I know what you’re thinking, and no, I’m not out of my mind. While everyone has been talking about the Summer of 2010 with as much voracity as Y2K, people often forget that there are reasons and rules behind people’s actions. Sure Torontans consider it blasphemous that Chris Bosh would opt out and/or not re-sign, just as Clevelanders are convinced that (title or no title) LeBron James will remain atop the throne in his home state, but there are economics backing up the future decisions of the NBA’s superstars this summer. And that is something you cannot argue with.
With that in mind, I consulted Larry Coon, a computer scientist by both education and trade. While Coon works as an IT Director at the University of California, Irvine, in his spare time, the lifelong NBA fan has assimilated a working knowledge of the League’s salary cap and trade rules into what he calls, the NBA Salary Cap FAQ. A regular contributor to the New York Times NBA blog, Off the Dribble, Coon is to the basketball journalist what William Wesley is to the basketball player.
So looking at the NBA landscape this summer, the free agent pool has the potential to have never been deeper. LeBron James, Dwyane Wade, Chris Bosh, Amar’e Stoudemire, Joe Johnson, Paul Pierce, Ray Allen, Dirk Nowitzki, Yao Ming, Carlos Boozer, Manu Ginobili, Richard Jefferson, Michael Redd and oh yeah, Kobe Bryant, can all become free agents this summer, making for what should be the craziest offseason the League has ever seen.
Sure only Johnson, Allen, Boozer and Ginobili are currently unrestricted free agents, but with the NBA’s current Collective Bargaining Agreement (CBA) set to expire on July 1, 2011, it’s in every player’s best interest to lock in a new deal now opposed to waiting.
“It makes way more sense for them to terminate this summer, rather than wait until next summer,” says Coon. “A deal signed next summer will be by the terms of the next CBA. We don’t know what the final terms of the next CBA will be, but in all likelihood they’re going to be much more in favor of the owners â€“ shorter contracts, lower salaries, fewer guarantees, etc. This summer is their last chance to lock in a deal under the terms of the current CBA.”
So here lies the dilemma. If you’re a player with either an Early Termination Option or a Player Option on the table, what do you do? Do you become a free agent this summer, or play one more year under your current contract and become a free agent next summer? If the NBA is going to get their way in the new CBA (which in all likelihood points to just that), then you’re most likely going to see your team’s franchise player hit the open market in five months â€“ even if they plan on returning.
“Even players who are extending are in danger,” says Coon. “The salary in the first year of an extension can’t exceed the maximum salary in that year. If the rules for maximum salaries change significantly in 2011, then the players whose extensions kick in that year will be subject to the new rules. I wrote an article about this a couple months ago, predicting that Kobe Bryant (among others) would become a free agent this summer and sign a new deal rather than sign an extension.”
The point that Coon raised in his article is this: If Kobe signing a contract extension with the Lakers is a foregone conclusion, then why is it not already done? It has been rumored since last summer that he’s been close, but the deal has still not been made. As Coon points out, Bryant can guarantee himself more money by first becoming a free agent, and then re-signing with the Lakers.
“There is a small tradeoff,” says Coon. “It works to his benefit that he gets to play the free agent market â€“ be wooed by other teams, etc. It gives him the opportunity to leave if he chooses, although all indications are that there’s about a zero percent chance of that happening. The downside for him is that he has no long-term security. If he blows out a knee tomorrow, then this year’s salary might be it for him. If he extends now, he locks in big, long-term dollars.”
So if I’m 32-year-old Paul Pierce, and I’m set to make $21.5 million next season, what is in my best interest? Coon says that if Pierce can get a deal that locks him in for a lot of years, then he takes it this summer. With his salary already at a max level, like Kobe, he’ll probably opt out rather than extend and risk having the rules for max salaries change significantly.
But if I’m Kenyon Martin, and I’m going to be making almost $17 million next season â€“ a figure that I would never fetch on today’s open market â€“ there’s no way in hell that I’m opting-out.
It breaks down three ways:
1. The max contract guys (Kobe, LeBron, Wade, Bosh, Amar’e) will opt out this summer.
2. The non-max guys (Pierce, Dirk, Yao, Jefferson, Redd) can either opt out or extend.
3. The guys like K-Mart, Tyson Chandler, Peja Stojakovic, Eddy Curry and Jared Jeffries will need to hang onto their current deals, protecting the income they’ve already secured.
In a shaky economy, these decisions are scary. Sure, by opting out this summer, Kobe, LeBron, Wade, Bosh and Amar’e will be making a little less in 2010-11 than they are already signed for, but they will more than make up for that monetary loss in a long-term deal. As Coon puts it, these guys are “max years, max salary players, no ifs, ands or buts.” But for everyone else, that’s up to them to decide.
What do you think? Of this summer’s bumper crop of potential free agents, who terminates their contract early/declines their player option to test the waters?
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