Do the upcoming cap increases make expiring max deals pointless?

[Hemingway]

As of next year, when about everyone will have money to spend will the value of having a guy with 1 year left on a max deal be diminished?

If the past, rolling over expiring max deals has been very important. Guys like Theo, Wally, Raef. The trick was if you couldn't trade the player (with picks) for a star than trade him at the very end to get a guy with 1 more year so you can try again next year. That was the point of the draft night trade that got us telfair if I remember correctly. Under that old way of thinking, we would be looking at Lee as #1 matching contract in a trade for a star. And if we can't get one we need to trade him for a guy with one more year so we can basically have a another Lee next year. But with the cap on the rise is all of this out the window?

If next year NYK wanted to get rid of melo, they could just trade him to any team with enough room for a pick right? These cap increases kind of suck to well managed teams like us. Just when we are getting to the point where we can put the best deal on the table for a disgruntled star the rules are changing. If we don't get someone this yar for Lee or Amir we are kind of funked. We would still have picks and cap space but one of our best options (having decent guys with 1 year left on big deals to put into a trade) is mitigated.

[obnoxiousmime]

Expiring deals haven't mattered much for a long time. Back when everyone was over the cap, the league was full of bad long-term deals, and things like trade exceptions didn't exist, expiring deals were the only way for a bloated team to get some relief. Teams manage their cap a lot better now and there are always teams under the cap to help facilitate trades.

[Csfan1984]

Not pointless. Teams are always looking to dump bad contracts. All cap going up means is you actually have money to sign a single FA. Yet more cap space by dumping guys for expirings would mean you can sign a bigger FA or multiple FAs. If Davis had held off on an extension how big would it have been to have cap space to tell Davis and Durant they could team up on your team because you had the $ to sign both? More money always helps. Though the team isn't getting those two guys it is possible to get a max player to consider your team by say trading top 3-5 pick via Nets for Cousins which becomes easier if you can absorb his whole contract with your cap space. Maybe Durant or Barnes then considers Boston a prime winning destination. Then again maybe team trades for Melo then gets Hordford to sign with C's. More $ helps to make more things possible no matter the team.

[JBcat]

Expiring deals haven't mattered much for a long time. Back when everyone was over the cap, the league was full of bad long-term deals, and things like trade exceptions didn't exist, expiring deals were the only way for a bloated team to get some relief. Teams manage their cap a lot better now and there are always teams under the cap to help facilitate trades.

I think part of this is true that there aren't as many bad long term deals in the past.

However I think expirings still matter as part of matching salaries in trades with a star going 1 way, and mostly young players going the other way.  For example hypothetically we couldn't simply trade KO, Sully, and Young for Melo.  Lee's big expiring would probably need to be mixed in somehow so the saleries match in a trade.  This is where Lee's, Johnson's, or even Jonas's contract could come into play this season in a trade.

[saltlover]

They used to matter a lot more in the old CBA when you could sign-and-trade for a player and give him the same deal as he would get for sticking with his original team.  So you could use your expiring and some draft picks to get a star.  Now the player gets the same if he signs with the new team regardless of whether a sign-and-trade was involved, so having a matching contract is only useful in acquiring max players steady under contract, which are rarer deals.

[Fafnir]

For one year only pretty much. Salary room is just going to be too available for absorbing salary to fetch much on the market.

Eventually it will normalize and the value will return.

[Donoghus]

For one year only pretty much. Salary room is just going to be too available for absorbing salary to fetch much on the market.

Eventually it will normalize and the value will return.

And so will the awful contracts.   Tough to gauge value & overpays right now but within a couple of years, we'll be back to some pretty awful albatross contracts.  Nature of the beast in the NBA.

[Hemingway]

We could have a lot of cap room next summer if we wanted to. I guess rolling over Lee's contract if we fail to get a better player for him is meaningless this time around because we will already be under the cap and could simply absorb a player into cap space. So maybe there is a decent chance we resign Lee to a lower contract if he fits in here and will take a friendly deal to stay.

[mmmmm]

The value of having max (or simply 'large') expiring contracts that you can trade has far less to do with cap room than with salary matching.

Consider two teams, A & B.

Team A has a superstar player on a large contract, who for whatever reason they can't or don't want to retain (maybe he's disgruntled, maybe his next contract is going to be too big for them, whatever).  For this exercise, it doesn't matter if Team A is over OR under the cap.

