As the Cavaliers Struggle To Re-Sign Restricted Free Agent Delonte West, We Look At A Changing Market That Is Bending Under The Pressure Of Impending Change
A lot of assumptions have been made regarding the Delonte West free agency. Reasonable assumptions they may be, but they're assumptions none the less. I've yet to hear anyone voice any kind of doubt as to whether or not the Cavaliers would be able to sign Delonte. That is, until I read Bob Finnan's latest article for the Morning Journal, in which he discusses the negotiations,
"The Cavs continue to negotiate a contract with West's representatives. Sources say the two sides are not real close to an agreement at this time and a couple sign-and-trades have been discussed. The Cavs definitely want him back.
If things break down completely, West has the option of accepting the Cavs' qualifying offer of $2.76 million. He would then become an unrestricted free agent after the 2008-09 season.
After details of Gibson's contract have become available, West's agents are expected to ask for more money since he's the Cavs' starting point guard."
This is interesting, because I had been under the assumption that Delonte's deal would be easier to get done than Gibson's. I thought this for 2 main reasons. 1, I thought West had more motivation to sign quickly than Gibson did (meaning, I incorrectly assumed Gibson would try harder to negotiate with other teams than Delonte would), and 2, I felt like West's role on the team and his skills are easier to define than Gibson's. Again, this was obviously an incorrect assumption.
So here we are now, a player trying to get more teams interested in him to drive his price up to force the team that controls the ability to match any offer for him to pay him more money. This is where things start to get tricky, and this is where fractures in the perceived serenity of the NBA's collective bargaining agreement are starting to show up.
This all ties in with what happened recently with Josh Childress, and believe it or not, I believe it's possible this could have an impact on Cleveland directly. Now, to be clear, I am not suggesting Delonte will use Europe as a bargaining move or even consider it as a serious option. Delonte has not said anything about such a move and nobody has written anything about him. This isn't so much about Delonte West as it is about the NBA in general.
For those who don't know what happened, here it is in a nutshell. Josh Childress, an important part of the Atlanta Hawks, was a restricted free agent. After some negotiations with Atlanta, Childress was offered a rather lavish contract from a Greek professional team, Olympiacos. After heading to Athens to check out the team first hand, Childress accepted the 3 year contract.
How could this happen, you might ask, and how might this impact the Cavaliers? Both are good questions, and both have weighed heavily on my mind since this was first announced. The answer to the first question is easy. Sekou Smith of the Atlanta Journal Constitution lays out the differences between the 2 offers Childress had,
"a€" Olympiakos offered three years and $32.5 million, which after taxes paid by the club becomes a net of salary of about $6.7 million a year for Childress.
a€" The Hawks offered five years and $33 million, which after taxes paid by Childress becomes a net salary of about $3.4 million per year for Childress.
a€" In addition to the double-stuffed salary Olympiakos also pays for all of Childress' living expenses, including luxury accommodations, a car and driver and maid service.
a€" Childress also has an annual opt-out clause in the contract that will allow him to weigh his NBA options, as a restricted free agent provided the Hawks tender a qualifying offer to him, every summer.
a€" There is no buyout clause in the contract, meaning Childress won't have to negotiate a compensation package for Olympiakos if he were to return to the NBA before the end of the three year deal."
When you look at it like that, it's actually easy to see how this could happen. As we have previously pointed out, the global economy has made location less relevant than ever before. For the same reason we feel that LeBron can prosper in Cleveland just fine thanks to the smaller world created by technology and global marketplaces, so too can a player go to Europe, prosper, and not feel so disconnected from his home country.
We're not the only ones who have noticed that this move not only makes sense, but could send waves of impending change throughout the NBA. The Hawks blog Impending Firestorm wrote an interesting bit of perspective on this, writing,
"The move for Childress probably paves the way for plenty more American players to do the same. A handful of other big names have also bolted to Europe, and with the Euro doing better than the dollar right now it doesn't seem like such a bad option to be a superstar overseas. Childress would instantly become one of the highest paid players in Europe and would basically become one of the star players in his league. Instead of playing for a franchise that doesn't seem to care about him in a league that sometimes doesn't realize he exists, Childress will now become a star and will be paid like it."
