Are NBA teams overpaying for free agents, or simply planning ahead?


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This year’s NBA free agency period has at times called to mind the unfettered optimism of the pre-recession housing market. On the surface, at least, teams appear to be paying journeymen like starters and treating role players like key cogs.

Here are just a few examples:

Darren Collison (four teams in five years) received a three-year, $15 million deal from the Sacramento Kings.

Shaun Livingston (eight teams in nine years) received a three-year, $16 million deal from the Golden State Warriors.

The Boston Celtics agreed to a four-year, $32 million deal for 23-year-old Avery Bradley, who’s coming off two shoulder surgeries and has only played in 205 of a possible 328 games for the Celtics thus far.

Looking ahead to 2016, though, the hefty contracts seem less like overspending and more like strategic fiscal planning. With a new media deal looming in 2016, the general consensus among NBA teams is that the salary cap will increase significantly. The NBA gets $930 million annually under its current television deal with ESPN/ABC and Turner Sports. Some expect the new deal will be worth at least double that. The league announced yesterday that next season’s salary cap will increase by nearly $5 million.

The new media deal should further raise the salary cap in two years’ time, shifting the prism of perception with regard to multi-year contracts signed this summer. Considering that next year’s cap will be 7 percent higher than last year’s, you could conservatively expect at least the same percentage increase in 2015-16, which would put the cap at nearly $68 million. Again, it could be even higher, depending on the terms of the new media deal.

So with that in mind, even though players such as Gordon Hayward may not be worth a max contract, the deal becomes less harmful to a team’s budget sheet as the cap increases.

Although the terms of Hayward’s four-year, $63 million contract are not yet available, by using the average annual salary ($15.75 million), we can get a better idea of his effect on a team’s salary cap. Of course, deals are not necessarily structured this way and can have up to a 4.5 percent increase from year to year, if signing with a new team.

Using the flat annual salary number of $15.75 million, however, you can project the percentage of a team’s cap his salary will account for over the next two years. With the 2013-2014 cap figure, Hayward’s deal would account for 26.8 percent of a team’s salary cap. Next year, that number drops down to 24.9 percent. Using the conservative 2016 estimate ($68 million), that number decreases to 23.1 percent.

So even as Hayward is projected to earn more per year than established players —David West, Al Horford, Nicolas Batum, Rajon Rondo, Steph Curry, Demar Derozan, Paul Milsap, to name a few— his deal may be less costly than initially thought.

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