How can a useless player with a big contract be a trade commodity in the NBA?
January 2, 2011 4:25 PM
Could somebody please explain to me the economics by which a useless NBA player with a large contract is valuable on the trade market?
I know it involves the salary cap but I do not get it even though the local pundits have tried a number of explanations. I don't think they understand it. It astounded me that the Rockets got what they did for TMac last year and apparently they are going to be able to get something soon for Yao. Simple mindedly, can I expect to be astounded again? Or is it so complex that it is impossible for a fan who is not a trickster accountant to comprehend?
I know it involves the salary cap but I do not get it even though the local pundits have tried a number of explanations. I don't think they understand it. It astounded me that the Rockets got what they did for TMac last year and apparently they are going to be able to get something soon for Yao. Simple mindedly, can I expect to be astounded again? Or is it so complex that it is impossible for a fan who is not a trickster accountant to comprehend?
Basically, it depends on whether the contract is what is referred to as "expiring" or not. Expiring means, obviously, it expires at the end of the season. Which would mean that the money that McGrady was being paid (I forget the amount but I think it was upwards of $18, may have been $20 as he was on a max deal), would come off their books, freeing up that money in cap space. It is that cap space that allows teams to sign players like the Knicks did this summer with Amar'e Stoudemire, with enough space left over to absorb a second max contract (they failed to do so) or a player like Carmelo Anthony's $16 million this season.
Longer term contracts like Elton Brand's are more difficult to move, but get more valuable the closer they get to expiring. So Brand's owed $51 million over the next three seasons (his $16 million would be prorated this season in a trade). His value becomes much more valuable at the trade deadline next year, when a team would be able to acquire him, pay him for the prorated amount for the remainder of the season, play him through the end of his contract in 2013, and then have that space off their books.
(NOTE: Brand has what's referred to as an ETO- Early Termination Option- for 2013, which means he could opt out. If a team could convince him to opt out, they'd have him off the books in 2012. Un-bloody-likely, but should be mentioned.
A great example for this season would be Yao Ming, who's $17.7 million contract expires this season, and $8 million of it is insured under his insurance policy for his injury which has ended his season. So you trade for Ming, you pay him roughly $8 million for the season, then you have $17 million in cap space.
But of course, the problem this season is that the Collective Bargaining Agreement will expire at the end of this season and the owners are pushing for massive changes which would make things like expiring contracts this summer much less attractive. So there's that.
For more check out Larry Coon's essential CBA FAQ.
posted by paroxysm at 4:53 PM on January 2, 2011
Longer term contracts like Elton Brand's are more difficult to move, but get more valuable the closer they get to expiring. So Brand's owed $51 million over the next three seasons (his $16 million would be prorated this season in a trade). His value becomes much more valuable at the trade deadline next year, when a team would be able to acquire him, pay him for the prorated amount for the remainder of the season, play him through the end of his contract in 2013, and then have that space off their books.
(NOTE: Brand has what's referred to as an ETO- Early Termination Option- for 2013, which means he could opt out. If a team could convince him to opt out, they'd have him off the books in 2012. Un-bloody-likely, but should be mentioned.
A great example for this season would be Yao Ming, who's $17.7 million contract expires this season, and $8 million of it is insured under his insurance policy for his injury which has ended his season. So you trade for Ming, you pay him roughly $8 million for the season, then you have $17 million in cap space.
But of course, the problem this season is that the Collective Bargaining Agreement will expire at the end of this season and the owners are pushing for massive changes which would make things like expiring contracts this summer much less attractive. So there's that.
For more check out Larry Coon's essential CBA FAQ.
posted by paroxysm at 4:53 PM on January 2, 2011
It is indeed the ramifications of the salary cap at work here. "Cap-ology" is both science and voodoo. It's likely the local guys don't understand it. It's akin to the old saying about Hollywood -- nobody knows anything.
The simplest way to put it is that there are three major forces at work, and maneuvers are all about balancing the three forces.
* You can spend only X dollars every year.
* Per-year salaries fit into "slots" like a player max, a mid-level, a minimum, etc.
* You can make trades with players or groups of players with equal costs.