Henry Abbot of TrueHoop takes it even a step further. You need to set aside 15 minutes of your time and read his whole post on this topic, because it offers outstanding perspective on the whole thing. The part that particularly caught my eye, though, was when Henry wrote,
"The NBA's collective bargaining agreement includes a ton of complicated clauses. Each serves a purpose, and you can make a case that, all told, it's a good and fairly fair system. But regulation is always burdensome, and this league, famously run by lawyers, is knee-deep in legalese. In this instance, those rules created a really weird deal. According to Josh Childress, there were championship-contending NBA teams that were willing to pay him more than the Hawks would. A sign-and-trade couldn't be worked out, so Childress was stuck. But that makes a situation where here's an employee, a place that wanted to employ him, and an agreed upon price. In normal human life, that's all you need to make a deal. You can only tinker with the free market so much before it starts depressing normal economic activity. This is one of those cases. A rule (essentially, the salary cap) designed solely to keep NBA teams competitive with each other now ends up helping a whole different league. Will the NBA change the salary cap in some profound way to address that? Babby, for his part, says that he would "never underestimate the capacity of the NBA to respond to market trends.""
Wow. Let that sink in for a minute. Could this set a trend so dramatic that it could even destroy the current Collective Bargaining Agreement that tries to protect smaller market teams? If Josh Childress is to be believed here, that's what's going on. If you look at the Championship-contending teams in the NBA, none of them have any real cap space left. What this means is that the most any of these teams could offer to Childress straight up would be the MLE ($5.8 million for 2008-09), a number the Hawks would obviously match if they really offered 5 years, $33 million, which is above the MLE anyway. So what we're looking at is a situation where the system technically did its job and limited the offers other teams could make, thus protecting the Atlanta Hawks. But when players show a willingness to enter a completely different market to buck this system, it puts a lot of strain on the Salary Cap as it currently exists. So is this the beginning of a trend?
Micah Hart of Hawks BasketBlog isn't so sure. Micah seems to think this is more of a move fitting to a guy with the demeanor of Josh Childress, as he writes,
"Not to go all Harvard, but today's global economy is much different than it used to be. The euro is much stronger than the dollar, making it very easy for European teams to make competitive (or in this case, far superior) financial offers to NBA players. The top European teams are making more and more money every year, giving them large enough budgets to handle contracts of this size without even blinking. This was going to happen eventually, it just took the right kind of player to take the bait, and frankly, I think Childress is that guy.
Chills is not like most NBA players (afro aside). Every time I've chatted with him at the start of seasons past he's raved about his trips abroad over the summer, including trips to China and Africa as part of the NBA's Basketball Without Borders program. He realizes there is a much larger world out there, and he's experienced a good bit of it. Right off the bat, the idea of playing in a foreign land was going to be much more palatable to him than most.
Josh is also a guy who, though dedicated to his craft, maybe doesn't see basketball as the end-all be-all of his existence. He has continued to work towards a business degree over the past few summers and spoke often of wanting to be as successful off the court as he is on it. Therefore I can absolutely see where playing in the NBA, just because it's "the NBA", might not be enough of a reason on it's own (the way it would be for many of his peers) to keep Childress stateside.
Maybe the money, coupled with the opportunity to travel and see the world, was enough to make him happy - regardless of what it meant to his NBA stature. I think that's entirely possible, even if it's hard for us to understand.
I don't know if Chills' move is a sign of things to come (in the same way Kevin Garnett ushered in the era of prep-to-pros players) or is more the random actions of a single player (think Ricky Williams retiring from the NFL). Only time will tell."
So what does any of this have to do with Cleveland? Well, to put it as simply as possible, the current system is designed to create a competitive balance whereby a team like Cleveland can keep its superstars like LeBron James. But what happens is some of the more marginal role players, key as they might be to a team's success, are stuck in the margins. A player like LeBron is going to get paid max dollars no matter where he plays, and there will be no shortage of offers for him when he becomes a free agent. But what happens to players like Daniel Gibson and Delonte West? The system as it is currently setup actually hurts these kind of players.
