The New 2010 Strategy: Clear Money to Survive

Storm clouds are gathering everywhere, and that includes some directly overhead the NBA and its players union. The league warned teams this week that basketball-related income—the basis for salary cap, max contract and luxury tax threshold numbers—will probably remain steady or drop a little next season before cratering in 2010-11 as season ticket-holders and sponsors don’t renew at the same rate.

2010? Haven’t I heard that year talked and written about recently? Isn’t that the year when all those great free agents were going to parade down virtual runways as GM’s toss lots of very real dollars their way?

Not going to happen…and teams are beginning to rethink their long-term strategy. That’s one reason the Nets considered dealing Vince Carter.

As time goes on, the free-for-all over the 2010 class is going to look more like a mirage, mainly because of the deteriorating economy. Players are increasingly likely to stay home, where they can make more money. The top two members of that class—Lebron James and Dwyane Wade—have already hinted they might be willing to sign extensions with the home team before 2010. That would be the smart thing to do since they’ll almost certainly be able to get better deals this summer than next. Chris Bosh has yet to be heard from, but if he turns out to be the big catch in 2010, we’re not talking about a millennial event.

Here’s the math as SLAM Online reports today…

The salary cap is going down—perhaps as fast as it shot up.
A conservative estimate might peg the ‘09-10 salary cap at $50 million, a drop of 15 percent. If all things economic aren’t righted by miracle cure, it’s reasonable to think the recovery might not be underway by 2011, so expect the cap to take another plunge from there.

When the dust settles on the storied Class of 2010, teams could be squeezing players into a salary cap that’s rolled back to $45 million or less.

So what is the alternative strategy? How about loading up your payroll with players on their rookie contracts...draft smart and trade older, higher-priced players for younger players on rookie contracts? Stockpile first round picks? Cast about for young players with long term, low-cost contracts and acquire them?

In a word, yes, yes, and yes. (Okay, one word times three.)

In some cases, the teams that were clearing space for the 2010 free agent market are already in good shape. Cutting costs ahead of a recession is just smart business, but several teams—yes, including the Nets—are in better shape because they did more than just clear space. They went younger and stockpiled picks.

It all works for a number reasons: those players on rookie contracts cost less now (duh) but also when they begin to hit free agency in two, three, four years, they may cost less than those free agents who were signed in the last two, three, four years. The picks can be used to lighten your own payroll load or be sent in packages to other teams looking to lighten theirs. There will be a big market for low-paid assets.

Take a look around the league at the teams with the largest number of draft picks and/or players on rookie contracts as well as young players on reasonable contracts.

The Blazers and Thunder immediately jump to mind. Neither were considered in the first rank of teams going for 2010 free agents. They’re just rebuilding.

The Blazers have nine players on rookie contracts--which may be too many to manage, two first round picks still developing in Europe and three first round picks in the next three drafts. (They have seven second round picks, but four are in this draft which is very top heavy.) Their list of young players is the best balanced, with top-flight bigs in Greg Oden and LaMarcus Aldridge, an All-Star swingman in Brandon Roy, and a number of hyper-athletic kids with real potential, players like Travis Outlaw, Nicolas Batum, Jerryd Bayless, and Sergio Rodriguez. Of course, not one of those guys have ever played a single minute in a single playoff game.

The Thunder have five first-round picks in the next three years and six players on rookie contracts. Those players include Kevin Durant, Jeff Green, Russell Westbrook, Thabo Sefolosha, and D.J. White. They also have a couple of young players on reasonable contracts...like 25-year-old Nenad Krstic. But unless Krstic comes around or they get a solid big in the draft, they don't have a great young big man in that mix and no playoff experience.

The Nets, too, have five first round picks in the next three drafts (as many as any team) and seven players on rookie contracts. Neither the players nor the picks are as good as the Thunder's or the Blazers’, but then whose are? Still, Brook Lopez, Yi Jianlian and Ryan Anderson are all bigs with potential with Lopez and Yi "seven feet every day" as Rod Thorn likes to say. They also have something the others don’t: a 25-year-old with reasonable long term contract—5 years at $43 million—and NBA Finals experience in Devin Harris.

The Grizz have seven players on rookie contracts as well and four picks in the next three years. O.J. Mayo, Marc Gasol, Rudy Gay, Darrell Arthur and Mike Conley Jr. could all be more than just solid players. What Memphis doesn't have is that 25-year-old starter, the Harris type…or anyone with playoff experience at all.

Bottom line for the Nets is that they are in pretty good shape, comparatively. The team can’t be in that bad financial shape or Carter would be suiting up in Portland today and Nets fans would be welcoming (?) Channing Frye. The problem is that Carter’s contract is just the kind you trade in this environment if you’re going to fully embrace this alternative strategy—one that would get you some relief, some picks. Maybe Thorn thinks he can do better in June. He has to be thinking about it. In the 2010-11 season, Carter is likely to be paid $21.5 million: $17.5 million in salary plus a $4 million buyout in July, the partial guarantee of his 2011-12 season. That’s a lot of money…but it’s not ours. It’s Bruce Ratner’s and he seemed comfortable sitting next to Thorn Friday night (at least until the game began).

Of course by June, things will change, particularly with regard to Brooklyn. If, as expected, courts rule in Ratner's favor and if he gets his financing package, then it's likely the Nets will start to think bigger. They expect to make a lot of money in Brooklyn. But if the economy worsens, as it almost certainly will, and Brooklyn remains stuck for whatever reasons, you are likely to see a further retrenchment at the Nets offices in East Rutherford...or worse.

All of it is risky, but no more risky than assuming there will be a free agent class worth planning for in 2010.