The New CBA Sets The Sixers Up For a Decade of Success

For years, the cries from the rest of the NBA regarding the scourge known as tanking rained down from every corner of the Earth, from the typewriters of traditional media columnists to the interviews with coaches and general managers bemoaning the path that Starbucks Rewards Gold Member Sam Hinkie elected to take with the Sixers.

Many here on Liberty Ballers defended the plan. (OK, pretty much all of us defended the plan.) In 2016, the results of that plan have begun to show, thanks to the team finally winning a draft lottery and picking Ben Simmons, followed by the on-court debut of Joel Embiid that has surpassed all but the wildest expectations (those being that he steps on the court and the other team immediately forfeits, knowing any chance of victory is immediately lost).

And now, thanks to provisions in the NBA’s newly-approved Collective Bargaining Agreement, Hinkie’s plan could be paying dividends for the Sixers well into the next decade.

Let’s take a step back for a moment to review a familiar concept. There’s three ways in the NBA to acquire a superstar.

1. Trade for one.
2. Sign one as a free agent.
3. Draft one.

(A fourth way, kidnap one, was legislated out during CBA negotiations after the infamous DeAndre Jordan incident.)

This decade has been marked with unprecedented movement of superstar players. The best player in the league has changed teams as a free agent twice. Other superstars took less than the max contract to allow teams to sign other free agents, sparking a debate as to whether superstars had a larger duty than simply to themselves and their own financial interests.

The straw that broke the camel’s back, however, was Kevin Durant leaving Oklahoma City for Golden State. It was the worst nightmare of small, non-glamour market owners — a homegrown superstar leaving to join an already stacked team, and that home team essentially having no recourse, no advantage in keeping him.

The NBA has traditionally been a league that over-corrects to solve these sorts of problems, ignoring the unnatural factors that create them. One key overlooked fact is that the Durant situation was made possible by an almost unprecedented spike in the league’s salary cap. In any normal year, such a move would not have been likely, or even possible. A situation was created where it was advantageous for Durant to accept a short-term deal in anticipation of a larger cap jump, where he would truly be able to cash in. When a short-term deal became the better option, it essentially negated Oklahoma City’s best weapon against losing Durant as a free agent, their ability to offer a longer term (a five year deal instead of four years) and larger annual raises.

To prevent such a situation again, the NBA has essentially created a system where if a star wants to leave his current team, he can, but it’s going to be a financially questionable decision at the level of “should I invest my life savings in a responsible 401K or a collection of Furbies?”

The new CBA created a new “Designated Player” exemption, which is pretty much a souped-up max contract extension almost specifically for homegrown players.

(Credit to Eric Pincus at Basketball Insiders, who obtained a copy of the term sheet for the new CBA and spelled out a lot of the new details of the deal.)

The exemption applies to players entering their eighth or ninth season, or what’s essentially their third NBA contract. Let’s use Joel Embiid as an example. Embiid is currently on the third year of his four-year rookie deal. The next contract he signs will likely be for four or five years (more on that momentarily). The “designated player” extension would not apply to that contract, but rather the next contract he signs.

To qualify for the designated player extension, a player needs to make one of the three All-NBA teams or be named defensive player of the year in either the preceding season or two of the last three seasons. He also must have been drafted by the signing team, or acquired during the term of his rookie contract.

(Side note: If Embiid would make an All-NBA team this season, he would be eligible for a larger extension next year under a modified version of the Derrick Rose rule. That’s unlikely, though, so don’t look too far into it.)

A player who qualifies for that five-year extension can receive a first-year salary of 35% of the cap, which normally requires ten years of service, with 8% annual raises. Alternatively, signing a free agent contract with a new team would only leave that player eligible for a four-year deal with 30% of the cap in his first year salary with 5% annual raises.

It’s hard to project what the cap will be when the time comes for Embiid or potentially Ben Simmons to become eligible for such a contract, but essentially, either would be throwing away tens of millions of dollars to leave, and demanding a trade at that stage would still leave them unable to collect the largest possible contract.

Additionally, the new CBA allows for two five-year rookie-scale extensions, up from one in the most recent CBA, which could potentially spare the Sixers a difficult decision when the time comes to extend Embiid or Simmons. Looking way down the road, the CBA also allows for two designated player extensions, which could mean Embiid and Simmons would both be able to receive the significant contract extensions from the Sixers, if they both were to meet the requirements.

Let’s take a look at Embiid, as an example. Let’s say, hypothetically, Embiid signs a five-year maximum extension with the Sixers after this season. If he met the criteria, he would become eligible for a designated player contract extension entering the last year of that extension, his ninth year as a pro, the 2022-23 season.

Projecting the salary cap that far in advance is something of a fool’s errand (ask anyone to project the 2016-17 salary cap seven years ago and their answer certainly wouldn’t have been $94 million), but for the sake of demonstrating the point, let’s pencil it in at $125 million, a small increase over the projected growth of the cap for the next three to four years.

The following chart shows side-by-side what Embiid would make signing a designated player extension with the Sixers as opposed to what he would make for leaving as a free agent. As you can see, the differences are massive. Embiid would essentially be forgoing $10 million annually to sign with a different team. He would have the choice between signing a five-year extension with the Sixers worth over $256 million or a four-year free agent contract with another team worth over $161 million.

With every action, however, comes an equal and opposite reaction. If it’s easier for the Sixers to retain their homegrown stars, then naturally, it’s easier for every other team to retain their stars. Remember the three ways to acquire a star player? Well, signing one just got a lot more difficult.

This new tool is essentially in place to restrict the movement of superstar players and the building of super teams. If this tool were in place in the last CBA, Durant would have been eligible and could have signed a massive new long-term deal with Oklahoma City before he ever hit the market. Obviously, he still could have left (and the forthcoming salary cap spike might have still made it advantageous to do so), but he would have been forgoing tens of millions of dollars to do so.

The decision for potential free agents moving forward, like Steph Curry, Paul George, and Russell Westbrook, may have just become a lot easier. Would they really forgo upwards of $50 million to test the free agent market? It’s unlikely, and by instituting this provision, owners are hoping against it.

As for trading for a superstar, what’s the number one impetus for a trade? An impending free agent that teams are concerned will leave. If teams have that trump card in the form of a contract that nobody else can even come close to matching, why do they need to trade their stars? It becomes far easier to call a star’s bluff when you have the ability to offer them far more money than anyone else.

This isn’t to say high-end players will never become available again. There’s plenty of talented players that won’t hit the criteria for the designated player deal. There’s only fifteen All-NBA spots per year, after all. But it does take a major chunk out of any potential market.

Many teams hoped that Hinkie’s plan would prove to be a cautionary tale, but instead, the new benefits afforded to teams attempting to keep their drafted stars may mean that Hinkie created the blueprint to sustainable success.