Welcome to Part II of Cowbell Kingdom’s interview with NBA salary cap guru Larry Coon. In yesterday’s discussion, we touched on a lot of big picture ideas, not really focusing on individual team or player situations. Our conversation took on a myriad of topics, everything from what the new CBA might look like, an explanation on gross revenue versus net revenue, to what a team like the Sacramento Kings with massive cap space should be able to accomplish in the new NBA landscape. Today’s segment of the interview still has a big picture feel, but the specific teams and players are discussed along the way for context. Hopefully you enjoy round two of the amazing Larry Coon with Cowbell Kingdom’s James Ham.
James Ham: Rumors are already flying about the 76ers looking to move Andre Iguodala. Rumors are what they are, but with the new CBA looming, do you see a devaluing of players like Iguodala, who are at the $13-15 million range over a three or four year period because there is obviously going to be some constriction in salary, how much we don’t know yet?
Larry Coon: You could see that, but what’s going to happen with the rollbacks? I think that is one of the things that’s going to end up happening, so it depends on what percentage we see in rollbacks. Then these guys are going to have a salary that’s a little bit more palatable. Maybe they alter guarantees so that even players with existing contracts, the guarantees become less. So you’re still committing the cap money, but at least you’re not committing yourself to an albatross contract like Eddy Curry or Gilbert Arenas who are just sitting there and you can’t do anything about it except buy them out and they still count against the cap.
It depends mainly on how hard the cap is. If it’s a true hard cap, and say it’s a $60 million cap, then that $15 million becomes one fourth of the entire table that you’re going to be looking at. In a soft cap, you are going to spend $25 million for Kobe, but so what, you can go up to $100 million, and although that’s a quarter of the cap, maybe it’s worth it – but if you’re in a situation like an Atlanta or Memphis and you’re paying a lot of guys these high salaries, and it’s a true hard cap or a pretty hard cap, you are going to have to make these decisions. You have to be basing your payroll on what percentage of the total dollars available do we want going to this one player.
James Ham: Memphis is one of the bigger question marks in this upcoming off-season. They are a team that is already climbing toward the mid-$50 million range and then they have two big free agents in Marc Gasol and Shane Battier. How are they going to keep this thing together? Or do they have to trade a player like Rudy Gay to make it work?
Larry Coon: Yeah, they might be in a situation where they have to do that. Memphis and Atlanta both are teams where they were in an awkward situation last summer where they had their own players who were free agents who probably didn’t deserve max money, but they didn’t really have an alternative other than to give those guys the money. Joe Johnson – if Atlanta didn’t sign him, he was probably going to some place like New York and what was Atlanta going to do? When a player leaves like that, you don’t just automatically get room to replace them. The roster and the cap room are the only exceptions that you have. So Atlanta looked at Johnson and said we have to max this guy.
Even though Rudy Gay was a restricted free agent, what Memphis was worrying about was one of those poison type of offer sheets where we are going to make it as painful as possible for you to match – we are going to give a signing bonus and max it out, we are going to take that first year salary and pay the full 80% up front- the max we can pay, we are going to write a check for millions and millions of dollars up front so if you’re going to match that, you are going to have to sign that same check on the day you match. Good luck with that. At least what Memphis did was to see the writing on the wall, see that was coming and say, alright, we’re just going to cut to the chase and at least sign you to a maximum contract and take a little bit of pressure off of us.
Both teams were kind of stuck and now both teams are looking at, with Atlanta, are we going to give up (Josh) Smith because we had to overpay Johnson? With Memphis, I was actually surprised, despite what he’s been for that team, that Zach Randolph got the contract that he did.
James Ham: He (Randolph) seems to have earned that contract through the playoffs, but you’re right, you have a player who’s had off the court trouble. A player who has not been known as a team player and he is going to cost you one of your other pieces. And chances are, with the giant extension you just gave him and with his history of knee issues, you’re looking at a player that is untradeable, so now you have to determine whether it’s Rudy Gay who loses his job or Marc Gasol that you have to let walk out the door. This dynamic that they ran themselves into, knowing that there is a new CBA looming, just wasn’t a cautious approach.
Larry Coon: One of the possibilities that a team like Memphis is looking to with the new agreement is to bail themselves out. They know that discussions are going on regarding revenue sharing. The league is saying that there’s two components to fixing the economy of the league. One is the changes in the new CBA. The other, separate and apart but related, is more robust revenue sharing. Stern has said there have been very large discussions on that. It looks like it is going to happen, so teams like Memphis are probably looking at it, thinking that the new CBA, salary rollbacks, revenue sharing, all of this put together is going to bail us out and we are going to get exactly what we are arguing for. We need a league where all 30 teams are on as level a playing field as possible so if a team really wants to compete and they have the players to win, they should be able to finance that. They could put together a roster to contend for a title just like the Lakers or Celtics can. It’s possible that they are saying that this is what we are going to be looking at, so let’s go ahead and spend the money now.