Some agents were a bit miffed by the deal Daniel Gibson signed with the Cavs, as Bob Finnan wrote,
"There was never any question whether Gibson would return to the Cavs. His agent, Lewis Tucker, was unable to find any teams willing to sign Gibson to an offer sheet. Other teams figured the Cavs would just match the offer. Some other agents scoffed at Gibson's contract. Sure, $21 million is a lot of money. But some agents thought Gibson should have gotten a lot more, especially if he's one of the Cavs' "core" players.""
And that's precisely the point. It's all about creating a competitive marketplace for your client. The more offers you can get for your client, the higher his price will be. But under the current system, there are no offers available for mid-level players. There's no point in teams making an offer when they know the original team will just match them.
To be clear, I am not saying this is necessarily bad. I do feel it is somewhat un-American to limit any marketplace, but I also understand the benefits of this limited marketplace approach. After all, its this limited marketplace approach that's going to give the Cavaliers a leg up in the race to sign LeBron 2 years from now (strictly from a salary standpointa€¦.obviously other factors will come into play). After all, the NBA seems to be becoming more and more of a small market league. They just moved a team from the--th largest media market (Seattle/Tacoma) to the 45th largest market (Oklahoma City). The league's current dynastic franchise resides in the 37th largest market (San Antonio). There are franchises in New Orleans (53rd), Memphis (47th), Salt Lake City (35th), and Milwaukee (34th).
I'm sure people in the mega markets of New York, Los Angeles, Chicago, Philadelphia, and Dallas will scoff at this notion, but obviously this system has served the league as a whole quite well in building a diverse portfolio of cities and markets where their product can exist in and in some cases thrive.
If players leaving for Europe becomes a trend and forces dramatic changes in the salary cap system, this will have a serious impact on both mid-market (Detroit, Phoenix, Minneapolis, Miami, Cleveland, Denver, Orlando, etc) and small market teams alike. A simple lifting of the salary cap altogether will create a system much like baseball where a small, select handful of teams are the only players in the free agent market every year. Smaller market teams will be forced to operate under a much different methodology, relying much more heavily on the draft and trading stars for "prospects". Again, it can be debated whether this is a good thing for the NBA or a bad thing.
One question that can be asked is whether simply eliminating this idea of restricted free agentcy would suffice as a fix. The logic being that by eliminating the ability of any team to match offers, that more teams will get involved and make offers, and the price of the player will thus go up and the market will self correct accordingly. It sounds like a nice fix in theory, but the problem that will still remain is that most teams will only be able to offer the MLE due to the Salary Cap.
I would argue, then, that perhaps the best fix would be to remove restricted free agency and remove the hard limits on max annual increases. What this means is that in this proposed system, a team could sign a guy to the MLE for the first year, but then if said team has an extra $10 million in expiring contracts for the following year, the team could use that expiring money as the basis for the 2nd year increase. No team would be able to give a player a raise that would put the team above a projected salary cap for future years, though. What this would do is create a system whereby teams could get creative and make competitive offers without fear of having them simply matched right away. It would increase the number of offers being made, but by keeping the salary cap and the Qualifying Veteran Free Agent exemptions (Bird Rights) it would still allow the smaller market teams the ability to offer the maximum amount of money to their own superstar free agents.
Without a flux of players leaving the NBA to accept offers from European teams, none of this will matter. The system will likely stay in place, mostly as it currently is setup, and life will go on. We've already seen the likes of Juan Carlos Navarro, Carlos Delfino, Primoz Brizac, andBostjan Nachbar leave the NBA to play overseas, though, and now the most well known player yet in Josh Childress has fled the NBA. If this continues, the NBA will need to make changes to remain the most appealing and the most luxurious league in the world, and it's entirely possible these changes will not be friendly to teams like Cleveland. It will definitely be interesting to watch future negotiations with our mid-market goggles on and observe what trends may be pushing the NBA into a different direction regarding the Salary Cap and the Collective Bargaining Agreement and monitoring what affects these changes will have on Cleveland. Stay tuned.
