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Anthony Davis and His Next Contract With the New Orleans Pelicans
(A special thanks to Jason Calmes in this article for his fact-checking and infinite wisdom. Also, a large shout out to one of our favorite podcast guests and salary cap guru’s Larry Coon.)
While the drama of free agency is fun for most, it is nerve-racking for fans of that team whose star player is out there hearing pitches from other franchises. The idea of losing a franchise changing player for nothing causes more anxiety in a fan base than anything on the court possibly can. And even if your team’s superstar is not a free agent, just the threat of him becoming one can put your team in a position where they almost have to trade him (See: Kevin Love).
This is the new NBA, and with this franchise’s history of losing its star players, it is not a surprise that some fans are worried about Anthony Davis eventually exiting stage left. And while it is possible that he will some day play for another city, that day will likely not come any time soon. If the past is truly the best indicator of the future, the Pelicans will likely have Anthony Davis in uniform for at least five more seasons before they have to worry about him having the ability to put the Pelicans in a position where they have to move him or risk watching him leave. This is the timeline they are on.
But don’t just take my word for it. Let’s take a look back at the past, examine the present, and project forward to the future, as I take you through each and every detail of what is likely to be Anthony Davis’s next contract.
Anthony Davis’s Current Contract
Davis will count for $5,607,240 against the cap this season, and the Pelicans have the right to pick up a $7,070,730 option for the 2015-16 season. They have until October 31st, 2014 to do so, and they will undoubtedly pick up that option year. The Pelicans would then have the ability to make a qualifying offer of $9,191,949 in June of 2016 that would make him a restricted free agent that summer. But don’t expect it to get that far, as the Pelicans will be able to offer him a contract extension in the Summer of 2015. If and when Anthony Davis accepts, his new contract will start in 2016, seamlessly continuing his position on the Pelicans roster following that final year of his rookie deal.
First, let us start with the timeline. The New Orleans Pelicans can not offer Anthony Davis a contract extension until July 1st, 2015. He will have until November 2nd of 2015 to sign the offer. If the two sides fail to agree on a new contract, then the Pelicans will have to wait until June of 2016 to extend him the qualifying offer and make him a restricted free agent. From there, they would still have the ability to negotiate with Davis and sign him to a new deal, or allow him to sign a contract with another team and match that contract.
That seems to be the worst case scenario. The more likely scenario, if history is any indicator, is that Davis and the Pelicans agree to a contract extension at the beginning of July 2015. With Anthony Davis being a player that has between 0 and 6 years of service in the NBA, they can offer him approximately 25% of the 2015-16 salary cap as a starting point, with a duration that goes up to four years. His overall contract will start at that salary, and then standard 7.5% increases will commence for the duration of the contract, regardless of how much the salary cap increases or decreases over the next four years.
The Pelicans do have another option, one that they are likely to take. They have the ability to extend one player coming off his rookie deal a ‘five-year designated player’ contract. This contract can be signed between July 1st and November 2nd of 2015, and a team is only allowed to have one ‘five-year designated player’ contract on its roster. In addition to allowing the team to offer a 5th year, the player also has the ability to command a salary that counts for approximately 30% of the cap in the first year if they meet certain criteria. This has been deemed the ‘Rose Rule’ in the new CBA.
The Rose Rule
For a player to meet the requirements of the Rose Rule, and in turn get up to approximately 30% of the salary cap, as opposed to 25%, he must do at least one of the following:
- Be named to the All-NBA First, Second, or Third team twice
- Be voted to start the NBA All-Star game twice
- Be named the NBA MVP once
With two years left before Davis starts his new deal, all three of these remain a possibility for Davis even though he has not accomplished any of those things yet. By July of next year, it is possible that they all remain in play. Or perhaps only one or two of them will remain a viable option. If he signs a ‘five-year designated player’ deal and does not achieve one of those select criteria, then he will count for 25% of the salary cap in the first year of his extension. It is possible that, over the course of the contract, this could make a 10 to 25 million dollar difference for Davis and the Pelicans.
