotiated in 2011, the next ten years’ rookie salaries were based on conservative inflation, with little regard to relativity with a salary cap. If the league had experienced a decline and the cap dropped, rookie salaries would have risen anyway. As it turned out, a 35% increase in the cap this summer had no impact on rookie salaries.
The next CBA should make rookie salaries a direct function of the cap, much like ‘maximum salaries’ are calculated.
There’s no way a player should get 1/110th of the salary cap when he represents 1/15th of the roster spots.
Until then, look for teams to lock up as many low-salary contracts as possible, with special emphasis on long-term deals with their youngest players.
The current Collective Bargaining Agreement on how to spend the league’s revenue can be rendered null and void by either the players or teams as early as next summer. In 2011, the owners locked out the players while they haggled over the exact split of league revenues, settling on some overly complicated formula that nets the players somewhere around half of the biggest income sources.
This time, as early as July 1, 2017, either side can opt out of the current CBA. But this time, if there is a work stoppage, it’s likely going to be focused on the more minute details of contract negotiations given the today’s landscape of the higher cap.