A lot of assumptions have been made regarding the Delonte West free agency. Reasonable assumptions they may be, but they're assumptions none the less. I've yet to hear anyone voice any kind of doubt as to whether or not the Cavaliers would be able to sign Delonte. That is, until I read Bob Finnan's latest article for the Morning Journal, in which he discusses the negotiations,
"The Cavs continue to negotiate a contract with West's representatives. Sources say the two sides are not real close to an agreement at this time and a couple sign-and-trades have been discussed. The Cavs definitely want him back.
If things break down completely, West has the option of accepting the Cavs' qualifying offer of $2.76 million. He would then become an unrestricted free agent after the 2008-09 season.
After details of Gibson's contract have become available, West's agents are expected to ask for more money since he's the Cavs' starting point guard."
This is interesting, because I had been under the assumption that Delonte's deal would be easier to get done than Gibson's. I thought this for 2 main reasons. 1, I thought West had more motivation to sign quickly than Gibson did (meaning, I incorrectly assumed Gibson would try harder to negotiate with other teams than Delonte would), and 2, I felt like West's role on the team and his skills are easier to define than Gibson's. Again, this was obviously an incorrect assumption.
So here we are now, a player trying to get more teams interested in him to drive his price up to force the team that controls the ability to match any offer for him to pay him more money. This is where things start to get tricky, and this is where fractures in the perceived serenity of the NBA's collective bargaining agreement are starting to show up.
This all ties in with what happened recently with Josh Childress, and believe it or not, I believe it's possible this could have an impact on Cleveland directly. Now, to be clear, I am not suggesting Delonte will use Europe as a bargaining move or even consider it as a serious option. Delonte has not said anything about such a move and nobody has written anything about him. This isn't so much about Delonte West as it is about the NBA in general.
For those who don't know what happened, here it is in a nutshell. Josh Childress, an important part of the Atlanta Hawks, was a restricted free agent. After some negotiations with Atlanta, Childress was offered a rather lavish contract from a Greek professional team, Olympiacos. After heading to Athens to check out the team first hand, Childress accepted the 3 year contract.
How could this happen, you might ask, and how might this impact the Cavaliers? Both are good questions, and both have weighed heavily on my mind since this was first announced. The answer to the first question is easy. Sekou Smith of the Atlanta Journal Constitution lays out the differences between the 2 offers Childress had,
"a€" Olympiakos offered three years and $32.5 million, which after taxes paid by the club becomes a net of salary of about $6.7 million a year for Childress.
a€" The Hawks offered five years and $33 million, which after taxes paid by Childress becomes a net salary of about $3.4 million per year for Childress.
a€" In addition to the double-stuffed salary Olympiakos also pays for all of Childress' living expenses, including luxury accommodations, a car and driver and maid service.
a€" Childress also has an annual opt-out clause in the contract that will allow him to weigh his NBA options, as a restricted free agent provided the Hawks tender a qualifying offer to him, every summer.
a€" There is no buyout clause in the contract, meaning Childress won't have to negotiate a compensation package for Olympiakos if he were to return to the NBA before the end of the three year deal."
When you look at it like that, it's actually easy to see how this could happen. As we have previously pointed out, the global economy has made location less relevant than ever before. For the same reason we feel that LeBron can prosper in Cleveland just fine thanks to the smaller world created by technology and global marketplaces, so too can a player go to Europe, prosper, and not feel so disconnected from his home country.
We're not the only ones who have noticed that this move not only makes sense, but could send waves of impending change throughout the NBA. The Hawks blog Impending Firestorm wrote an interesting bit of perspective on this, writing,
"The move for Childress probably paves the way for plenty more American players to do the same. A handful of other big names have also bolted to Europe, and with the Euro doing better than the dollar right now it doesn't seem like such a bad option to be a superstar overseas. Childress would instantly become one of the highest paid players in Europe and would basically become one of the star players in his league. Instead of playing for a franchise that doesn't seem to care about him in a league that sometimes doesn't realize he exists, Childress will now become a star and will be paid like it."