Recent Designated Player Contracts
First things first – NOBODY turns down the designated player contract. Kevin Love would have accepted it in Minnesota (it was not offered), Kyrie accepted it less than a month ago despite three somewhat miserable years in Cleveland, and so on and so forth. Now, I guess there is always room for breaking with precedent, but few (if any) agents will allow a client to turn down five years and 100+ million dollars just to allow a client to play on a bargain basement salary for two more years (one rookie, one on the qualifying offer), earn their free agency, and only get 25% of the cap from another team.
Now, all ‘five-year designated player’ contracts are not created equal. Players and teams can negotiate trade kickers, early termination options, and other minor clauses. For example, Kyrie Irving does have an ETO for his final season and a 15% trade kicker as well. Paul George’s contract has an ETO in year 5, but no trade kicker and in exchange for getting the ETO, the Pacers got him to agree to only start off at 27% as opposed to 30% in the event that he qualified for the Rose Rule (which he did). Meanwhile, John Wall is a straight 5-year contract with no ETO and since he did not meet the qualifications, he started at 25%. Quite frankly, the better the player, the more leverage he has. Expect Anthony Davis’s contract to have an opt-out in the 2020-21 season. The trade kicker, however, might work to the detriment of Davis if he wants out down the line, so I don’t know if that will be a part of his agents’ demands.
A couple of small things to note here as well. First, it is not a “true” 25% or 30% of the cap, which is why I used approximately earlier. It is 25% or 30% of a slightly small number that was negotiated a recent collective bargaining agreement. The two sides negotiated a different formula for setting the salary cap than they did for maximum salaries, so the two became decoupled. The salary cap is based on 44.74% of the BRI (Basketball Related Income), while maximum salaries are based on 42.14% of the BRI. So, for example, if BRI was 5 billion dollars, the salary cap would be a little less than $74.56 million (5 billion x 44.74%, less some deductions, divided by 30), but the 30% max salary would only start at a little less than $21.07 million (5 billion x 42.14%, less some deductions, divided by 30, then multiplied by 30%). As you can see, that is not 30% of the salary cap.
Second, you can sign other players on your team to 5-year contracts. Just not the designated 5-year contract. The Indiana Pacers, for example, re-signed George Hill for 5 years when he became a free agent, and that did not cost them their designated contract. The designated contract is an extension to a rookie deal, essentially giving you a one-time ability to have a guy under contract for six seasons. So, the Pelicans could sign AD and then turn around and give Jrue or Evans or Asik, etc. 5-year deals when their contract is up, like the Wizards just did for Marcin Gortat.
Also, once the 5-year designated contract is up, the Pelicans get the right to give it to somebody else if they so choose. And if they wanted to trade for a guy who was given designated contract by another team, they could do so. But you can only give out one designated contract. So in a world where the Pelicans kept Nerlens Noel and he became a superstar, they wouldn’t have been able to offer this contract to both Davis and Noel. This, in part, was why Harden wasn’t opposed to leaving OKC, as the Thunder could not offer him the five-year designated contract. Not saying that this was a big part of why Dell Demps has been willing to trade picks these last couple of years, but it is something to consider.
The Effects of the New Television Contract
You have probably heard about the new television contract that will come into effect starting in 2016. The current contract runs out after next season and the NBA will likely make close to double in their next deal, according to some projections. This directly affects the salary cap, and as we have seen, the salary cap directly affects Anthony Davis’s next contract if he is given the ‘five-year designated extension.’
The players are guaranteed to get no less than 49% of the BRI (Basketball Related Income) and no more than 51% of the BRI in each given season. For the purpose of this article, let’s assume that the players will get 50% of the BRI. A small percentage of that money goes towards benefits, while 44.74% (see above) is dedicated to the salary cap. Now, television is only a portion of the income, but it is a large percentage. Currently, television accounts for about $930 million every year and total BRI projects to be between $4.5 and $5 billion these next two seasons. Now, we can do some complex math here, but let’s assume that the television deal essentially doubles and an extra $930 million is thrown into the pool. About half of that will go to the players, with 45% of it going towards the salary cap and the rest going towards benefits. Divide that up amongst 30 teams, and you are looking at the cap rising by about $15 million per team in that first year, just based off the new television deal.
