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The thirty NBA teams will collectively have almost $1 billion to spend on free agents this offseason. It’s a good time to be a basketball player!
This massive bounty is a result of the much-hyped new TV contract with ESPN and Turner Sports, worth in excess of $USD 24 billion over nine years, which kicks in next season.
The league will make more money at every level, and the players will see average salaries rise accordingly. A rising tide lifts all boats.
That $1 billion in anticipated cap space works out to be more than $30 million per team. This is more than any player, even those on a maximum contract, can make in a year.
The first logical question is to ask how will all this money be spent? Players will be overpaid, that much is certain. Average players who are hitting free agency next month figure to be the biggest beneficiaries.
Take Kent Bazemore. A modest estimate places the annual salary of his next contract at $12 million. It’s a near certainty he will be making more than Steph Curry (who is on a tick over $12 million) next season, and, if a franchise gets desperate, he could make as much as Russell Westbrook and James Harden ($16-17 million).
In an overinflated market, short-term deals will be crucial, and teams who adapt to the new landscape will be rewarded in the long run.
Before we dig any deeper, here are a few factoids behind all these dollars.
• The salary cap will jump from approximately $70 million this season to a projected $92 million next season. And even this estimate could be low – the Washington Post reported some teams expect it to reach $95 million.
• There is the expectation of another significant cap jump in 2017 – coincidently when a new collective bargaining agreement could be negotiated. This could further fuel the spending frenzy come July 1. Front offices can justify any contract using a familiar retort to what we heard last offseason: salaries will be so much higher in the future so ostensibly ‘bad’ deals will look better in a couple of years.
• Roughly 60% of NBA roster spots for 2016-17 are already accounted for. This number is lower than the actual representation as it fails to include draft picks, overseas arrivals and minimum salaries. In other words, teams will have all this money and fewer options to spend it on.
• The $1 billion total actually understates the potential spending power for teams like the Golden State Warriors, who can use a low cap hold for Harrison Barnes to spend up to the cap and use his Bird rights to go over.
These factors combine to create a noticeably different offseason than any we have seen recently. Last offseason saw almost every team use up all their cap space before the end of the moratorium on July 9.
That rapid spending caused the market to dry up for restricted free agents who wanted to test the open market. Restricted free agents can’t sign offer sheets before the moratorium ends, but this time around plenty of teams will be able to make offers to any players who do not make early agreements.
The crazy amount of available money will lead to bad contracts and players being overpaid. But it will also make players already under contract so much more attractive.
Hassan Whiteside, Nicolas Batum and DeMar DeRozen all getting offers in the four year, $90 million range will make existing contracts like Brook Lopez (one year, $21 million), Lou Williams (two years, $14 million) and Rudy Gay (one year, $13.3 million plus a player option) look like bargains in terms of both salary and contract length.
Heck, even Enes Kanter’s four year, $70 million deal will look decent in a few months. $17 million a year will soon be the going rate for a starting calibre player.
Also, don’t be surprised to see teams start the 2016-17 regular season below the salary floor (roughly $81 million using a $92 million cap estimate). The penalty for this isn’t actually a penalty – the ‘penalty’ is distributing the difference among contracted players and calculations for are not done until the end of the regular season.
There is potential to collect draft assets in exchange for absorbing contracts into this cap space, just like Portland did this season in trading for Anderson Varejao along with a future first-round pick.
The astonishing amount of available cap space this offseason ensures that we are heading towards a new NBA, one that will disrupt the long accepted ecosystem. Those who adapt best to this new reality can take giant steps on the path to success, while those who inevitably hand out problematic contracts will be riddled with massive headaches for the remainder of this decade.
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