Henry Abbot of TrueHoop takes it even a step further. You need to set aside 15 minutes of your time and read his whole post on this topic, because it offers outstanding perspective on the whole thing. The part that particularly caught my eye, though, was when Henry wrote,
"The NBA's collective bargaining agreement includes a ton of complicated clauses. Each serves a purpose, and you can make a case that, all told, it's a good and fairly fair system. But regulation is always burdensome, and this league, famously run by lawyers, is knee-deep in legalese. In this instance, those rules created a really weird deal. According to Josh Childress, there were championship-contending NBA teams that were willing to pay him more than the Hawks would. A sign-and-trade couldn't be worked out, so Childress was stuck. But that makes a situation where here's an employee, a place that wanted to employ him, and an agreed upon price. In normal human life, that's all you need to make a deal. You can only tinker with the free market so much before it starts depressing normal economic activity. This is one of those cases. A rule (essentially, the salary cap) designed solely to keep NBA teams competitive with each other now ends up helping a whole different league. Will the NBA change the salary cap in some profound way to address that? Babby, for his part, says that he would "never underestimate the capacity of the NBA to respond to market trends.""
Wow. Let that sink in for a minute. Could this set a trend so dramatic that it could even destroy the current Collective Bargaining Agreement that tries to protect smaller market teams? If Josh Childress is to be believed here, that's what's going on. If you look at the Championship-contending teams in the NBA, none of them have any real cap space left. What this means is that the most any of these teams could offer to Childress straight up would be the MLE ($5.8 million for 2008-09), a number the Hawks would obviously match if they really offered 5 years, $33 million, which is above the MLE anyway. So what we're looking at is a situation where the system technically did its job and limited the offers other teams could make, thus protecting the Atlanta Hawks. But when players show a willingness to enter a completely different market to buck this system, it puts a lot of strain on the Salary Cap as it currently exists. So is this the beginning of a trend?
Micah Hart of Hawks BasketBlog isn't so sure. Micah seems to think this is more of a move fitting to a guy with the demeanor of Josh Childress, as he writes,
"Not to go all Harvard, but today's global economy is much different than it used to be. The euro is much stronger than the dollar, making it very easy for European teams to make competitive (or in this case, far superior) financial offers to NBA players. The top European teams are making more and more money every year, giving them large enough budgets to handle contracts of this size without even blinking. This was going to happen eventually, it just took the right kind of player to take the bait, and frankly, I think Childress is that guy.
Chills is not like most NBA players (afro aside). Every time I've chatted with him at the start of seasons past he's raved about his trips abroad over the summer, including trips to China and Africa as part of the NBA's Basketball Without Borders program. He realizes there is a much larger world out there, and he's experienced a good bit of it. Right off the bat, the idea of playing in a foreign land was going to be much more palatable to him than most.
Josh is also a guy who, though dedicated to his craft, maybe doesn't see basketball as the end-all be-all of his existence. He has continued to work towards a business degree over the past few summers and spoke often of wanting to be as successful off the court as he is on it. Therefore I can absolutely see where playing in the NBA, just because it's "the NBA", might not be enough of a reason on it's own (the way it would be for many of his peers) to keep Childress stateside.
Maybe the money, coupled with the opportunity to travel and see the world, was enough to make him happy - regardless of what it meant to his NBA stature. I think that's entirely possible, even if it's hard for us to understand.
I don't know if Chills' move is a sign of things to come (in the same way Kevin Garnett ushered in the era of prep-to-pros players) or is more the random actions of a single player (think Ricky Williams retiring from the NFL). Only time will tell."
So what does any of this have to do with Cleveland? Well, to put it as simply as possible, the current system is designed to create a competitive balance whereby a team like Cleveland can keep its superstars like LeBron James. But what happens is some of the more marginal role players, key as they might be to a team's success, are stuck in the margins. A player like LeBron is going to get paid max dollars no matter where he plays, and there will be no shortage of offers for him when he becomes a free agent. But what happens to players like Daniel Gibson and Delonte West? The system as it is currently setup actually hurts these kind of players.
