Monday, July 16, 2012

Wait, How Much Money???: Spending and Overspending in NBA Free Agency



With the NBA Finals and NBA Draft now complete, teams are starting to look forward into the future. With the new CBA in place for the first time this offseason, GM’s are looking to see how much flexibility they have to sign new players and improve their roster. Unfortunately, this has led to some flat out bad contracts, with average players getting way too much money. Overblown and ludicrous contracts were one of the things that the lockout was supposed to solve, and the NBA even rewarded bad behavior by creating the amnesty provision.

The offer sheets that are getting thrown around are absolutely ridiculous. Nicolas Batum and Brook Lopez are solid, above average players, but their play should not reward them with the most money a team could possibly offer. Omer Asik’s offer sheet from the Houston Rocket is even more absurd. He’s an ok backup center who could get $15 million in the third year of his deal! Asik is just another example of how much the NBA values big men with even a little bit of skill or potential. Like Asik, Jeremy Lin has an offer sheet from the Rockets that has close to $15 million in the final year. Using this “poison pill” tactic, GM Daryl Morey makes it very hard for the Knicks to match because of provisions the new CBA. If they were to match his offer, the Knicks would have to pay up to $43 million in luxury tax fees in 2015. Although Knicks owner James Dolan has shown in the past that he could care less about monetary penalties (although he was smart in not match Landy Fields’ ridiculous $20 million offer sheet), rumors out of New York’s camp seem to imply that he are seriously considering letting Lin walk. The poison pill seems to be working so far, and it will be interesting to see if other GM’s use this method to sign restricted free agents in the future.

Of course, I’d be remiss if I didn’t mention the various trades that have made in the past couple weeks. Steve Nash, Joe Johnson, and Kyle Lowry all changed jerseys for a relatively low costs to the teams that acquired them. Johnson’s trade in particular is interesting because it highlights Brooklyn’s all-out blitz to compete in the playoffs next season. Although they seemed to have failed in their attempts to procure Dwight Howard, they resigned star Deron Williams and key contributors Lopez and Gerald Wallace, creating an interesting starting lineup next year. That group of players almost assures them a spot in the playoffs in the poor Eastern conference.

As a passionate NBA fan, it’s maddening to have an offseason of overspending and dumb contracts. The lockout and new CBA were supposed to curb frivolous spending, but it seems owners and GM’s don’t care unless the signing has serious luxury tax implications. I hope some of these signings work out, because if they don’t, we’ll see as many amnesties in two years as we did this year.   

2 comments:

  1. It's so hard to find a standard to judge absurdity by. In the late 60s, Bill Russell and Wilt Chamberlain were each making around $250K, and that seemed like an incredible amount of money compared to baseball, where people like Mickey Mantle and Willie Mays made just over $100K.

    To complete the argument, I think you have to go one of two ways: Either it's absurd to pay Asik $15 million because there's a better player you could get with that money. Or you have a model of how much Houston's revenue will increase with each extra win and how many extra wins (maybe a fractional number) Asik could get them.

    Without something like that to nail the numbers down, the contracts aren't absurd, they're just unheard-of.

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  2. I was going off of what I thought the market was for these types of players. Centers, for the most part, are overvalued because they're aren't a lot of skilled, 7-foot big men in the NBA. When a few of them hit free agency, teams tend to pounce and give them a lot of money. I also should have had more explicit comparisons to other players on the market.

    In my opinion, Asik is an average backup center whose contract doesn't represent fair market value. Greg Stiemsma and Marcus Camby, also free agents, represent equal value at this point in their careers. They roughly have the same skill-set as Asik, who is a good defensive center that can block shots and get rebounds. The Timberwolves are paying Stiemsma $3 million for one year, and the Knicks are paying Camby $13 million over 3 years. Asik's gets $5 million in each of the first 2 years, and then $15 million in the third year. In my opinion, Houston could have signed either Camby or Stiemsma and saved a lot of money without losing much value at all. They apparently see Asik as a much better player, and are paying him that way. It also doesn't help that they will now also owe Jeremy Lin the same about of money in 2015, although not all of their salary will count against the cap.

    As for Landry Fields, there were several other comparable players that the Raptors could have signed (OJ Mayo, Ray Allen, Jamal Crawford, Gerald Green, Jason Terry, etc.). What makes his contract unique is that it was signed with an ulterior motive. By signing Fields to a large offer sheet, Toronto hindered the Knicks ability to sign-and-trade for Steve Nash, who ended up going to Los Angeles. Now the Raptors are left with Fields, who they really only felt comfortable paying if it meant getting Steve Nash as well.

    Thanks for the input Doug!

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