[NBA]In changing economy, expiring contracts a golden ticket

BetterThanEver · Jan 1, 2010

Interesting article on how the recession is affecting teams and making expiring contracts in demand. It also shows how the value of some star players are low, due to their max contracts.

http://www.nba.com/2009/news/features/shaun_powell/12/29/contracts/

In changing economy, expiring contracts a golden ticket

Posted Dec 29 2009 9:29AM

If the Pistons wanted to shake up their team, maybe put on a sale, two players would enter the conversation: Rip Hamilton and Kwame Brown.

Individually, it doesn't seem like a fair comparison. Hamilton is the team's most accomplished player, a proven scorer who can get 20 points a night and helped win a championship. Brown is a first overall pick who hasn't exactly panned out, to put it nicely, and would struggle to crack almost any starting lineup, and some rotations.

Which one would be in the most demand on the open market?

Easy call there. Kwame, of course.

That's because we left out one very important detail. Rip stands to make $48 million over the next four years. Kwame is on the last year of a contract that pays just over $4 million.

He has an expiring contract, gold in this market and this economy. Unless a team is raking in millions in revenue and is one player away from making a serious run at a championship, Hamilton wouldn't even get a second look around the NBA. He's an example of yesterday's excesses, a symbol of a different age, when teams routinely shelled out eight-figure yearly salaries to their better players because ... well, it seemed like the right thing to do at the time.

And that seems like a long time ago.

Welcome to the new business model. Teams don't necessarily like their players short, but they love players with short contracts. The contract itself, in most situations, is more attractive than the player. Bobby Simmons is hardly valued by the Nets for his production, but greatly valued for his expiring contract, which they will gladly watch as it melts $10.5 million off their payroll this summer.

As one general manager recently said: "An expiring contract is like a good sixth man nowadays."

Teams are being extra budget-conscious because the salary cap is expected to decrease when the league and the union hammer out a new labor agreement in 2011. Everyone expects the worst, if only because the boom decade is done. Fans aren't as carefree with their discretionary income. Advertisers and sponsors are squeezing their budgets. The overall economy is putting a pinch on everything and everyone. Teams are trimming front-office staffs.

Guess who's next to take a hit? That's right, the players themselves, if not in salary, then in length of contract.

When the goose was truly golden, and money gushed, and franchise values tripled, player salaries soared. Superstars were always paid well, then and now, but the real indicator of a healthy cash flow was the high cost of mediocrity. Players who merely filled a role and were hardly superstars were making healthy seven-figure salaries. And when these contracts became obvious mistakes, most teams could laugh them off, or at least find somebody else to take their errors.

No more. The economy and a greater reluctance to pay the luxury tax has made everyone tighter-fisted.

Budget woes forced the Nets, for example, to virtually give away their two best players, Richard Jefferson and Vince Carter, in recent years. Shortly before dumping them, the Nets gave them long and lucrative deals. And then the recession hit. Beset by arena and attendance issues, along with a change in the ownership structure, the Nets reacted swiftly. Jefferson was sent to Milwaukee in exchange for players with shorter deals. Carter (along with Ryan Anderson) was handed to the Magic for Rafer Alston and Tony Battie, two players with expiring contracts, along with Courtney Lee, who came cheap.

And recently, the Jazz, mindful of the luxury tax, surrendered their first round pick, the promising point guard Eric Maynor, because the Thunder agreed to take Matt Harpring's $6.5 million contract. That transaction saved the Jazz, a franchise that historically practiced fiscal responsibility until lately, more than $3 million.

Teams such as the Knicks are also anxious to shed payroll in anticipation of spending next summer in the Great Free Agent Market. But in reality, no more than a handful of teams will have the financial wherewithal to make a run at LeBron James and Dwyane Wade, and even then, those players can make millions more money by staying put. Which, as one GM predicts, is exactly what they'll do, because money will be the great equalizer.

The big losers next summer will likely be the B- and C-list free agents who must settle for the exemptions, if they can get even that. And most teams will be receptive to only one-year deals in those situations, given the approaching labor agreement.

Strange: Two years ago Elton Brand commanded a massive contract that still has four years and $67 million left. Now, even if they wanted to give him away for an expiring contract, the Sixers would have a tough time doing that.

Let's put it this way -- If the Clippers offered a point guard choice of Baron Davis (four years, $53 million) and Sebastian Telfair (two years, $5 million) ... well, everyone knows who plays better. But in today's market, who looks better?
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[NBA]In changing economy, expiring contracts a golden ticket

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