Some agents were a bit miffed by the deal Daniel Gibson signed with the Cavs, as Bob Finnan wrote,
"There was never any question whether Gibson would return to the Cavs. His agent, Lewis Tucker, was unable to find any teams willing to sign Gibson to an offer sheet. Other teams figured the Cavs would just match the offer. Some other agents scoffed at Gibson's contract. Sure, $21 million is a lot of money. But some agents thought Gibson should have gotten a lot more, especially if he's one of the Cavs' "core" players.""
And that's precisely the point. It's all about creating a competitive marketplace for your client. The more offers you can get for your client, the higher his price will be. But under the current system, there are no offers available for mid-level players. There's no point in teams making an offer when they know the original team will just match them.
To be clear, I am not saying this is necessarily bad. I do feel it is somewhat un-American to limit any marketplace, but I also understand the benefits of this limited marketplace approach. After all, its this limited marketplace approach that's going to give the Cavaliers a leg up in the race to sign LeBron 2 years from now (strictly from a salary standpointa€¦.obviously other factors will come into play). After all, the NBA seems to be becoming more and more of a small market league. They just moved a team from the--th largest media market (Seattle/Tacoma) to the 45th largest market (Oklahoma City). The league's current dynastic franchise resides in the 37th largest market (San Antonio). There are franchises in New Orleans (53rd), Memphis (47th), Salt Lake City (35th), and Milwaukee (34th).
I'm sure people in the mega markets of New York, Los Angeles, Chicago, Philadelphia, and Dallas will scoff at this notion, but obviously this system has served the league as a whole quite well in building a diverse portfolio of cities and markets where their product can exist in and in some cases thrive.
If players leaving for Europe becomes a trend and forces dramatic changes in the salary cap system, this will have a serious impact on both mid-market (Detroit, Phoenix, Minneapolis, Miami, Cleveland, Denver, Orlando, etc) and small market teams alike. A simple lifting of the salary cap altogether will create a system much like baseball where a small, select handful of teams are the only players in the free agent market every year. Smaller market teams will be forced to operate under a much different methodology, relying much more heavily on the draft and trading stars for "prospects". Again, it can be debated whether this is a good thing for the NBA or a bad thing.
One question that can be asked is whether simply eliminating this idea of restricted free agentcy would suffice as a fix. The logic being that by eliminating the ability of any team to match offers, that more teams will get involved and make offers, and the price of the player will thus go up and the market will self correct accordingly. It sounds like a nice fix in theory, but the problem that will still remain is that most teams will only be able to offer the MLE due to the Salary Cap.
I would argue, then, that perhaps the best fix would be to remove restricted free agency and remove the hard limits on max annual increases. What this means is that in this proposed system, a team could sign a guy to the MLE for the first year, but then if said team has an extra $10 million in expiring contracts for the following year, the team could use that expiring money as the basis for the 2nd year increase. No team would be able to give a player a raise that would put the team above a projected salary cap for future years, though. What this would do is create a system whereby teams could get creative and make competitive offers without fear of having them simply matched right away. It would increase the number of offers being made, but by keeping the salary cap and the Qualifying Veteran Free Agent exemptions (Bird Rights) it would still allow the smaller market teams the ability to offer the maximum amount of money to their own superstar free agents.
Without a flux of players leaving the NBA to accept offers from European teams, none of this will matter. The system will likely stay in place, mostly as it currently is setup, and life will go on. We've already seen the likes of Juan Carlos Navarro, Carlos Delfino, Primoz Brizac, andBostjan Nachbar leave the NBA to play overseas, though, and now the most well known player yet in Josh Childress has fled the NBA. If this continues, the NBA will need to make changes to remain the most appealing and the most luxurious league in the world, and it's entirely possible these changes will not be friendly to teams like Cleveland. It will definitely be interesting to watch future negotiations with our mid-market goggles on and observe what trends may be pushing the NBA into a different direction regarding the Salary Cap and the Collective Bargaining Agreement and monitoring what affects these changes will have on Cleveland. Stay tuned.
Original Story:
