Miami Heat Struggling Early In Free Agency

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The Miami Heat would love to get younger.

The Heat would love to get some youthful assistance on the wing, as protection for Dwyane Wade as his advancing age and health restrictions cause him to miss so many games and render him so ineffective in so many others.

The Heat would love to get a youthful presence down low, a big man capable of imposing his will on the block and the boards.

But for as much as we, as fans, have dreamed it to be so, it was never truly possible. Supremely talented youth is almost never a possibility on the open market. The very nature of NBA rules makes it virtually impossible to attract youthful talent in free agency.

The intensity of recruiting these days is such that the vast majority of all of the best free agents will have once been first round draft picks. Such selections provide their teams the promise of cheap labor over an extended period – via four year “rookie scale” contracts which make it categorically impossible for them to shake free during the interim. If not for being operated under a set of rules which were collectively bargained, the concept alone would surely violate anti-trust laws.

And, yet, it doesn’t get much better for these players after just the four years. At that point, the door opens, but only very slightly. The player is then to enter free agency in restricted fashion, such that any agreement he strikes with any team can be matched by his prior team and, in-so-doing, obligate said player to play for his prior team under its terms. These rules are so restrictive that, typically, the only option for any team desiring such a player is to severely overpay for him, in the hopes that his prior team refuses to match such ludicrous payouts. Most teams don’t even bother to bid on such players. And, thus, by the time the better former first round draft picks are truly free to consider other alternatives, somewhere between eight and nine years will have already passed them by. 

The situation isn’t all that much better for players who previously entered the league as second round draft picks, or even as players who went undrafted entirely. Even such players can be made restricted free agents, after any or each of their first three seasons in the league. The vast majority of these players, then, are signed to less-than-fully guaranteed contracts, many of those lasting up to the full three years, on minimum salary contracts. These are the cruelest of contracts – they effectively allow their teams to discard such players for little to no compensation if they so choose, but to keep them for as many as the full three years at rock-bottom prices if they outperform. That’s the price of entering the world’s greatest basketball league. These players, then, are almost impossible to pry away not only for their first three years in the league but also for the term of any subsequent contract. And, thus, by the time the better such players are truly free to consider other alternatives, somewhere between seven and eight years will have already passed them by.

The minimum age for entry into the NBA is 19 years, and the league is poised to raise that level even further. Add between seven and nine years, and you’re typically looking at signing even the most youthful of unrestricted free agents to contracts that extend well into their 30s.

Kyle Lowry was originally selected as the 24th overall pick in the first round of the 2006 NBA draft. He played under the terms of his rookie scale contract for the full four years. At the end of it, in July of 2010, the Cleveland Cavaliers tendered a four-year, $23.5 million offer sheet to the then restricted free agent who had only ever been a backup. Twelve hours later, his prior team, the Houston Rockets, matched it. This summer, then, is the very first time since the 28-year-old has been in the NBA that he’s been an unrestricted free agent. He’s just agreed to a contract with the Toronto Raptors which will take him to the age of 32.

Marcin Gortat entered the league in 2007 for the Orlando Magic as a former second round draft pick. He signed a two-year minimum salary contract – standard fare for second round picks. At the end of it, in July of 2009, the Dallas Mavericks tried desperately to pry him away. They signed him to an offer sheet for the full value of the mid-level exception, a five-year pact paying out $34.0 million for a player who had only ever been a marginally-impactful backup to the league’s most imposing big (Dwight Howard). One week later, the Magic matched. This summer, then, is the first time since the 30-year-old has been in the NBA that he’s been an unrestricted free agent. He’s just agreed to a contract with the Washington Wizards which will extend out until he is 35-years-old.

And so, yes, the Heat would love to get younger. Youth is a noble concept. But it is a nearly impossible task to address in free agency.

Youth is a concept always better addressed through the draft, or via trade.

Over the years, the Heat have been left almost entirely without young, developing players, and with a major shortage of bench athleticism and speed. There has rarely been anybody on the roster who could be targeted to have a big jump in productivity from one season to the next, or down the road. There has rarely been anyone or anything which has had the potential to create future trade value should the need arise.

Why? The Heat has sacrificed a total of 15 draft picks – 8 first rounders and 7 second rounders – in preparation for and during the Big Three era, including at least one in every draft from 2010 to 2017. The logical progression of the Pat Riley approach was never difficult to prognosticate. Just four years into the Big Three era, the Heat now finds itself the oldest team in the league. And it’s not even close. The average age? A stunning 31 years.

