NBA AM: What Are NBA Free Agents Worth?

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The New Economy:  If you are even a casual fan of the NBA, you have likely heard the NBA hit the mother-load in its new television rights deal that kicks in next year. As a result, what we have all to come to understand in terms of player valuation is getting tossed out the door, as the salary cap for each team is going to escalate at such a massive rate, that every coveted player hitting free agency is going to get massively overpaid by current standards.

The common language when talking salary valuation is ‘what is this guy worth in millions?’ but the reality is value, especially max-level value, is computed as a percentage of the salary cap. Top-level players with less than seven years of NBA experience get 25 percent of the cap. If the cap is $1 billion, then they are worth 25 percent of that, whether you agree or like the number or not, that’s the way the labor deal is constructed.

Now teams don’t have to use that formula, they can always come under those figures if they believe the number is too large, but when dealing with agents, that is the bench mark and they typically will not deviate from that. They also usually apply that logic to lesser free agents as well.

Salary $66.7m $87m $97m
$5m 7.5% 5.7% 5.2%
$7m 10.5% 8.0% 7.2%
$9m 13.5% 10.3% 12.4%
$12m 18.0% 13.8% 12.4%
$14m 21.0% 16.1% 14.4%
$16m 24.0% 18.4% 16.5%
$18m 27.0% 20.7% 18.6%
$20m 30.0% 23.0% 20.6%

So if the asking price on a player is going to be a percentage of the salary cap, and the salary cap is going to balloon out of control for a few years, virtually every coveted player this summer is going to be asking for and likely receiving significantly more money for a couple of key reasons.

The biggest is the lockup factor. If you want to tie a guy up for the next three or four years, you’re taking him out of the free agent pool when the cap is higher. So that value is going to be factored into the deal. When Eric Bledsoe signed his whopper $70 million deal with the Phoenix Suns last summer, the new cap environment played a big factor in those values.

When Orlando’s Tobias Harris or Milwaukee’s Khris Middleton ink their new deals this summer, they too will be looking at what their market values would be as free agents in each of the years their new contract takes them off the market.

So let’s say for the sake of argument that Harris and Middleton are truly worth $12 million per season as players. Next season, that’s 18 percent of the salary cap. In 2016, 18 percent of the salary cap becomes roughly $16 million and in 2019, 18 percent of the cap is $18 million. That’s three years and $46 million or an average of $15.3 million. That’s putting both players at 18 percent of the cap for three years with no built in raises beyond cap escalation.

So let’s do the same math problem but up the percentage to 21 percent of the cap; just under the 25 percent maximize allowed. That’s $14 million in 2015, $18 million in 2016 and $20 million in 2017 for a total deal of three years and $52 million, which averages out to $17.33 million; which, if you are not doing the math in your head, is greater than the $16.5 million max that could be offered on July 1.

Are Harris and Middleton truly max contract players? Maybe not, but they’ll get one because in three years this summer’s max is going to be a much smaller portion of the salary cap.

You can play this game out on smaller players too.

Let’s say Orlando Kyle O’Quinn is worth $5 million; that’s 7.5 percent of the cap. In 2016, 7.5 percent becomes just under $7 million and in 2017 that 7.5 percent is just over $7 million. That’s a total of three years and $19 million or an average of $6.33 million.

So that player that gets labeled as a $5 million a year guy, is really worth $6.33 million, that guy you think is worth $12 million is really worth $15.3 million and that guy you think is worth $14 million is really worth $17.3 million.

The new cap will be changing everything you have come to know in player valuation. Now it’s still up to teams and their general managers to sign off on deals (and trying to get a bargain, when possible), but tossing around $40 million in an offseason isn’t going to mean what it used to mean and some of those contracts that looked sort of fishy last summer are going to look better and better as the cap grows.

The Way Of Wade:  There has been a lot of talk lately about the state of things between Miami star Dwyane Wade and the Miami HEAT organization. Wade has a $16.1 million Player Option for next season that he is planning to opt-out of.

The problem is Wade is seeking a new three-year deal to recover much of the money he left on the table to allow the HEAT to re-tool and the HEAT, to put it nicely, are not as eager to tie up their cap space.

Sources close to the process say there really isn’t animosity between the two sides, but that there is a growing sense that Wade, if he does not receive his deal, would consider other opportunities in free agency.

Now before this horse gets out of the gate, Wade wants to remain in Miami and the HEAT want to retain Wade, so this is simply a case of figuring out the right way to make the numbers work.

The smart answer would be to have Wade opt-out and ink a one-year fully max deal worth $23.4 million and then do a new deal in 2016 when the cap is higher and there is more room.

The problem is Wade isn’t getting any younger or healthier and while the HEAT want to be loyal to Wade on many levels they also have other business to attend to, including re-signing Goran Dragic and finding cash in 2016 for would-be free agent Hassan Whiteside.

The Wade story seems more dramatic than it really is, there is a sense both sides will reach a deal. The question becomes how much and for how long?

The talk of Wade leaving isn’t as much a reality as a reminder, but is there really more than $16 million a year out there in free agency for Wade at this point in his career?

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