If you’ve read Part 1, you might be able to guess my basic objectives. I want to raise the level of competition from the bottom up, by encouraging all teams to try to win. I want to increase the likelihood that well-run organizations can meaningfully contend. And I want to equalize opportunities to build great teams as opposed to trying to break them up.
To accomplish all of this, my proposal broadly consists of emphasizing the value of the draft and player development relative to free agency, while restructuring the draft lottery to favor teams striving to win and coming up short rather than teams at the bottom of the standings. Here is my plan:
(1) Institute Rainbow Draft Lottery Odds Covering All Teams Failing to Reach the Conference Finals
I’ll start here because it’s the one aspect of my plan that doesn’t require a change to the Collective Bargaining Agreement. Team owners (a.k.a. the NBA Board of Governors) can implement this change themselves, and they absolutely should.
The biggest problem facing the NBA from a competitive standpoint is tanking—the organizational prioritization of losing over winning in order to increase the probability of landing a top pick. In 1990, the NBA began using a weighted draft lottery system, with teams at the bottom of the standings having the best lottery odds. The particulars have been adjusted from time to time, including a modest flattening of the odds beginning next year, though the same basic system rewarding losing over winning among non-playoff teams has remained in place.
Back in May I wrote an article describing the tanking epidemic in detail, explaining why the NBA’s most recent adjustment to draft lottery odds won’t solve the problem, and exploring what can be done about it. One of my suggestions was to convert the lottery odds into a sort of rainbow, where teams in the middle have the highest odds of landing a top pick. Back then my proposal kept the lottery confined to non-playoff teams, which would lessen the tanking incentive but not eliminate it except at the very bottom of the standings.
Recently I had a sort of epiphany: there’s no reason the lottery needs to be limited to non-playoff teams. By expanding its scope to include teams that make the playoffs but don’t contend for the title, you solve two major problems: (1) you remove the incentive to tank, and (2) teams formerly in purgatory, or on the “treadmill of mediocrity,” gain a much more likely path to contention. Here is what the new draft lottery odds would look like:
The best odds of a top pick belong to the teams that narrowly missed the playoffs, followed closely by average non-playoff teams and those that barely made the postseason. The worst teams in the league have lower lottery odds, though they’d still pick first among teams who fail to win the lottery and thus be guaranteed top-10 selections. Teams like last year’s Raptors and Sixers that won lots of regular season games but failed to make the conference finals would have the lowest odds, similar to what teams that barely miss the playoffs have now.
Such a distribution would be much better than the current system both from a competitive standpoint—rewarding teams trying to win rather than lose—and from an entertainment standpoint.
On the competition side, consider the difference in lottery outcomes between the Pacers and Nuggets on the one hand, and the Lakers and Sixers on the other. The Pacers and Nuggets persistently try to win but come up short. The Pacers have never won an NBA title, and they’ve only made the Finals once. They’ve also never lost more than 50 games in the 29 years of the weighted lottery system. As a result, they haven’t had a single top-5 pick since the system began. In contrast, the Lakers have won 5 titles in the weighted lottery era and made the Finals 3 more times. They also bottomed out for a few years, resulting in 3 straight #2 overall picks. The Nuggets and Sixers have each won just 2 playoff series in the past 15 years. But the Nuggets haven’t had a top-5 pick in that span—missing out because they’ve won 30+ games every year—while the Sixers blatantly tanked their way into 3 straight top-3 picks.
Wouldn’t it make a lot more sense if the teams that finish in the middle of the pack were rewarded with higher odds of a top pick, as opposed to the teams that either make little effort to win or are too inept to come anywhere near the playoffs? Then the treadmill of mediocrity can be replaced by an escalator to contention, and the concept of purgatory disappears.
From a pure entertainment perspective, it’s simply a lot more fun when the most promising rookies play on competitive rather than dysfunctional teams. Think about how the Rookie of the Year race last season was so much more exciting than a typical year, with Ben Simmons, Donovan Mitchell, and Jayson Tatum all making the playoffs. Now imagine how exciting it could be if Luka Doncic ended up on the Nuggets, or if Jaren Jackson Jr. had gone to the Bucks. With the above rainbow lottery odds, those would be distinct possibilities.
(2) Make “Supermax” and “Derrick Rose Rule” Contracts Operate Like Veteran Minimum Contracts
That probably reads like gibberish to anyone who doesn’t study the CBA as a hobby. [And if you don’t study the CBA, what are you doing with your time???] In any event, I’ll explain.