Based on this conservative projection, it would be safe to assume that the salary cap for the 2016-17 season will be at least $80 million, with $85 million likely being the top end of the projection. Now, let’s go back to AD’s possible contracts. This would put the first year of Davis’s contract at $18.8 – $20 million if he did not meet the clauses of the Rose Rule. If he did, his contract would start at $22.6 – $24 million in year one. Again, factoring in standard increases over all five years in his contract, this could mean a difference of close to $25 million dollars over those five seasons, depending on how much the cap increases. The first table below will shows what his contract will look like, give or take, if the cap rises to $80 million, and the second table shows what his contract would look like, give or take, if the cap rises to $85 million.
|Davis Contract Type||2016-17||2017-18||2018-19||2019-20||2020-21||Total Contract|
|No Rose Rule (25%)||$18,837,729||$20,250,559||$21,769,351||$23,402,052||$25,157,205||$109,416,896|
|Rose Rule (30%)||$22,605,275||$24,300,670||$26,123,221||$28,082,462||$30,188,647||$131,300,275|
|Davis Contract Type||2016-17||2017-18||2018-19||2019-20||2020-21||Total Contract|
|No Rose Rule (25%)||$20,015,087||$21,516,219||$23,129,935||$24,864,680||$26,729,531||$116,255,452|
|Rose Rule (30%)||$24,018,104||$25,819,462||$27,755,921||$29,837,615||$32,075,437||$139,506,539|
The 1800+ words can be summed up like this: On July 1st of 2015, the New Orleans Pelicans will present Anthony Davis with a five-year extension that will likely wind up being in the neighborhood of $110 – $140 million when it is all said and done. There is no sure-fire way to know at this point what the final numbers will be, and in fact, the Pelicans and Anthony Davis will not know what the final terms of the contract will be on the day he signs it. But it will be signed, because it is far more financial security than he can get in any other scenario.
Nobody has ever turned down the ‘five year designated contract’ and AD likely won’t be the first. Based on recent precedent, we could expect to see Davis negotiate for an ETO in the final season, and this basically puts the team on a five-year time table starting this season. They will have the last two seasons that he is under his current contract and the first three of his new contract to show him that he can win here. If not, Davis could very easily do what Kevin Love is doing now (and Chris Paul did before him), and threaten to opt out and leave the following season if the team does not trade him. Once we hit the summer of 2019, Davis will have all the leverage, so it is imperative that the team shows him that this is the best place for him by then.
The eventual dollar figure attached to the contract will depend on two major factors:
- The new TV contract
- Whether Davis meets the ‘Rose Rule’ criteria
In all likelihood, we won’t know the exact figures until some time in June of 2016 what Davis’s contract will look like, because that is when the All-NBA teams are released. Some might root for Davis not to meet the criteria because that would likely add an addition 4-6 million dollars in cap room each season, and while that is understandable, I believe that Davis will be underpaid regardless of whether he meets the criteria or not. If Davis becomes the MVP candidate that most expect, his true value would probably be closer to $40-$50 million per year over the course of that extension. It’s nice to save money wherever you can, but some players are simply worth paying top dollar for, and Davis is one of those players.
Something else to keep in mind is that while I have stated in the past several times that 2015 could be the last chance for Dell to make a big move for a core piece, the truth is that he can also set things up so that he can make a splash in 2016 if he so chooses. Jrue Holiday and Tyreke Evans will be on bargain basement deals at that point, accounting for approximately $22 million against a cap that figures to be between $80 and $85 million. Even if you add in Davis at the highest level possible and Omer Asik on a contract similar to Marcin Gortat’s new deal, the Pelicans will still have more than $20 million in salary cap room. And that is the low side of the projection, with $30-$35 million in cap room a realistic possibility if they clear out everyone else on the roster – something they would do if say Kevin Durant were interested in teaming up with AD.
In the summer of 2017, the team would likely have to give significant raises to both Jrue Holiday and Tyreke Evans if they wanted to keep them around, but there is a window for the Pelicans to do something major in either 2015 or 2016, even with AD’s new deal on the horizon. By the end of the summer of 2016, however, the team will likely have whatever core it wants around Davis locked into place and will move forward with that core, trying to get the championships that will satisfy Davis and keep him here long term.