Team B wants to trade for the superstar.   They have a few draft picks that Team A is willing to take in exchange for the superstar.  But Team B IS over the salary cap.   Because B is over cap, the are required by the CBA rules to trade _out_ matching salary in order to bring in the superstar's contract.

In this situation, having an _expiring_ (or even better a non-guaranteed) contract to send out to Team A is ideal, because it imposes no extra commitment upon Team A.   Team A was going to pay the salary of the superstar anyway so they are no worse off (financially) for taking on the expiring contract.

Note that in this example, it does NOT matter whether Team A is below the cap or not.

So this shows why the rise in the cap doesn't really change the usefulness of having tradable, expiring (or non-guaranteed) contracts.

[KeepRondo]

Interesting thread. I would think the value of them will go down until the new salaries get readjusted. It may take 4-5 years until the value of expiring contracts go back to where they were.

[Fafnir]

For one year only pretty much. Salary room is just going to be too available for absorbing salary to fetch much on the market.

Eventually it will normalize and the value will return.

And so will the awful contracts.   Tough to gauge value & overpays right now but within a couple of years, we'll be back to some pretty awful albatross contracts.  Nature of the beast in the NBA.

Well since we can't have the 7 year deals anymore expirings will never become as valuable as they once were.

4/5 year deals really changed how the league operates.

[bdm860]

What might be interesting is the NBA could be at the top of the tv bubble right now.  League revenue isn't guaranteed to increase forever.  If the value of tv deals go down even a little, that could lead to some interesting situations in 2025 when the next tv deal goes into effect.  That's still a couple of generations of players away though, but down the road in 2022, 2023, 2024 we might see some interesting salary dumps if the cap is projected to go down.


Looking at the tv deal:

They signed their current tv deal with ESPN and TNT in 2014, and some people think they overbid as they had exclusive bidding rights and didn't want others like Fox or NBC to get the chance to bid.  Also they were pretty much the only sports deal available until 2020 with the Olympics (expires 2020), MLB (expires 2021), NHL (expires 2021), NFL (expires 2022), World Cup (originally expiring 2022, now 2026), March Madness (expires 2024), as well as all the football conferences other than the Big 10 already locked into deals.

Most of those tv deals were signed between 2010-2012, and it's been reported that cable tv subscriptions peaked in 2012 and have been declining ever since (at increasing rates too I believe).

Then we have this current news with ESPN laying off 300 employees, and most of those reports focus on cable subscription rates declining, which was a big source of the revenue that companies used to bid on these deals.  ESPN charges cable companies like $6+ right now to carry its channel, and it's built into their contracts to actually increase. I've read reports that said it's set to go up to about $8.50 in 2018. 

So cable subscription rates are declining (with many people blaming the high costs) while the cost to carry sports is increasing.  So to offset the lost subscriptions, they raise the price, which causes more people to cancel?  Welcome to the death spiral.

Sure cable companies like ESPN can go à la carte and offer streaming subscription services, but with pirating and sharing accounts that will come along with the high price I'm sure they'll charge, I don't know if that will be the savior the industry is hoping for.  Especially when people pay $10 for Netflix, $10 for Hulu, $20 for ESPN, $15 for HBO, etc.  As much as the consumer says they want to go à la carte, they also don't want to subscribe to several different services to get what they want.

While I don't see sports ever going away, I don't think it will always be the same revenue driver either.  There's a ton of industries  (music, radio, video sales and rentals, print media, etc.) where many probably thought the good times will last forever that are now on life support.  Sure they still exist, but they aren't really making money anymore.  Think of when things like when the tech bubble or Real Estate bubbles burst, a large part of that was because the prices kept getting bid up as the investors thought the values would continually increase.  Then you suddenly realize people aren't buying at the price you thought you could sell at.  This is where I think sports is headed, and if so the salary cap is going to have to take a hit at some point which will lead to the price to take a salary dump to go up.

[Donoghus]

What might be interesting is the NBA could be at the top of the tv bubble right now.  League revenue isn't guaranteed to increase forever.  If the value of tv deals go down even a little, that could lead to some interesting situations in 2025 when the next tv deal goes into effect.  That's still a couple of generations of players away though, but down the road in 2022, 2023, 2024 we might see some interesting salary dumps if the cap is projected to go down.


Looking at the tv deal:

They signed their current tv deal with ESPN and TNT in 2014, and some people think they overbid as they had exclusive bidding rights and didn't want others like Fox or NBC to get the chance to bid.  Also they were pretty much the only sports deal available until 2020 with the Olympics (expires 2020), MLB (expires 2021), NHL (expires 2021), NFL (expires 2022), World Cup (originally expiring 2022, now 2026), March Madness (expires 2024), as well as all the football conferences other than the Big 10 already locked into deals.

