Ginobili is probably not going to be a $7 million/year player for the next two years, but this contract was the price of doing business with a franchise legend that's declining. Paying Ginobili his true market value may have been seen as disrespectful to someone who helped the team win championships in the past. It would be easy to say that human emotions shouldn't come into play in contract negotiations, but it's just not feasible. This deal is just like the one Kevin Garnett signed with Boston a couple years ago and it'll likely be just like any new deal Kobe Bryant signs with the Lakers after his massive contract ends. The Spurs overpaid slightly to allow one of their legends to stay with the team that made him so.
The trick is figuring out the sweet spot that acknowledges a player's decline while not disrespecting him. Ginobili's number ended up being less than Garnett's and will surely be less than Bryant's because he's not THE face of the franchise. He was the second- or third-best player on the Spurs for many years, but has been worse than that in the last couple years. He still has value, of course, but he's clearly not as important as he used to be. A contract that pays him a little more than the average salary acknowledges his age while still valuing him at a higher level than any other mid-level player.
The Spurs now have an interesting cap situation on their hands. Even with new deals for Ginobili and Tiago Splitter, the Spurs are slightly under the cap. That normally would mean they lose the ability to use the full mid-level exception and could only use the Room mid-Level exception that starts at $2.652 million, which wouldn't be enough to sign an impact player. However, the Spurs can get around that by waiting to officially sign Splitter and Ginobili until after they find someone for the full mid-level exception. The cap holds of Ginobili and Splitter would keep the Spurs above the $58.5 million salary cap number, giving them access to the mid-level exception. San Antonio could use the mid-level on someone like Andrei Kirilenko, then give Splitter and Ginobili their new deals and still stay below the $71.6 million luxury tax.
In layman's terms, the Spurs will be able to keep their two biggest free agents and add another useful piece quickly. Depending on who that additional useful piece ends up being, it's been a fine offseason in San Antonio.