You will undoubtedly hear (or read) misinformed people tell you that the Pelicans are in danger of losing Davis if they don’t show him they can win big in the next year or two, and now you have the ammunition to correct them. Or you can just point them to this article so you can save your breath (or fingers). The fact is that Davis is here for a minimum of five more years, and in all likelihood, a couple of more after that. Davis is less than 350 days away from signing a contract that will make him financially stable for the rest of his life, and the Pelicans will fork over $100 million with a smile on their face, because they will be securing one of the best bargains in the entire NBA for at least another four years.
Just saw this article on ESPN.COM on Davis being the center for Team USA for the World Cup in Spain. It's nice to see him getting the recognition for his improvements and living up to being what everyone hoped for him. I especially like the photo of him at the top, it's one of the rare photos where he looks absolutely happy. Most photos he looks introspective, forlorn or even dour. In this photo he looks like he's having the time of his life on the court. Good for him.
just saw this on hoopsrumors.com
Rockets GM Daryl Morey called the protected 2015 first-round pick he acquired from the Pelicans in the Omer Asik deal “the best draft pick in the league for someone to trade for,” as the GM said to Jonathan Feigen of the Houston Chronicle. It’s protected for the top three and the bottom 11 picks each year through 2018 and the top three and the bottom six picks in 2019 and 2020, as RealGM details.
... But DUDE... It's sooo not! Dealer Dell doubled down and I think he's a genius! The Rockets will likely end up with like the 28th pick in like 2018 when the Pels are stupid good
Asik for a late 1st round pick.. That's a Deal!
Gr8 write up! We have a potentially fantastic team assembled with options to get our SF soon. The contracts that everyone in the media was questioning like Tyreke and Jrue will look like total steals next year with all the extra cap space.
By next yr.. The final yr of ADs rookie contract.. We should be even better and he will absolutely sign an extension! This article made me do a pheeeeeew out loud haha!
So because of timing, Davis' contract will be based off the projected higher cap due to the new TV deal, and Kyrie's will not since it kicks in the season before?
@PatWorth Correct. Kyrie's contract will start off based on the projected 66 million dollar cap of next year
Does not the spectre of the cap spiking add somewhat to the small chance he chooses not to take the 2015 extension?
@Houpgarou The extension starts when the spike starts in '16. Not when he signs it in '15
This is really great stuff. I like the idea that we get the opportunity for a more or less complete do-over in a few years, while there's still time on AD's next contract to reboot as needed. But given the new TV contract and the change in the cap line that will come with it, isn't it reasonable to project that if Gordon doesn't opt out in 2015, then Del stretches him and sends him packing a year early, assuming that no trade possibilities materialize (and why would they)?
With an expanded cap, the team can afford 3 million a year for five years as the price tag for locking in a small forward that can help the team get to the next level, facilitated by the fact that Salmons, Babbitt, Miller, (and Casspi?) all are all basically on one year deals. Their salaries won't finance a big upgrade, but throw Gordon's salary in there (the $3 million they have to pay to stretch him is more than balanced out by those expirings) and you have enough to offer that won't break the bank and won't impact the re-signing of Asik, if he gets a deal like Gortat.
The downside is that there's really not much of anyone on the free agent market next year that could be targeted at that position, if you filter out the guys who won't come here. Thaddeus Young might be there, but he's basically Aminu on steroids, by which I mean he can't stretch the floor consistently the way the Pels need a 3 to do. Paul Milsap? Huge upgrade, could be sold (like Young) on "coming home." Won't require the full max salary. Now shoots 3s in bunches and rebounds like a demon. Plays solid defense, and can play the 4 in a small ball lineup. But since he doesn't play small forward, he'd be a tweener that would have to be used in only certain situations. As a small ball pf, he'd take minutes from Anderson, so he's less of an option that will make a dramatic change.
But hey, there's also . . . Kawhi Leonard! We could theoretically snatch the prototype D and 3 small forward, and simultaneously decimate the roster of our evil (but successful!) twin. Leonard will be restricted, but it's San Antonio! Would they decimate their roster to match a max offer? Would Demps go down in San Antonio infamy if he even took that shot? Wouldn't it be worth it to find out?
@xman20002000 Riding the Gordon bandwagon you're the only one on board.
@Sportnlyfe I love Demarre Carrol as a cost effective 3 and D next summer
@Michael McNamara @Sportnlyfe Yeah, Carroll is a good fit. Size, demeanor, plays to his strengths. No harm thinking about swinging for the fences, though. I just sorta like the addition by subtraction aspect of stretching Gordon. Can you just clear cap space and not use it, from a fan base perspective?
