NBA free agents cashed in big time this year. Everybody got paid. Even the scrubs.
Using CARMELO projections, which estimates the future value of NBA players based on wins above replacement, we can weigh players’ contracts against their projected market “worth” in the years to come. These projections assume a player’s full value in a world with a team salary cap but without a maximum individual salary, which would allow the best players to be paid something closer to their true value but perhaps leave less budget for more marginal players.
By that measure, the average 2016 contract is overvalued by $4.4 million per year of the contract. This is primarily the result of a windfall to mediocre players. Matthew Dellavedova, who barely saw the court for Cleveland in the 2016 NBA Finals, inked a four-year deal for $38.4 million with the Milwaukee Bucks. According to CARMELO, he is valued at $1.4 million a year during his contract, meaning his $9.6 million average annual salary is $8.2 million over his value per year.
DeMar DeRozan’s five-year, $139 million contract to stay with the Toronto Raptors is just crazy. He will average $27.8 million a year, but his CARMELO value per year is $13.1 million. The Raptors will be paying more than $14 million per year over value for a player who is the second-best on the team. In the 2015-16 season, DeRozan led the team in scoring, with 23.5 points per game, and played well in the playoffs. But his WAR was just above 5, compared with teammate Kyle Lowry’s nearly 14.
Of course, free agents get paid more than their stats might warrant all the time — that’s the nature of a salary-capped league with a maximum salary for the best players. What makes this summer special is the scale. In addition to DeRozan, five players signed $100 million deals, and according to CARMELO, they’re all are overvalued. In the past, deals at that level were typically for surefire stars, like LeBron James, or good-but-not-great players leveraging their worth against a small market, like Joe Johnson. Now guys like Nicolas Batum are signing for nine figures, and it’s practically a matter of course. In the table below, you can see every contract signed in the 2015 and 2016 free agency periods, what each is worth and each player’s CARMELO value over the length of the contract.
Sources: Spotrac, NBA and Basketball-Reference.com
Among the players who signed nine-figure deals, Batum, Al Horford and Andre Drummond are within reasonable distance of their CARMELO value,1 while Bradley Beal’s five-year, $128 million deal with the Washington Wizards is overvalued by $7.7 million a year. The Memphis Grizzlies kept Mike Conley with the richest NBA contract ever, at five years for $153 million — $83.2 million more than his projected value over those years. He’ll be 29 during the 2016-17 season and produced less than 4 WAR last season. However, Memphis is a small market that needs to hold on to its core players if it wants to fill seats — even if the core players are now average starters.
The chart below shows the difference between players’ CARMELO average value per year and what their contracts pay per year, for both 2015 and 2016 free agents. As you can see, the orange (2015) line is always higher than the blue (2016) line — meaning that, at the same rate of pay, teams got more bang for their free-agency buck last year than they did this summer:
Because CARMELO’s market value numbers don’t set a floor at the veteran’s minimum, some players with especially poor projections end up appearing to “owe” their teams money. For instance, Lance Thomas has a negative CARMELO value for every year of his contract with the New York Knicks. He will make $27.5 million over four years but is worth -$13.8 million.
One thing that’s striking is how much difference a year (and a massive salary cap spike) can make. Twenty-three percent of contracts that were signed in 2015 were overvalued by at least $5 million per year, compared with 45 percent from this year. When we look at all contracts signed during the 2015 free agency period, the collective CARMELO value projections show that under the NBA’s new economic conditions, teams actually underspent by $80,000 per contract.
The once-laughable four-year, $70 million deal that Enes Kanter signed with the Thunder last year still doesn’t look great — according to CARMELO, he is worth almost $15 million per year less than he’s getting. But it’s much closer to where the market has settled this year. This offseason, five players signed contracts that paid them over $15 million more than their value.
Next summer, the salary cap will rise again, but probably not as high as the league previously projected (the estimate fell to $102 million from $107 million). So this trend of average players being overpaid might slow down. However, with Russell Westbrook, Steph Curry and Blake Griffin all hitting the market in 2017, we can still expect to see superstars going the Kevin Durant route — playing on super teams for below-market value and leaving money on the table for everyone else.