This isn’t a reality imposed by the new and more restrictive collective bargaining agreement. This is a reality based on rules that have been in existence for at least a decade. Acquiring youth in free agency has always been a monumental challenge.

It’s a challenge that is getting increasingly difficult as the asking prices for such free agents are starting to soar.

The league is about to undergo a seismic shift in the value of future NBA contracts, a concept which many of us don’t yet fully appreciate but is very prevalent in the minds of those involved in contract negotiations. The league’s current national television rights arrangement, an albatross of an eight-year agreement that promises pro basketball a total of $930 million per year from ESPN/ABC and TNT, divided equally among all thirty teams, comes due in just two years time. The new deal promises a financial windfall.

Just about every sport is thriving in the television landscape that social media sculpts, resulting in record rights fees for one of the last remaining completely DVR-proof programming options over the past four years. Each new deal makes all other ones seem more outdated: MLB more than doubled its previous take! The NHL more than doubled its take in Canada and nearly tripled its take in the U.S.! NCAA conferences are quadrupling their previous deals!

It’s getting silly out there. Three years ago, the NFL cut a $1.9 billion per-year Monday Night Football deal with ESPN, an arrangement that towers over the NBA’s $930 million in total yearly television revenue. Your initial reaction might be: Are the rights to 17 regular season Monday Night Football games really worth more than twice the rights to every single regular season and every playoff NBA basketball game?

If you’re keeping count, that’s 145 nationally televised NBA regular season games this past season, followed by 81 (non-NBATV) higher-rated playoff battles. Is it all that unrealistic to think that we’re looking at going from $930 million to more than that $1.9 billion?

Rising league revenues means rising salary caps. We could quite easily be looking at a 2016-17 cap that is around $20 million higher than it was this past season. Rising salary caps, in turn, means rising player salaries.

Don’t think the players are focused on this eventuality right here and now?

Why do you think LeBron James craves a short-term deal?(1)

Players are demanding they get paid now for a reality that will take hold two years down the line. And their incumbent teams are leveraging their “Bird rights” (which allow a player’s incumbent team to exceed the salary cap to re-sign him for any amount up to the maximum salary) to give it to them. That, then, is how Lowry and Gortat, players perhaps appropriately valued in the neighborhood of $9 million to $10 million annually, have each signed with their incumbent teams at an average of $12 million.

That’s the greatest source of frustration for the Heat this summer – the exorbitant prices that other teams are paying. The Heat simply can’t compete.

While we, as fans, were all seduced by visions of grandeur when James, Dwyane Wade, Chris Bosh and Udonis Haslem all opted out of their prior contracts, providing the Heat the flexibility to create as much as $55 million in cap room – a figure which would represent an All-time NBA record, a figure which could increase further by trading the unspectacular Norris Cole (who, at this point, does still have trade value upon which the Heat could capitalize) – neither we or nor the Heat could account for the sharply rising cost of labor.

Despite his decision to opt out, James still wants something near or at the maximum. His new salary for next season, then, could actually be higher than that called for under the contract he just terminated. Bosh’s initial proposal to the Heat was reportedly in the five years for $85 million neighborhood, which would start at roughly $15 million. Wade’s initial proposal was apparently in the $55 million range over four years, which would imply a starting point of roughly $13 million.

Reports vary as widely as any agent promoting his player, or any journalist promoting his work, want them to. But, even in the most aggressive of circumstances, it would appear that the most the Heat could manufacture in potential cap space even in the most aggressive of circumstances approximates $10 million (i.e., a $63.2 million salary cap, less $20.7 million for James, less $15.0 million for Bosh, less $12.0 million for Wade, less $1.03 million for Shabazz Napier, less eight roster charges at $507,336 each, and assuming Cole is traded).

Lowry and Gortat are gone – gone at prices the Heat never could have afforded anyway. The Heat never even got to the point of making either an offer.

So where do the Heat go from here?

The list of potential alternatives isn’t all that spectacular, at least not among the younger set. If 2010 was the summer of the Big Three, then 2014 would appear to be the summer of the Big Fail.

Would the Heat be better off surrendering to it? Would they be better off effectively reinstating the contracts of James, Wade, Bosh and Haslem, and salvaging what would be an entirely clean slate for the all-important summer of 2016 – the summer during which the cap figures to dramatically spike on the heels of the new TV deal, a time during which James, Kevin Durant, Kevin Love (if he first exercises his player option) and many others could all become free agents? Is the plan, then, to trudge along for the next two years, hoping LeBron doesn’t leave?

It wouldn’t be a total whitewash. The Heat would instead be operating as a team over the salary cap. They’d have access to the Mid-level Exception, perhaps even the full $5.3 million version if the team’s finances were carefully managed.

Is that the appropriate course of action? Or can the summer still be salvaged?

Can the Heat find a better bridge to the summer of 2016?

How could the Heat potentially address its need for depth both in the backcourt as well as in the middle, all within the confines of about $10 million in cap space and, when it’s all used up, an extra $2.732 million in the form of the Mid-Level Exception for Room Teams? Lest we forget, the Heat also has obligations of loyalty to Haslem, who has just opted out of his $4.6 million expiring contract to assist the Heat.

How about a Pau Gasol, Anthony Morrow, Jameer Nelson trio, on a trio of short-term deals? Would that make for a successful Heat summer?

Could you envision a Nelson, Morrow, Bosh, Gasol foursome as a dominant interior presence plus three superior shooters to space the floor for LeBron? Among those four players, which could you leave open in order to double-team LeBron? What might LeBron accomplish if he were perpetually playing one-on-one over the course of a full season?

While far from stellar defensively as a unit, would a 7’0-250 center and a 6’11-235 power forward be at least somewhat comforting?

For much of the last few seasons, it has been painful to watch Gasol play. He has found his talents somewhat wasted within the Lakers’ offense, which asked one of the NBA’s premier post scorers to primarily play as a power forward away from the basket. The results mask what could be a rejuvenation for the Spaniard with a shift to the middle, especially when paired with the perimeter-oriented Bosh. The position change to center takes Gasol’s athleticism from a minus to a plus, and even at 34 years-old in three days, he can still be an unstoppable force in the post, and he remains as skilled as ever as a passer and rebounder. Is it all that difficult to imagine he’d be a better fit for the Heat than the likes of Gortat ever was?

Gasol is currently exploring his options. He is pushing for a contract in the range of $10 million to $12 million. That range, however, seems to belie the conversations he’s having. The San Antonio Spurs and Oklahoma City Thunder are said to be “frontrunners” for his services despite, in each case, being able to offer no more than $5.3 million via the Non-Taxpayer Mid-Level exception. In other words, the Heat has the ability to offer as much over two years as either of these frontrunners could offer over three years, and blow them out on an equivalent three-or-four-year deal.

Morrow, for his part, is something of the man who got away for Miami. After going undrafted in the 2008 NBA draft, Morrow joined the Heat for the 2008 NBA Summer League in Orlando. He started five games, averaging 11.6 points while hitting 11 of his 20 three-point attempts. Rather than offer him a minimally-guaranteed contract to retain his rights, the Heat let him play for the Golden State Warriors during the Las Vegas Summer League. In four subsequent games, he averaged 21.0 points while converting 11 of his 16 three-pointers. The Warriors immediately signed him to a two-year minimum salary contract with just a $100K partial guarantee.

He has long been one of the league’s top deep shooters, but his inability to add value in other areas has undermined the impact of his floor-spacing. He has been plodding along for his entire career on minimal contracts, playing limited minutes in offensive systems that haven’t well leveraged his skill-set. Any system in which he can get clean looks should yield a 45% season from deep — the equivalent of 67.5% for two-pointers. Is it all that hard to envision Morrow as a legal but deadly weapon alongside James, capable of spotting up on the wing and in the corner all game long, capable of putting up 20 or more points off the bench, or in the starting rotation in a Wade-less environment, on any given night?

Morrow signed a veteran minimum contract last summer with the New Orleans Pelicans as a free agent, one that paid him just more than $1 million this past season and included a player option for the upcoming season that would have paid him $1.1 million. After averaging 8.4 points and making 45.1% of his 3-pointers, the 28-year-old opted out. He could potentially command a salary that equals or exceeds $3 million per season.

So, can you find a way to split $13 million – $10 million or so in cap space(2), plus another $2.7 million exception – between Gasol, Morrow and Haslem?

Would Gasol accept, say, three years and $22 million? Would Morrow accept, say, three years and more than $9 million? If so, the Heat could reward Haslem for nullifying his $4.6 million option with a two-year $5.6 million contract and at the same time offer Chris Andersen any salary he wants (up to around $5.6 million) all within the confines of the cap.

Would Jameer Nelson then accept a minimum salary contract as a potential replacement for Norris Cole? Nelson will still draw $2 million in the upcoming season from the Magic (an amount which can be reduced slightly by set-off).

It would look something like this.

LeBron James called for an upgrade at every position after the Heat’s loss to the San Antonio Spurs in the NBA Finals this year. Does Gasol at center, shifting Bosh to power forward, James Ennis at small forward, Morrow at shooting guard, and a Napier-Nelson combination at point guard constitute an upgrade at every position that, when including the extra $34 million only the Heat could offer him(1), would entice LeBron to stay?

Notes:
(1) If LeBron James were to request his release from the Heat via sign-and-trade this summer – to a team like, say, the Los Angeles Clippers – he would, by rule, be required to sign a contract of at least three years in length. The new TV deal expires after just two years. In three years, the current CBA will have expired and James will have turned 32-years-old, and therefore competing with the league’s “Over-36” rules as he tries to secure one final contract before he retires. James’ options, in order to lock in a long-term deal under the new TV-rights deal therefore become either to sign a short-term deal with the Heat, a long-term deal with an outside team that extends well into his 30s and by rule shortens his final NBA contract, or sign a short-term contract with an outside team and simultaneously run the risk that it won’t be able to resign him. If he goes anywhere, then, it’ll be as a free agent, on a two-year deal. But, at the end of those two years, his new team will have only accumulated “Early Bird” rights to James, meaning that his subsequent deal under the auspices of a new TV-rights deal can only be for four years in length, as opposed to the five years the Heat would be able to offer. The extra year could equate to about $34 million for a then-35-year-old. 

(2) Squeezing two players within the maximum projected $10 million of cap space actually raises it to approximately $10.4 million. Once a team drops below 12 players in the off-season a temporary roster charge equal to the rookie minimum salary ($507,336 this season) is added for every player below 12. As the team builds back up to 12, for each player subsequently signed, a roster charge is removed. As NBA rules require an opening day roster of at least 13 players, roster charges can never extend into the regular season.

10 Responses

  1. berkeley223 says:

    So Albert, what do you think—LeBron stays or goes? It would be the ultimate dick move if he left after saying whatever he said to Wade and Bosh at their meeting to lead them to opt-out.

  2. Albert says:

    @berkeley223
    I disagree with it being a dick move. We don’t know what was said. And, of course, the Wade and Bosh salaries can always be reinstated.

    At this point, I continue to think LeBron stays. I do concede that there are attractive alternatives out there, but I don’t think they are compelling enough to supersede the benefits of staying. The money factor, for one thing, is a very large and under-appreciated issue. If Riley were to be successful this summer (and see the post above for what I would define as success), I believe LeBron sees the upgrade he needs to see and still maintains his flexibility for the summer of 2016. Things could change, of course, if Riley isn’t successful.

  3. berkeley223 says:

    I don’t see why Wade especially would opt out unless he was given some sense from LBJ that he’s be coming back. No team will pay him what he opted out of and I can’t see MIA paying him that amount again even if (esp if) he alone among the Big3 returns.
    This has been a brutal few days for Heat fans’ sanity, I cling to the hope that this is all a brilliant smoke screen and all 3 come back at good deal that allow us to sign some decent players as well.
    I always said if LBJ left I’d wish him nothing but the best and be grateful for the years we had with him. No hard feelings. I still feel that way but am now beginning to see what the folks in Cleveland felt like in 2010. There are good and bad ways to leave an organization…

    thanks for keeping up with the blog, it’s still the first thing I check each day for heat articles

  4. berkeley223 says:

    your thoughts on mcroberts and granger and their contracts? I would’ve thought we could do better with our full mid level than mcRoberts. I wonder if LBJ signed off on these guys before Riley offered them the deals

  5. James says:

    I just read that Lebron is only signing a 2-year contract with the Cavs. Is this a serious miscalculation by Clev and LBJ? They won’t have his Bird rights in the summer of 2016 yet right? Since he will not have been with the team for 3 years at that point. If Lebron’s starting contract for 2016 is ~$28M (estimated based on the new TV contracts coming up), does this mean that Clev needs to be at least $28M under the cap to sign Lebron into cap space once his 2-year contract is up?

  6. Albert says:

    @James
    No miscalculation. Cavs won’t have his FULL Bird rights in two years but they will have his Early Bird Rights. Early Bird rights can be used to sign to a salary starting at up to 175% of a player’s previous one. Even if the cap skies, LeBron will be covered.

    The only downside is that Early Bird contracts can only be for up to 4 years in length (vs 5 with Full Bird rights). I project that extra year could cost somewhere around $34 million.

  7. James says:

    Albert,

    Ok, thank you for the explanation. Your posts are great BTW – very, very knowledgeable about the NBA and the salary cap. Thanks for all the insight these last several years.

  8. Albert says:

    @James
    Thank you! Much appreciated.

  9. Jon says:

    Any way you can make a post about what draft picks Miami has over the next few years?

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