I'm thinking the same thing about "the Kings Slayer".. For those of you who don't know.. That's Kawhi's nickname!
We should throw a max offer at him.. But I'm guessing that with all the extra $ rolling in over the next couple yrs.. He'll prob have at least 3 teams willing to do so.. The spurs will absolutely match but it's worth a shot!
…of course the risk of him walking into he office and saying.." look i'm exhausted and I've been waiting for help…i want to give you enough time to work out a del and trade me…i gave you the time…"…….the article was very well done…the math was brilliantly stated….KEEP YOUR STARS EYES HAPPY..when he looks at his team he wants to see the hope of winning big.
Nice post. I'm sure Dell realizes that deep playoff runs (or a ring) will make Davis Mr. Pelican for life, not a superstar teammate and a shallow team that may or may not achieve. Breaking the bank to have Davis and one other awesome player isn't as smart as developing players, building cohesion and continuity, and being able to play 7, 8 , 9 deep with quality players, because different teams present different match-up problems, and some injuries seem to be inevitable. Gutting the roster and playing with Durant and Davis sounds good until Durant misses a season and a half after shredding his knee, and his back-up is minimum contract Waldo, the undersized streak shooter.
To be fair, if AD's original contract didn't make him financially stable for the rest of his life, he's doing life wrong.
@Noggy LOL. Hell, give me $200,000 and I'll be set. Pay off cars and buy a nice house.
Good write up for the details, but anybody that knows anything about how the NBA rookie deals work knew we aren't in danger of losing Davis.
@daThRONe You would think so. But from looking around the inter webs, there seemed to be a lot of misinformed people. Hopefully this stops that, or at least decreases it by a large margin
The salary cap scares me with AD. Considering he WILL BE the highest paid player on this team, it will limit our flexibility. That's why the chemistry of the currently assembled roster is so important. If they all love playing together maybe we can get the other guys to re-sign for less.
However if The Unibrow becomes the best player in the world, all bets are off and it will change my opinion on all of this.
@Caffeinedisaster You might be looking at the numbers within current context. Even at his highest starting salary, he is only making about 27 or 28% of the cap. That is equivalent to 17 or 18 million under this current salary cap. That doesn't handcuff your team. Heck, that is a little more than what Parsons or Hayward are making.
You can still build a very good roster with a player taking up 28% of your cap. Especially if that player is one of the top 2 or 3 in the world, which he should be at that point.
@Michael McNamara @Caffeinedisaster Indeed he will. Nice article. Now would be a good time to thank you for all that you do. Nobody else covers the Pelicans like BSS and TBW. Being that NOLA media sucks otherwise with P'cans coverage, all we'd be left with is the national media that only cares about Lakers/Knicks/Lebron and we'd all be screwed with that as our only option.
Again, thanks the you and the great writers of BSS & TBW for keeping us all up to date.
@Caffeinedisaster The reason our sports media stinks because the local stations and TP keep hiring idiots that don't have an inch of sports knowledge. I wish the local stations and TP can hire people from Chicago,L.A or N.Y not a bunch of local jokers of today. All the great local sports journalist are gone past away at that.
Get Durant in 2016 and Davis will stay IMO . As of right now we should be concerned about the future of ownership with old man Benson getting close to 90 we should be wondering what the team will look like once Rita LeBlanc takes over soon. We all know she wants to bring big market ideas to the Saints and Pels but I guess we've to cross that bride first.
@Zed84 You don't want to cross your bride. Ladies are vengeful. :)
@Zed84 This is a good point. We have a great owner, but he is up in age. Hopefully he's taught his family how to be great owners as well.
@Zed84 So, is that the only way AD stays in your opinion? Just do the simple task of 'getting Durant"?
@Michael McNamara Getting another superstar wouldn't hurt and with Gordon off the books next season I hope not 2016 an good SF like Durant would be a good addition because the SF in 2015 I really can't say who would fit for us next season.Yeah it's wishful thinking for Durant and Davis will stay because he'll be an RFA anyway.
which can be good for business from a publicity and possible reality show standpoint if AND ONLY IF there is a competent sports minded professional in the front office to keep the Pelicans and the Saints competitive..