Vorkunov: It’s time we start discussing NBA contracts in a different way

It’s late July and NBA free agency is almost over. All the big names have signed and billions of dollars have been spent. Now comes the next part: the ongoing analysis and discussion of whether each team or player got a good deal. It’s a time-honored passage of the offseason.

While everyone will attach their own grades to each free-agent signing and debate whether this guy should have gotten the max or if that guy really deserves $10 million a year, the conversation is also a little out of context. We know the nominal dollars that each player signed for, but finding comparisons isn’t that easy. A player who signed a contract for $20 million annually in 2023 did not get the same kind of contract as a player who signed for the same amount in 2021.

There is another way we should talk about contracts. It’s not exactly new – team managers and player agents have been doing it for years – but it’s been mostly ignored on the internet and TV, save for a few cap fans like our resident wimp John Hollinger.

It’s time to stop talking about contracts in their raw dollars and start talking about them as a percentage of the salary cap.

Intuitively, this makes sense. The NBA is a salary-cap league; every financial decision is based on how much cap space a team has or doesn’t have. The collective agreement already explains this in a few ways. Max extensions for veterans and players coming off their rookie-scale deals, for example, are tied to a percentage of the cap. This summer, the Hornets’ LaMelo Ball got a contract that will guarantee him 25 percent of the salary cap in 2024, the year it starts, or up to 30 percent if he qualifies for that bump by making an All-NBA team.

How do you know a player is considered a superstar in the NBA? He has a contract that pays him 35 percent of the cap, as do Stephen Curry and Nikola Jokić. This figure allows for an apples-to-apples comparison of each contract, whether it was signed in 2018 or will be agreed in 2025.

But we can do this with every other deal across the league. The cap has more than doubled over the past decade (with a mighty big increase in 2016). By the end of the decade, the cap may be more than triple what it was a decade ago, a huge increase in such a short period of time. Wages have risen steadily alongside the ceiling.

Take the deal Dillon Brooks just made with the Houston Rockets. He is set to make $86 million over four seasons; he will make $22.6 million for the 2023-24 season, according to a league source. The salary cap is $136.021 million this coming season, so he is set to earn 16.6 percent of the cap. Had he signed at the same percentage of the cap last summer, he would have received a deal that paid him $20.5 million in his first year. Had he signed at the same percentage in 2021, he would have made about $18.68 million in his first year. In the summer of 2014, pre-cap spike, that contract would have equaled a salary of $10.49 million; in 2017, post-cap spike, it would be $16.59 million

Brooks and Lonzo Ball, currently halfway through a four-year, $80 million contract signed in 2021 with the Bulls, took roughly the same percentage of the cap in the first years of their contract. Plus, Brooks’ salary is going down every season, while Ball’s is going up. In 2019, Julius Randle signed a contract that paid him $18 million in the first year — 16.5 percent of that season’s cap.

Let’s reverse the timeline. In 2018, Aaron Gordon signed a four-year, $82 million deal with the Magic, paying him $21.59 million in his first season before his salary declined each subsequent season. That was worth 21.2 percent of the cap that year. This offseason, the first year salary would have been inflated to $28.83 million. That’s roughly near the salary cap for Khris Middleton in 2023-24, where he’ll earn $29.3 million in base salary and likely incentives as part of a three-year contract that could be worth as much as $102 million.

And remember, the further out each contract goes, the smaller it will be as a percentage of the cap. It is important. If a contract is supposed to pay a player the same amount each season—say, $20 million—then that $20 million each year will become more and more affordable as the cap increases. If the contract decreases with each season while the cap increases, as the Knicks did with Mitchell Robinson’s four-year, $60 million deal signed last summer, it makes the contract look better. Due to the possibility that the cap could increase by the maximum 10 percent with each upcoming season as the NBA sees its new media rights deal go into effect, even contracts with the highest annual raises allowed — at eight percent year-over-year — will not be able to grow as fast as the cap and will slowly begin to decline as a percentage of the cap.

Another way to consider offers is to link them to the mid-level exemption for non-taxpayers. It can be used as a level-setter in negotiations, and it is not uncommon to see contracts come in at around that number. Under the old CBA, it was worth approximately 8.48 percent of the cap; under the new one, it is 9.12 percent of the ceiling. In 2017–18, it was worth $8.406 million; this season it will be worth $12.4 million. In 2017, the Spurs signed Rudy Gay to a two-year, $17 million deal, with a player option, starting at mid-level. This month, Dennis Schröder agreed to a two-year, $26 million deal with Toronto, about mid-level, if not quite.

Let’s check in with another deal that might have been a little surprising this summer: Max Strus to the Cavaliers for four years at $63 million. We don’t have the exact contract terms yet, but let’s assume he gets $14.49 million in Year 1, which is 10.7 percent of the cap. He is about 15 million dollars a year player now, but over the years, so much salary has less and less spending power for teams in the market. Consider the players who signed contracts starting at around $15 million in Year 1 of the deal:

Tying player contracts to a percentage of the cap instead of the salary itself may be the simplest way to conceptually deal with salaries that will already grow larger in the coming years.

Jerami Grant signed a five-year, $160 million contract this offseason (with a player option), a figure that caught many eyes. He will make $27.59 million in the first season of that deal, according to a league source — 20.28 percent of the cap. In 2020, Fred VanVleet signed a four-year, $85 million deal that paid him $21.25 million in year one — 19.5 percent of the cap. In 2015, Goran Dragic signed a five-year, $85 million contract that paid him $14.78 million in year one — 21.1 percent of the cap. In 2025, if the cap increases the maximum 10 percent each summer, a player signing for the same percent of the cap would earn $33.38 million during the 2025-26 season — and be worth about $193.6 million over five seasons, assuming the same eight percent annual raises.

Expect wages to keep rising. If a supermax contract went into effect that summer, at the same salary cap, that player would get about $57.6 million for the 2025-26 season — that’s more than $9 million more than Steph Curry earned this season as the league’s highest-paid player. After that, it will continue to increase by $4.6 million each season over the course of the deal, amounting to a five-year deal worth nearly $334 million.

There’s going to be a lot of money floating around the NBA for years to come—there already is—and the best way to judge each trade is to stop paying attention to the raw number and start looking at the percentage of the cap.

(Photo: Petre Thomas / USA Today)