Under this system, a high salary on an expiring contract has a weird kind of secondary value -- you have the opportunity to allow the contract to expire and use that "slot" to sign a high-priced free agent. This is the McGrady example.
So, let's say you're Team A and you have Player 1. Let's also presume that Player A is indeed worthless -- like Yao, for whom it is questionable that he will ever play again.
Your friend on Team B has his sights set on signing Player 2. He needs to clear the salary cap room to do this. He trades you Players 3 and 4, who together are worth Player 1's salary. Then he says bye-bye to Player 1 and never pays him (or pays him for only very little time), and signs Player 2.
What did you get out of it? You got Players 3 and 4, whom you can also choose to sign (or not). More importantly, you got rid of that giant albatross in Player 1, who was preventing you from getting things done.
In the McGrady deal, it was actually a three-team trade with New York and Sacramento. Houston wanted to get rid of McGrady. New York wanted to look like a better option for the LeBron sweepstakes, and possibly mitigate any damage if LeBron didn't sign with them (they eventually let McGrady go). Sacramento was essentially just moving bodies around.
Finally, realize that neither McGrady (at the time) or Yao (now) is worthless. McGrady put up several 20-point games for the Knicks. As for Yao ... well, you can't teach someone to be 7-feet tall.
posted by Cool Papa Bell at 5:07 PM on January 2, 2011
The simplest way to put it is that there are three major forces at work, and maneuvers are all about balancing the three forces.
* You can spend only X dollars every year.
* Per-year salaries fit into "slots" like a player max, a mid-level, a minimum, etc.
* You can make trades with players or groups of players with equal costs.
Under this system, a high salary on an expiring contract has a weird kind of secondary value -- you have the opportunity to allow the contract to expire and use that "slot" to sign a high-priced free agent. This is the McGrady example.
So, let's say you're Team A and you have Player 1. Let's also presume that Player A is indeed worthless -- like Yao, for whom it is questionable that he will ever play again.
Your friend on Team B has his sights set on signing Player 2. He needs to clear the salary cap room to do this. He trades you Players 3 and 4, who together are worth Player 1's salary. Then he says bye-bye to Player 1 and never pays him (or pays him for only very little time), and signs Player 2.
What did you get out of it? You got Players 3 and 4, whom you can also choose to sign (or not). More importantly, you got rid of that giant albatross in Player 1, who was preventing you from getting things done.
In the McGrady deal, it was actually a three-team trade with New York and Sacramento. Houston wanted to get rid of McGrady. New York wanted to look like a better option for the LeBron sweepstakes, and possibly mitigate any damage if LeBron didn't sign with them (they eventually let McGrady go). Sacramento was essentially just moving bodies around.
Finally, realize that neither McGrady (at the time) or Yao (now) is worthless. McGrady put up several 20-point games for the Knicks. As for Yao ... well, you can't teach someone to be 7-feet tall.
posted by Cool Papa Bell at 5:07 PM on January 2, 2011
In the McGrady trade, the Knicks got McGrady, but the major prize for them was not having Jared Jeffries. Because you can't just fire a guy in the NBA, Jeffries was a guy with negative value - no team was willing to take him on for free*, so the Knicks were stuck paying his wages. This was especially painful to them, because the, as noted above, they wanted the cap space. Other teams knew that New York would be willing to pay to get rid of him, and the Rockets capitalized on that.
*: In fact, taking a player for free is illegal in the NBA, but they could have offered a top-55-protected draft pick, or a European prospect drafted in 1995 for him. Nobody did.
posted by piato at 5:10 PM on January 2, 2011
*: In fact, taking a player for free is illegal in the NBA, but they could have offered a top-55-protected draft pick, or a European prospect drafted in 1995 for him. Nobody did.
posted by piato at 5:10 PM on January 2, 2011
It's about large expiring contracts. There's a salary cap, and if Yao's $18m is coming off the books, and you trade back pieces more valuable to Houston in terms of playing ability but with longer-term deals, Houston gets players, Other Team gets room under the salary cap to sign different players next year.
