The Solution for Trade Demands
Another NBA offseason has brought with it another round of movement by discontented star players. These star players typically enter the NBA when they are drafted by a team that they don’t get to choose. The team then controls the player’s rights for eight years through the mechanism of restricted free agency. When coupled with shorter contract lengths in the current Collective Bargaining Agreement (CBA), the predictable result is unrest among the best players in the league (whose movement is most constrained by team control), and escalating trade demands one and even two years before a star reaches unrestricted free agency.
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Under the current CBA, the situation that has transpired this offseason is business as usual. The current M.O. has the unfortunate side-effect, however, of leaving all parties complaining that the current model is unfair and/or bad for business. Management avers that star players demanding trades before their contracts expire is bad for the league, bad for team-building, and unfair to small-market teams. Players complain that they are forced into a system that prevents them from making the basic choice of where they want to work until their late twenties, then demonized when they buck that system.
If everyone is unhappy, there should be motivation to change the system. Most suggestions for resolving the issues do not adequately address the interests of both labor and management, but don’t worry – I have a solution that will make both sides happier. First, however, I’d like to explain why the most commonly suggested plans fall short.
Why we don’t want to get rid of the NBA Draft
Some have suggested that the way to resolve the system which prevents players from choosing where they play until mid-career or later is to do away with the Draft entirely and allow incoming rookies to be free agents. Usually this suggestion is coupled with the elimination of individual player salary limits, so that whatever team is willing to pay a prospect the most is the team that gets him.
Dispensing with the Draft is not viable because it is not good for management or for the players. Teams are not going to give up their primary means of control over players in any bargaining agreement. What’s more, the Draft is management’s best source of cheap labor, as rookie contracts are typically the best deals in the league. Getting rid of the Draft would be a disaster for teams.
Eliminating the Draft is also bad for players, because of some fairly predictable results. If there had been no Draft and no maximum salary this offseason, some NBA franchise would have committed an annual salary in excess of the current veterans’ maximum to land Zion Williamson, perhaps something in the range of $50 million a year. Most other rookies would have been squeezed by teams. Since the incoming rookies do not have a current team to which they can feasibly return if the market proves chilly, they are under pressure to accept any deal, no matter how team-friendly.
Canceling the draft would also be bad for veterans – which is who negotiates with management in bargaining agreements. In our example from above, Zion Williamson gets one and a half times the current max contract value … which means that a veteran star somewhere down the line does not get a max contract. Taking money out of the pot for teams to participate in bidding wars for top prospects leaves less money for veterans. Those veterans, who comprise the Players’ Association, will never agree to leave less money on the table for their own salaries.
Why we don’t want to get rid of restricted free agency
Restricted free agency (RFA), the process whereby the team that drafted a player has the right to match a contract signed by that player with any other team at the conclusion of the player’s rookie contract, extends the team’s control over players and is the current locus of trade demands. Removing this leverage, the thinking goes, would result in players being free to sign with whatever team they please after their first four seasons in the league.
Doing away with RFA, on its own, is not an actionable solution because teams stand to lose a lot and gain nothing in the transaction. In this scenario, teams draft players between the ages of 19-22 and develop these players for four years with little to no prospect of retaining the players into their prime. The fallout from this state of affairs includes a severe devaluing of draft picks – why would you consider a first round pick to be an asset in trades when that pick will only get you a young prospect that you develop and then watch sign elsewhere in free agency?
Why we don’t want to make trades illegal
One recent suggestion, made by Doc Rivers, was to simply make all contracts two-year deals (since nobody stays put longer than that anyway) and make trades illegal. That way if a player wants to move, he only has to wait a year before he is a free agent. If a solution like this were in place, management would constantly decry the impossibility of developing continuity amidst ever-changing rosters. We would furthermore see an escalation in claims of tampering by teams, as every player in the league would be either a newly signed free agent or less than a year from free agency. In such a climate, we would hear management bemoaning player empowerment at a far greater volume than at present.
Drastically shortening contract lengths and banning trades would also be bad for players. With no prospect of long-term sustainability, we would see a sharp depression in the annual value of contracts offered for players not making a maximum salary (which is to say, 98% of the league). Say that a team targets a certain player whom they want to sign for $5 million per year; the player might well be worth $10 million per year, but why should the team pay him fair value when they would only get his services for two seasons? The team can just as easily move on to their Plan B. The is suddenly in a very sticky predicament, his list of potential suitors dwindling daily as teams find cheaper options. With the amount of player movement that would be occasioned by two-year contracts, there would be tremendous incentive for management to cut costs and increase profits in years where the team was not able to land a major free agent.
The Solution for trade demands
In order to resolve the issues posed by the present CBA, I propose a group of actions which would benefit both sides while alleviating the strain caused by the present system. The first action is to adjust rookie contracts. Rookie contracts are scaled to correspond with draft position, but are cost-controlled in order to prevent rookie salaries from exceeding veteran salaries and in order to provide management with cheap labor. I recommend that the Draft proceed as it does now, but that there be two options for rookie contracts.
The first option for rookie contracts would be the current rookie scale. As at present, these contracts would be for four years, with annual salaries correlated with draft position. At the end of the scale contract, however, a player would enter unrestricted free agency. Teams would still get cheap labor, but would relinquish the long-term control available to them through the RFA system.
Why would management agree to this deal? Here is where the second option for rookie contracts comes in. A newly drafted player and team could also choose to agree to a contract with pay rates beyond the rookie scale that would last for more than four years. In order to agree to this type of contract, teams would be required to offer an annual salary that is at least twice the value of the rookie scale amount for the number 1 pick in that season. In 2019-20 dollars, a team would have to pay at least $16.2 per year in guaranteed money to sign a rookie for more than four years.
While this latter option provides a boon for management by enabling teams to reach long-term deals with star players early in their careers, it looks like a loser from the players’ point of view. As mentioned previously, increasing rookie salaries takes money away from veterans, which the Players’ Association is unlikely to stomach without some type of recompense. I propose providing that recompense in the form of a 25% increase in the value of midlevel exception contracts and a 50% increase in the value of biannual exception contracts. This modest adjustment would incentivize owners to avoid spending too lavishly on rookies, given the prospect of acquiring much more valuable players with their MLE and BAE. In 2019-20 dollars, that would be $11.6 million for the standard MLE, $7.1 million for the taxpayer MLE, $6.0 million for the room MLE, and $5.4 million for the BAE. Thus, while the new system would allow for more money to be allocated to rookie contracts, it would motivate teams to devote more money toward veteran contracts.
By replacing RFA with either unrestricted free agency or the option to sign a player long-term by exceeding the rookie pay scale, both players and teams win. Players have the freedom to choose where they will play earlier in their career, while mid-level veterans gain improved prospects on their second and third contracts. Teams gain additional flexibility in building competitive rosters, as well as the ability to sign key prospects to long-term contracts. Once again, both labor and management benefit.
The result would be a steep decline in trade demands by players on their second contract, since they would have signed their second contract as unrestricted free agents. Players who chose to sign with the team that drafted them long-term might also prove less likely to demand trades, since the deal allows the player considerably greater financial freedom early in his career. In addition, these players would have retained an element of choice, as they would have had the option to either a) accept the team’s long-term, non-scale contract offer, or b) play on the rookie scale contract for four years instead.
With players having a greater degree of freedom while ensuring the ability of teams to build long-term continuity, both labor and management stand to win. Whenever the two sides choose to come to the bargaining table again, here’s hoping they carefully consider this solution.