One year removed from dramatic overspending by a multitude of NBA teams, precipitated by an influx of money from the recent $24-billion television deal, we are seeing a growing number of un-signed free agents feel the pinch of market correction—and it will continue to get worse before it gets better for a large swath of the league’s lesser talents. Mid-level players entering free agency next summer could face teams locked into spent money, unwilling or unable to pay commensurate price for their services, according to Tim MacMahon and Bobby Marks of ESPN:
This summer, only 14 teams entered free agency with cap space, and about $3 billion has been spent on free agents in this cycle, a figure that already includes $169 million extensions for James Harden and John Wall and eight rookie extensions signed before the Halloween deadline. Only 22 players have been signed with cap space, down from 60 last year.
The early projections for 2018-19: nine teams with cap space, and potentially 10 teams paying luxury tax.
"The real story is the nuclear winter for free agents coming next year," one team executive with authority to make personnel decisions told ESPN. "Teams planned the last two summers for the cap to be much higher. The fact that it went way down from the projections crushed teams."
"Nuclear winter," or summer, is probably a bit apocalyptic. Nevertheless, the consensus among several team executives was that the market correction would continue into next offseason. In particular, they projected the market to be tighter for the NBA's middle class in a star-studded free agency crop.
"Free agents will get squeezed," a general manager said.
The perennial all-star group should command market value in any cap climate, but the windfall enjoyed by standard roster pieces last summer—and to a lesser extent, this summer—may be all but consumed by the time next year’s crowd receives its payday, or lack thereof. It appears likely that cap smoothing in some form, rejected by the NBA Player’s Union in 2015, would have mitigated these issues, as well as prevented controversial signings such as Kevin Durant in Golden State that some found distasteful.
NBA teams that are now in luxury tax territory will have to quickly shed salary in order to regain some semblance of financial flexibility for the 2018 free agent class. Earlier this week, we saw the Portland Trail Blazers swallow the $20-million contract of Andrew Nicholson in order to jettison the mammoth contract of Allen Crabbe, ink still wet from last July. They will not be the last to save money is in this manner, and they may not be done themselves.
The punitive nature of the tax could cause some teams to make cost-cutting moves: either salary-dump deals or using the stretch provision.
Portland is a good example of a blueprint that teams could follow next summer and for the foreseeable future, as the albatross of bad contracts signed in 2016 could either be stretched to alleviate a team's luxury tax penalty or traded to a team with cap space.
In Tuesday's deal between Brooklyn and Portland, the Trail Blazers, facing a luxury tax bill of $48 million, traded Allen Crabbe to Brooklyn in a move that could save Portland $60 million in combined luxury taxes and salary. Both Crabbe and Andrew Nicholson had signed multiyear contracts last summer.
Young teams in the rebuilding stage may benefit the most next summer, provided their finances are in order, as teams that spent big in the last two seasons find themselves over the cap when free agency arrives.
To learn more about how NBA teams may be affected by the current cap climate, follow this link and read MacMahon and Marks’ full article.