Most of those tv deals were signed between 2010-2012, and it's been reported that cable tv subscriptions peaked in 2012 and have been declining ever since (at increasing rates too I believe).

Then we have this current news with ESPN laying off 300 employees, and most of those reports focus on cable subscription rates declining, which was a big source of the revenue that companies used to bid on these deals.  ESPN charges cable companies like $6+ right now to carry its channel, and it's built into their contracts to actually increase. I've read reports that said it's set to go up to about $8.50 in 2018. 

So cable subscription rates are declining (with many people blaming the high costs) while the cost to carry sports is increasing.  So to offset the lost subscriptions, they raise the price, which causes more people to cancel?  Welcome to the death spiral.

Sure cable companies like ESPN can go à la carte and offer streaming subscription services, but with pirating and sharing accounts that will come along with the high price I'm sure they'll charge, I don't know if that will be the savior the industry is hoping for.  Especially when people pay $10 for Netflix, $10 for Hulu, $20 for ESPN, $15 for HBO, etc.  As much as the consumer says they want to go à la carte, they also don't want to subscribe to several different services to get what they want.

While I don't see sports ever going away, I don't think it will always be the same revenue driver either.  There's a ton of industries  (music, radio, video sales and rentals, print media, etc.) where many probably thought the good times will last forever that are now on life support.  Sure they still exist, but they aren't really making money anymore.  Think of when things like when the tech bubble or Real Estate bubbles burst, a large part of that was because the prices kept getting bid up as the investors thought the values would continually increase.  Then you suddenly realize people aren't buying at the price you thought you could sell at.  This is where I think sports is headed, and if so the salary cap is going to have to take a hit at some point which will lead to the price to take a salary dump to go up.

NBA certainly cashed in at the peak of the rights bubble.  It'll be interesting to see what happens with this upcoming contract negotiation for the Big Ten.   I think the networks & cable are starting to see the writing on the wall that you can't just blindly throw money at sports rights anymore without paying a cost.  ESPN is certainly feel that crunch now. 

Was talking a couple of my friends about this earlier this week (one actually works for ESPN and survived the cuts) and we were discussing where the future will lead on this.

You have to wonder its just a matter of when & not if when entities like Yahoo, Google, Netflix, etc. start getting involved in the game here with media rights and the leagues start taking them more seriously as broadcast partners.  Heck, the NFL just had the Yahoo experiment this past weekend.

You have to wonder how much money those entities will throw at the leagues when these next rights deals come up in the next decade and how it'll impact the leagues.

[KeepRondo]

For one year only pretty much. Salary room is just going to be too available for absorbing salary to fetch much on the market.

Eventually it will normalize and the value will return.

And so will the awful contracts.   Tough to gauge value & overpays right now but within a couple of years, we'll be back to some pretty awful albatross contracts.  Nature of the beast in the NBA.

Well since we can't have the 7 year deals anymore expirings will never become as valuable as they once were.

4/5 year deals really changed how the league operates.

Great point. They should bring back the 7 year contracts. Teams like the Celtics who have a good GM and an owner who doesn't involve himself with player contracts would have a step up.

Would be great to see teams sign players like they did back in the day to such horrible contracts like Allan Houston's contract with the Knicks

[fairweatherfan]

For one year only pretty much. Salary room is just going to be too available for absorbing salary to fetch much on the market.

Eventually it will normalize and the value will return.

And so will the awful contracts.   Tough to gauge value & overpays right now but within a couple of years, we'll be back to some pretty awful albatross contracts.  Nature of the beast in the NBA.

Well since we can't have the 7 year deals anymore expirings will never become as valuable as they once were.

4/5 year deals really changed how the league operates.

Great point. They should bring back the 7 year contracts. Teams like the Celtics who have a good GM and an owner who doesn't involve himself with player contracts would have a step up.

Would be great to see teams sign players like Allan Houston back in the day and get locked into those terrible contracts.

Haha, the Knicks did such a terrible job with the Allan Houston contract that the league came up with a rule that allowed teams to get out of those terrible contracts, informally called it the "Allan Houston Rule", and the Knicks STILL didn't use it on Allan Houston!  Good times. 

And while it probably helps the game overall it is kinda, sorta sad that teams are so much more protected from themselves these days.  It was fun to see bad front offices screw themselves over so thoroughly.