All things contractual in the modern NBA stem from the 1998-99 lockout deal. That was the year the NBA instituted the individual player maximum salary, set maximum contract lengths, created the mid-level exception and developed the luxury tax to deter teams from going too far over the salary cap.
No collective bargaining agreement since, including the 2017 edition that will be ratified next month, has lived up to the incredible impact the ‘99 version had on the NBA.
In some ways, the NBA — who definitely won the 1998-99 negotiations — is still tinkering with the paradigm created 17 years ago. And it’s all about the individual max, a rule that has enormous ramifications for team-building and league parity.
The individual max was the reaction to Kevin Garnett’s six-year, $126 million contract extension signed in his third season in 1997-98. Owners didn’t want a league where teams had to commit to $20 million a year to keep their 22-year-olds. Some long contracts to sub-MVP stars (think Juwan Howard’s 11-year deal) also pushed owners to fight for caps.
It’s unclear if the league knew at the time what wide-ranging effects the individual max would have on team-building and player movement. Essentially, by capping the salaries of the best players, the league opened up tens of millions more for role players.
If teams are spending $50 million on player salary, and the best player is capped at $15 million, there’s a lot of dough to go around for the guys who are by definition not the best players. Combine that with max roster sizes and a strict rookie scale, and there were just gobs and gobs of money for non-impact players.
This put a premium on cap experts in NBA front offices, and turned the trade market into one based more on salary cap finagling than talent optimization. Over time, it’s had an even bigger effect: dropping the incentive for stars to stay with the own teams. After all, the best players will make roughly the same amount whether they re-sign with the team that drafted them or go somewhere else. If you can go a team with a better roster and not lose much salary — say, if you’re LeBron in 2010 or Kevin Durant in 2016 — why not?
The NBA has always tried to encourage players to stick around, but the incentives are usually fairly weak. Players can receive an extra year on their contracts if they re-sign, and the annual raises are slightly larger. For some — typically the lower-level stars, the Michael Redds of the league — this works. For others — typically the MVPs, like LeBron and Durant — it doesn’t. The incentives need to be stronger.
With this new collective bargaining agreement reached last week, the incentives are there. Based on reports, teams will be able to offer longer-term extensions to eligible star players before their contracts are up. The full details still haven’t been revealed, but the idea is that under the new system, the Thunder would have been able to offer Durant a lucrative long-term extension in 2015, after an injury-riddled season of foot surgeries. Would he have taken it knowing he could almost assuredly get a shorter max from a better team in 2016? Maybe, maybe not. But it’s a better carrot that what existed before.
The NBA’s new extension rules mimic the league’s greatest tool for keeping players at home: restricted free agency. It’s not quite parallel, but it is brilliant.
There are a number of factors that make restricted free agency so powerful and encourage an incredibly high rate of stars (essentially all of them) to sign early extensions after their third year in the league. But one of those factors is the ability to offer max salary as early as possible. The gaudy numbers teams will be able to offer guys like Paul George, DeMarcus Cousins, and perhaps even Russell Westbrook (depending on the specifics of the rule) will be a nice quiver in teams’ arsenal.
No tool will keep all superstars from fleeing in free agency. So long as free agency has existed, stars have been pushing for trades (Kareem Abdul-Jabbar), leaving for new teams (Shaq, Grant Hill, LeBron, and Durant), or leveraging free agency to influence change (Kobe). So long as the individual max exists and incumbent teams have no strong financial ability to supersede other clubs, this will be so. Players will leave.
But it’s interesting to see the league fight it by giving teams another tool to keep their players. The NBA is smart enough to know it can’t control what superstars do. The league can, however, influence their decision process. This will probably be a dance that comes up every time the league negotiates a new labor deal with the players for all of eternity.