James Ham: Unless there is a hard cap and they can’t spend to keep their players.
Larry Coon: But if they put in a true hard cap, they are going to have some sort of mechanism for dealing with the cap. Either way, their best decision will be to just go ahead and spend the money for Z-Bo and go ahead and match an offer for Gasol, and with Shane Battier we will see what’s going to happen. They’ve said they are going to keep Gasol at the very least and I’m sure they told Zach Randolph that as well. I don’t see any scenario where they don’t keep him.
James Ham: Back to a couple of Kings questions. The Kings have Marcus Thornton who is a restricted free agent and it looks like the Kings are going to match whatever it takes to sign him. Last season things got a little ridiculous with second round picks or undrafted free agents like Wes Matthews that signed lucrative second contracts. Do you think these types of players are going to get hammered by the new CBA or do you think Thornton is in line for something similar to what Matthews got last year?
Larry Coon: I don’t think it’s going to be that bad with the new agreement. What they are really trying to do is get rid of all of these things that make things insane. Sign and trades are one example. What I always compare sign and trades to is a credit line. Someone gets a credit line and then they use it to go out and buy all new furniture that they couldn’t otherwise afford to buy – buying clothes, buying jewels, things they couldn’t really afford before. The credit line gave them spending power that they otherwise wouldn’t have the check book to keep up with. Pretty soon, they are in financial trouble.
Sign and trades likewise allow teams to go out and sign players that they couldn’t otherwise afford. It’s a bad thing, it drives up salaries. It takes advantage of Bird Rights which were intended for teams as a mechanism to retain their own guys and the sign and trade was sort of a compromise. They were saying – well, if they are going to leave, at least we are going to let the original team get something, the sign and trade lets us do that. It also drives up salaries. The mid-level exemption drives up salaries. Restrictive free agency drives up salaries because if a team wants to have a prayer of signing a restrictive free agent, then they are going to have to give up a pretty big salary. Like I said a few minutes ago, Rudy Gay was going to get maxed out by somebody, and not only maxed out, but with a big signing bonus and all of these other things. What the league is trying to do is take all the mechanisms that really drive up costs and do something about them. They are trying to get a system where number one, the overall guarantee is smaller so the economics of the league are fixed, but also a system where teams aren’t motivated to do something stupid financially.
I’ve never liked the argument that people make, which is if teams don’t want to spend that much money, nobody is holding a gun to their heads – they don’t have to sign Joe Johnson to the max contract. At times, this is one association working together in business. At other times, this is 30 separate teams competing against one another and it’s hard, this is a competitive environment. If the rules are set up for teams to sign players to get a competitive advantage, they are going to do it, like the Atlanta case.
James Ham: It seems like, regardless of which professional sport we are talking about, as soon as a new CBA comes out, each team has five guys working behind the scenes trying to crack the code and do something different. Is there a way to protect these guys from themselves? I agree that you have to keep a product on the floor at a certain level, but is there a way to get these guys to simmer down and just play by the rules?
Larry Coon: They are playing by the rules first of all, it’s just how far can you stretch it. If you’re in legal trouble, you are going to hire a lawyer to do his best to use the law to your advantage. It’s not that you aren’t playing by the rules, it’s that in playing by the rules, you have to figure out how to best leverage the rules to your advantage. Even on the court, all the rules are set out and you are going to be holding and carrying and doing as much as the refs are going to allow you to do. In the context of what is going on in the game, there is a competitive advantage to be gained. You are competing to win.
James Ham: Okay, last question. Samuel Dalembert is an unrestricted free agent. Are we going to see a market change for 30-year-old players in the new landscape of the 2011 CBA? How do you assess Dalembert’s value?
Larry Coon: This has always been a league where you have to be either really quick, a really good shooter or really big. Even at age 30, Dalembert is still big. There aren’t 30 great big men to go around so I think the price is always going to go up. The cost of big men is always going to be high so I think he’s going to command a lot of money.
So there you have it. Nearly 4,500 words, a substantial amount of information broken down over two day’s worth of posts with the premiere NBA salary cap expert. The NBA looks prepped and ready for a very long battle with the player association, a battle that should reshape the economics of the league, hopefully for the good. Small to medium market teams like the Sacramento Kings are counting on both salary restructuring as well as revenue sharing to return to profitability. Armed with the league’s lowest cap figure and with a new CBA in tow, the Sacramento Kings should be primed to make major improvements.
A special thanks goes out to Larry Coon, who took time out of his busy weekend to drop some crazy cap knowledge on Cowbell Kingdom.