In my opinion, the most creative, well-executed idea in the CBA is embodied in Article VII, Section 3(f) and Article IV, Section 6(g)(2). Those are the provisions stating that veteran minimum contracts all count the same for cap purposes—even though more experienced players earn more money—and teams will be reimbursed for the extra amounts paid to players with more service time. This allows the league to reward seniority financially without discouraging teams from signing older players. The additional amount that a team pays a 10-year veteran, for example, versus a 2-year veteran is reimbursed out of a league-wide fund created and maintained by the NBA.
Similarly, “Supermax” and “Derrick Rose Rule” contracts were created to allow particularly deserving players to be rewarded financially beyond other players in their contract category. The Derrick Rose Rule, or “5th Year 30% Max Salary” in CBA terms, enables certain players to earn 30% of the cap following their rookie-scale contracts rather than the customary 25% max for players at that experience level. The Supermax, or “Designated Veteran Player 35% Max Salary,” enables players with 8 or 9 years of experience to earn a 35% of the cap instead of 30%. Only players with MVP, All-NBA, or DPOY recognition qualify. See CBA Article II, Section 7(a).
The problem with these specialized max contracts is that they function more as a penalty than as a reward. Teams lose both financially and competitively, as they end up paying such players significantly more than their peers while also losing that additional cap space. Since these contracts are not allowed in free agency, they effectively function as a star-development tax that most teams must pay in order to keep their franchise cornerstone satisfied. Though the player gains financially, the team loses compared to any team that signs a star in free agency.
As a result, the Supermax contract has not had its desired effect. It was meant to help keep star players with the teams that drafted and developed them. Instead, in multiple instances it has contributed to a deterioration of the player-franchise relationship, as teams were hesitant to extend such a contract, leading to a trade. Examples include DeMarcus Cousins in Sacramento, Jimmy Butler in Chicago, and Kawhi Leonard in San Antonio.
But the fix is simple. Keep the stringent criteria for these specialized max contracts, and treat them like veteran minimum contracts. The difference between the specialized max and the standard max will (i) not count against the cap, and (ii) be reimbursed out of the league-wide fund. Then star players will be rewarded for their achievements without any accompanying competitive or financial disadvantages to the teams that drafted and developed them.
(3) Make Contract Extensions Cap-Advantaged rather than Cap-Disadvantaged
Two years ago I suggested a few changes to the CBA, and this was essentially number one. In many instances, the CBA bizarrely discourages teams from offering extensions to star players, because those extensions would limit the team’s ability to build around the star in free agency. This problem stems from the rules involving cap holds—the salary amount a player counts against the cap. Once an extension is signed, the player’s salary under the extension immediately replaces his pre-existing cap hold. So, for example, if a player with a cap hold of $10 million signs an extension starting at $25 million, his team loses $15 million in cap space heading into free agency.
This problem is most apparent in the context of extensions to rookie-scale contracts. Rather than facilitating opportunities for teams to build a contender-quality supporting cast around a young star, the rules present an obstacle. As I wrote back in 2016:
signing a rookie-scale extension often leaves the team at a competitive disadvantage. The team is forced to choose between (a) signing the player long-term but having no cap space to improve the team around him, and (b) maintaining cap space but jeopardizing the team’s relationship with the player and likely signing a less preferred deal with him in restricted free agency.
The Kawhi Leonard and Giannis Antetokounmpo situations are particularly notable in exposing the pitfalls of presenting teams with such a choice. Both players were selected #15 overall, and thus their cap holds (which are tied to 4th year salary) were relatively low. The Bucks chose to sign Giannis to a big extension, forfeiting a great deal of future cap space, whereas the Spurs opted to forego any extension talks in the service of improving the team via free agency.
By extending Giannis as soon as possible, the Bucks maintained a strong relationship with him individually. Yet they limited their ability to improve the team in free agency, causing their free agent spending window to appreciably close in 2016 rather than 2017. As a result, largely by necessity they went all out in free agency 2016, which was the worst possible time to do so. That free agent market was plagued by extreme salary inflation due to the new national TV deal. They signed role players to deals that looked awful a year later when the market cooled, and it’s still unclear whether they’ll ever be able to build a contender around their star.
In contrast, the Spurs saw immediate dividends from declining to extend Kawhi. That decision enabled them to sign LaMarcus Aldridge the following summer, propelling the team to a 67-win season. It initially appeared that there were no negative consequences to stalling on Kawhi’s max contract. He signed a 5-year max deal upon entering free agency. Yet eventually a rift between Kawhi and the organization became evident, and a member of Kawhi’s camp suggested that the team’s refusal to offer him an extension years earlier had contributed to it.
Regardless of whether that earlier decision played a role in the split (I tend to think it paled in comparison to their injury treatment disputes and the team’s reluctance to offer a Supermax extension), there’s certainly a risk of harm to the player/management relationship from declining to offer an extension. To eliminate that concern and to expand rather than limit roster-building flexibility, we can insert a CBA provision like the following:
In the event of an Extension, the player’s Salary for the purposes of computing Team Salary [i.e. his cap hold] shall be the lesser of (a) his actual Salary or (b) his Free Agent Amount [pre-existing cap hold] in the absence of an Extension, until the start of the Regular Season in the first Salary Cap Year covered by the extended term.
Then extending a star player could only add to a franchise’s ability to construct a contender around him, not deter the team from doing so.
(4) Decrease Cap Holds following the Expiration of Rookie-Scale Contracts
In the current CBA, the league acted to reduce the disincentive against rookie-scale extensions, but it did so by increasing cap holds—a maneuver I’ve explicitly cautioned against. Here’s what I wrote before the CBA came out:
One common proposal to eliminate the competitive disadvantage of rookie-scale extensions is to substantially increase cap holds, though that’s not my preferred solution. I consider it a plus that rookie-scale cap holds are lower than expected salaries. That benefits teams that build through the draft by giving them a larger window to bring in talent and build around their draftees.
Now that we’ve instituted preferential treatment for extensions as set forth in the last section, we can further facilitate the creation of new contenders by bringing those cap holds down. Right now, cap holds following rookie deals range from 250% to 300% of 4th year salary, a substantial increase over their previous levels. See CBA Article VII, Section 4(d)(ii). Combined with an overdue increase in the rookie scale, this has resulted in the league roughly doubling cap holds for players coming off rookie contracts.
Knock that figure down to 150% of 4th year salary, and suddenly teams will have a lot more wiggle room to build around a re-signed or extended young star. To prevent teams from benefiting too much off of finding a star with a low pick, the cap hold could be adjusted to something like 150% of 4th Year Salary OR the full Mid-Level Exception, whichever is greater.
(5) Institute Cap Smoothing
While I tend to enjoy the Warriors’ greatness, I admit that one aspect of their roster construction was somewhat antithetical to competitive balance, and it resulted from a historical accident. Neither the league nor the players’ association appreciated how much a massive one-year spike in the salary cap would disrupt the 2016 free agent market. Often writers are quick to blame the players exclusively, but I remember it as a mutual misapprehension of the problem. As I recall, the league made a belated sort of “take it or leave it” proposal to smooth the cap, which would have amounted to the players granting the owners a several-hundred-million-dollar, interest-free loan. Unsurprisingly, the players declined.
In the absence of smoothing, the cap increased 34% from one year to the next. Almost every team suddenly had enough cap room to add a max player. This unusual circumstance paved the way for Kevin Durant, an MVP-caliber player in his prime, to join the league’s best team. It also led to a small collection of role players—those who were free agents that summer—getting oversized deals compared to all the other players who entered free agency in a different year.
Both the owners and the players have an interest in cap smoothing. The owners want to maintain a relatively stable competitive environment, and the players association wants to maintain a relatively equitable allocation of league revenues across its membership. But the players don’t want to give up a bunch of money during the season and wait to be made whole thereafter.
So here’s what I propose as an amendment to the CBA: The salary cap cannot increase by more than 10% from one year to the next, and it also cannot decrease from one year to the next. In the event that Projected Basketball-Related Income (BRI) for the salary cap year would result in an increase greater than 10%, the cap will increase 10%, and each player’s paycheck will be adjusted proportionally upward to account for the difference. In the event that Projected BRI would result in a cap decrease in any salary cap year, the cap will remain unchanged, and each player’s paycheck will be adjusted proportionally downward to account for the difference.
That way, players will share roughly evenly in the benefit or loss from unexpected revenue changes, irrespective of when they become free agents.
And more importantly for this exercise, dominant teams will not unduly benefit from large revenue swings that otherwise tend to disproportionately favor them in the free agent market.
Conclusion
All of the above changes are geared toward a simple objective: create an environment where there’s no incentive to be bad and where teams can more readily make the leap from mediocre or good to great. With the changes outlined above, I think that all well-run teams will be better equipped to build a contender. In addition, the overall level of play—especially after the All-Star break when lesser teams tend to really fall off—would be higher. That’s a win for the fans and probably a victory for the league financially as well.
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