posted by J. Wilson at 5:16 PM on January 2, 2011
posted by J. Wilson at 5:16 PM on January 2, 2011
As mentioned above, it really is all about cap space. An expiring contract is like gold to teams that have spent poorly and are looking for a way out. In this way, you can see teams who've got solid, solid talent, but end up giving up on it due to poor signings of other players. The league is filled with players who have great seasons just before their contract is up, and every single time they manage to convince a GM somewhere to take a shot (I'm looking at you, John Salmons, Drew Gooden, Larry Hughes, and many, many others), and usually they get signed for much more than they should. There's Dan Gadzuric, for example, who had one decent year as a backup center, and somehow got a five year deal at something like $7million per. Now, he's trade filler, bouncing around the league until it expires. When the cap is, what, around $60 million now (I could be off significantly), that's a huge chunk of your team's payroll spent on a guy who doesn't play. If you can, you find a more gullible GM to pawn him off, but Isaiah Thomas isn't a GM anymore, so you try to package him in a deal with a more desirable, young talent, and try to trade for an established player. When that doesn't work, you give up and package that young player, Gadzuric, and as many crap players as you can to get, say, T-Mac and his $20 million dollar deal so that, in the summer, instead of being maxed out, you've got that $20 million to spend on free agents.
Of course, if you have the same GM, you'll probably waste that on players who had flukey good contract years, and will never again reach the same level of output. Say, Hedo Turkoglu?
posted by Ghidorah at 5:20 PM on January 2, 2011
Of course, if you have the same GM, you'll probably waste that on players who had flukey good contract years, and will never again reach the same level of output. Say, Hedo Turkoglu?
posted by Ghidorah at 5:20 PM on January 2, 2011
If the big contract was front-loaded, say $50m over 5 years, but the last year he's only getting $5m, the player seems less useless for the price.
You can also (I believe) trade cash. You owe a guy $5m, but he is useless to you. So you pay him $2m, and offer him in trade so the "buying" team only has to pay $3m. Which again, like above, makes him more valuable to some other team. Meanwhile, you've got $3m to hire three rookies. Or someone else's useless player that isn't so useless to you for the position he plays.
Also, this.
posted by gjc at 5:49 PM on January 2, 2011
You can also (I believe) trade cash. You owe a guy $5m, but he is useless to you. So you pay him $2m, and offer him in trade so the "buying" team only has to pay $3m. Which again, like above, makes him more valuable to some other team. Meanwhile, you've got $3m to hire three rookies. Or someone else's useless player that isn't so useless to you for the position he plays.
Also, this.
posted by gjc at 5:49 PM on January 2, 2011
For years, Theo Ratliff was known in certain circles as Theo Ratliff's Expiring Contract, because that's the phrase that was constantly being mentioned in trade rumors/theories.
posted by Rock Steady at 9:50 PM on January 2, 2011
posted by Rock Steady at 9:50 PM on January 2, 2011
Thank you a . m! You all make far more sense than my media gurus.
posted by bukvich at 10:15 AM on January 3, 2011
posted by bukvich at 10:15 AM on January 3, 2011
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In its simplest form, a salary cap means there is a maximum amount of money you can spend on players in a year (ignoring luxury taxes, etc). If the salary cap was $100 million (to make the math easy), you could hire 10 guys at $10 million each. But what also matters is the length of their contracts. If you gave everybody on your team a five year contract, it would mean that you could not bring anybody new onto the team for five years. You may, however, be able to trade two of your good players who are on the hook for five years at $10 million per year for a really bad player who is owed $20 million per year for only one more year. Making this trade will make your team much worse in the short term---you trade two good players for one bad player---but you gave yourself the option to offer somebody new a $20 million dollar contract in the future.
To make it more grounded in the NBA, the Knicks wanted Tracy McGrady because he had a big contract that was about to expire. Taking McGrady's salary off the books, gave the the Knicks enough space in their salary cap to bring in two superstars and pay them the maximum salary. Things didn't work out as well as the Knicks had hoped---they really wanted LeBron James---but it gave them a fighting chance at the superstar free agents. As a Knicks fan, I was pretty proud of their efforts last summer.
posted by eisenkr at 4:51 PM on January 2, 2011