The entire NBA will have almost a billion dollars to spend on free agents next summer.
That is the result of the much-discussed new national TV contract (worth $24 billion over nine years) with ESPN and Turner Sports that kicks in next season. The league will make much more money, and the players will be paid much more money as a result. The question then becomes, how will it be spent? Players will be overpaid. Short-term deals will be crucial. The teams that adapt to the new reality will be rewarded for years to come.
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That nearly $1 billion in projected cap space, which SB Nation first brought to the NBA world’s attention, works out to more than $32 million per team, which is more than any player, even on a maximum contract, can make in a year. That is great news for teams such as the Lakers, 76ers and Celtics, three historic NBA powers who positioned themselves to have a ton of spending flexibility and take advantage of more tightly budgeted current powers such as the Cavaliers, Spurs and Warriors.
To better understand where these numbers and the numbers that follow come from, consider:
• The salary cap will leap from $70 million for this season to a projected $92 million next season. Initial estimates were for $89 million, but even the new projections could fall short when the NBA checks the books — The Washington Post reported some teams expect it to reach $95 million.
• That total $1 billion calculation in available cap space understates the flexibility for teams like the Wizards, who can use a low cap hold for Bradley Beal to spend up to the cap and then use his Bird rights to go over.
• A little more than half of the roster spots in the league for 2016-17 are already spoken for because of guaranteed contracts even before accounting for draft picks, overseas arrivals and minimum salaries. Teams will be holding a ton of money with fewer spots and an even narrower worthy talent pool to spend it on.
ALSO: Here is an explanation of how the composite total was figured out
The expectation of another big cap bump in 2017 — when a new collective bargaining agreement is expected — exacerbates the potential for extravagant contracts. Front offices can rationalize away irresponsible signings using a familiar refrain to what we heard this summer: Salaries will be so much higher in the future that seemingly “bad” deals will look better. While that logic applied last summer because the 2016 increase was (and is) inevitable, the next CBA probably should be considered before any rash moves are made this summer.
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These factors build off each other to create a substantially different offseason than any we have seen recently. Last summer, even with the largest cap increase since 2001, nearly every team that started July with space had used almost all of it before the end of the moratorium on July 9. The Kings were the butt of jokes because they missed out on so many free agents early in the process, but even then, they agreed to terms with Rajon Rondo on July 3 and Kosta Koufos on July 4.
That quick spending caused the well to dry up for restricted free agents who wanted to play the open market. Restricted free agents can not sign offer sheets before the moratorium ended, but this summer, more than enough teams still will be able to make strong offer sheets to whichever players do not make agreements ahead of time.
That becomes an even bigger factor because the moratorium is longer than usual this offseason: Free agency negotiations will be open without anything becoming official all the way until July 12. That could lead to a segmented process, where many of the unrestricted players agree to deals but there are enough teams with cap space and a narrow enough group of players to spend it on that teams and restricted free agents negotiate even offer sheets, which traditionally had waited until contracts could be signed. That would give teams such as the Warriors with Harrison Barnes, Magic with Evan Fournier or even Wizards with Bradley Beal more time to consider how much to spend on restricted free agents.
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The insane amount of available money will surely lead to some bad signings but will also make players already under contract much more attractive. Hassan Whiteside and Barnes getting offers in the four year, $90 million range will make contracts such as Brook Lopez (one year, $21 million plus a player option), Lou Williams (two years, $14 million) and Rudy Gay (one year, $13.3 million plus a player option) look like bargains in terms of both salary and contract length. The trade market, as Sporting News reported previously, is expected to be bustling during this offseason as a result.
Another growing possibility is that teams start the 2016-17 regular season below the salary floor (about $81 million using a $92 million cap estimate). Since the penalty is just distributing the difference among the other players and calculations for it are not done until the end of the regular season, some teams could choose to weather the spending storm and prepare for 2017 while leaving the door open to use space during the season through signings or trades if opportunity presents itself like Portland did in trading for Anderson Varejao and getting a future first-rounder with him, then releasing him.
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In a twist, more teams embracing that spendthrift strategy would lead to a larger salary cap spike in 2017 because players not getting the agreed-upon proportion of money in a prior season pushes the cap number up the next year. That was the original rationale behind the projected spike in 2017-18, and it could get stronger between now and then.
The sheer amount of available cap space this summer ensures that teams will be competing in an entirely new ecosystem where most of the well-established norms and practices will not apply. While strong planning and luck will help, the franchises who best adapt to this new paradigm can put themselves on the path to long-term success in just one summer while some will inevitably saddle themselves with problems that require years of struggle to overcome.