It’s been well documented that the cap is exploding. From $63M in 2015 to projections of $108M in 2018, there’s going to be a major increase in the cap within the next few years. With this increase, it’s pretty clear that a new NBA economy is developing and GMs aren’t exactly sure how to respond in valuing players.
While massive inflation occurs with most players, one commodity that’s going to remain fairly steady in price is first-round draft picks.
The NBA uses a predetermined rookie scale to determine how much rookies are paid based on their draft order. These rookie scale deals are seeing very small incremental increases while every other contract in the NBA is undergoing massive spikes up.
Taking the salary of the first overall pick in the next few years as an example and comparing it to the salary cap increase overall, it’s easy to see how these picks will become more valuable as they eat up less of the total cap space that teams possess:
Rookie deals have always had tremendous value in the NBA. Because rookies who aren’t even in the league yet aren’t able to represent themselves in labor deals, they often get the short end of the stick. For whatever reason, rookie scale deals weren’t negotiated as a percentage of total basketball revenue in the last CBA. As a result, these deals are going to pale in comparison to everything around them.
What makes these first round deals even better is that they’re team-controlled for up to five years. As a basic background, first-round picks get paid a relatively meager four-year salary, with team options on the third and four years. The fourth-year option sees a larger increase in pay than the first few years, with the No. 1 overall pick getting a 26.1 percent increase from Year 3 and each following first-rounder getting a larger percentage increase (30th pick gets an 80.5 percent increase).
The fifth year can be played on a qualifying offer at an increase of the fourth-year salary (No. 1 pick gets a 30 percent increase, while the 30th pick gets a 50 percent increase), at which point they can become an unrestricted free agent and sign with whatever team they want. (Signing the qualifying offer is pretty rare, as players will usually either sign an extension before Year 4 or get a new deal after Year 4, whether it’s with the current team or a new team.)
What this ends up meaning is that rookies can be salary-controlled for teams on very low deals for up to the first five years (but usually four years) of their career. This was always a great strategy in roster building, but it’s becoming even more valuable because rookie deals will begin taking up a smaller and smaller percentage of teams’ total salary caps.
Teams like the Philadelphia 76ers and Boston Celtics have figured this out already, or maybe just lucked into a great strategy with the massive cap increase. It’s better to stockpile picks now because once the rest of the GMs realize what’s going on, those picks are going to become an even more precious commodity. While veteran contracts are becoming inflated at tremendous rates, these rookie deals will continue to provide great value for progressively smaller fractions of teams’ total caps.