Posted November 14, 2013

Assessing teams’ risk on extension decisions for 2010 first-round picks

DeMarcus Cousins, Derrick Favors, Eric Bledsoe, Gordon Hayward, Greg Monroe, John Wall, Larry Sanders, Paul George, Quincy Pondexter, Rob Mahoney
DeMarcus Cousins

DeMarcus Cousins signed a four-year, $62 million extension last month. (Thearon W. Henderson/Getty Images)

The deadline passed Thursday for first-round picks beginning their fourth seasons to sign contract extensions. Six players from the 2010 draft class received extensions: Indiana’s Paul George, Washington’s John Wall, Sacramento’s DeMarcus Cousins, Milwaukee’s Larry Sanders, Utah’s Derrick Favors and Memphis’ Quincy Pondexter. Detroit’s Greg Monroe, Utah’s Gordon Hayward and Phoenix’s Eric Bledsoe were among the players who didn’t agree to extensions, making them restricted free agents next summer, when their current teams will be able to match any offer.

On the team side, the process of completing an extension is tricky business. Projecting the long-term value of any player in his early 20s is challenging enough, but market influences, salary-cap implications and the sensitivity of the player in question add complexity.

It’s a perilous attempt to balance risk and reward, with the former looming over all because an agreement is struck a full year before taking effect. Teams base their valuations on what their extension candidates might eventually be capable of, beginning from a year-out projection of inherent uncertainty. With that risk playing such a prominent role in the very concept of an extension, it’s only fitting that we examine the most prominent deadline decisions through that lens — in order, from the riskiest moves to the safest.

Center DeMarcus Cousins signed a four-year, $62 million extension with the Kings.

Cousins is at once the kind of talent who makes basketball decision makers giddy and the kind of personality who makes them incredibly nervous. Long-term NBA stardom requires a fundamental level of control that Cousins has seemed to lack. From that, some have inferred immaturity, others self-centeredness. Regardless of the precise diagnosis, the symptoms are undeniable; Cousins has taken out his frustrations on opponents, coaches, teammates and broadcasters, he pouts regularly and he sells out his commitment to his team with atrocious body language.

Even with all of that understood, this extension is still a risk worth taking. But those factors can’t be ignored when the Kings have banked a four-year max deal on the notion that Cousins can both keep his emotions in check and conquer the developmental curve. Beyond the disposition problems, Cousins has been a low-efficiency scorer and lacking defender. That Cousins, 23, has the tools to remedy both of those weaknesses should leave plenty of reason for optimism, but there’s no denying that the Kings have gambled on a phenomenally productive player in hopes that the rest is worked out later.

Cousins: Playing for Maloof-owned Kings ‘felt like an AAU team’

That makes sense, given both the rarity of his production and the buoyancy of Cousins’ trade value. Some team will always be willing to try its hand with a player this exceptionally talented, giving the Kings an out if needed. Cousins’ baggage complicates the Kings’ investment, but not to a degree that should have prevented this deal from happening.

Swingman Gordon Hayward could not agree to an extension with the Jazz.

Utah reportedly engaged in amicable negotiations with Hayward but will let the versatile forward test the market next summer as a restricted free agent. That’s a bit scary because the 23-year-old is exactly the kind of burgeoning talent who can thrive in most any style. His do-it-all game is perfectly complementary and appeals to diverse market needs. Come next summer, some teams will prioritize shooting, some defense, some ball handling, some off-ball movement and some youth. Hayward checks all boxes, a balance that could create enough competition to yield an inflated, near-max offer sheet.

Restricted free agency ensures the Jazz an opportunity to match such an offer, but they are risking either losing Hayward outright or overpaying out of necessity. The cost of passing on a deal now could be the difference of a few million a season. That kind of over-investment isn’t crippling but inevitably bears team-building repercussions. Such a margin would infringe on Utah’s cap space next summer, and with Enes Kanter and Alec Burks due for their own extensions/restricted free agency in 2015, the Jazz will have a finite window in which to use it.

Point guard John Wall signed a five-year, $80 million extension with the Wizards.

Wall’s deal registers a significant risk in its size alone, as he pulled every penny possible in lining up a five-year max extension. Though not as costly as the true max deals that select veteran players have scored in free agency, this is type of contract that weighed down Rudy Gay (who signed for five years and $82 million in 2010) to the point of making him an unmanageable luxury in Memphis. The same shouldn’t be the case with Wall, but signing a work-in-progress player to this kind of deal carries that level of risk.

NBA warns Wall for flopping

As a prospect, though (and at 23 with only 185 career games, that’s exactly what he is), Wall is relatively safe. At worst, he figures to be a fringe All-Star for the foreseeable future because of his scoring and playmaking ability. His defensive work is still a bit raw, but intangibly Wall seems to say and do all the right things in taking his development on that end of the floor seriously. Aside from the inevitable uneasiness in doling out $80 million to a player with such evident holes in his game (shooting, defense, etc.), this is a sensible gamble for someone who could eventually justify a max salary.

7 comments
CurtisSmith
CurtisSmith

i expect the lakers to take a run at a few of these players.. maybe even poision pill a contract or 2

jroane
jroane

I don't get how the Jazz would be "overpaying" if they matched a restricted offer to Hayward. Isn't that by definition paying the market price? Typically, overpaying is when you pay more than what the market dictates, correct?

anotherlevelsports
anotherlevelsports

Clearly does not watch enough Utah Jazz basketball to know what is going on with Derrick Favors.  Fouls happened all too often covering for "Casper" the friendly defender known as Al Jefferson and the undersized Paul Milsap. Favors will show this year that he is clearly and elite defender.....see more about Favors progression at http://anotherlevelsports.blogspot.com/

BryanCustard
BryanCustard

@jroane It will be an overpay somewhere within the contract, not dictated by the market, but dictated by the team trying to sign him. The market will determine the overall value of his contract, however the team attempting to sign him will determine the STRUCTURE of the contract. Think Jeremy Lin a couple years ago, NY would have probably paid him the $7.5 million AAS, however they were not willing to pay Jeremy $15 mill in the third year of the contract- a "poison pill" included by Rockets GM Daryl Morey because he knew NY would not pay the luxury tax hit during that year to have Lin around. So guaranteed, if another team does the contract, there is usually an overpay involved somewhere.

humdrumdrumhumming
humdrumdrumhumming

@BryanCustard @jroane

bryan, you're misrepresenting what he wrote.... this isn't about structure or a poison pill... he's simply saying it's very likely that Hayward will cost a lot more next offseason than he would if they did a deal now... that's the basic idea behind almost every single rookie extension -- teams and players have to project value, the number of teams with cap space, and the likelihood this player will be highly sought..

he's saying that hayward has a skill-set that is desirable to almost any team, and if he has a decent season the Jazz will have to pay him more next year than they would right now, or, they might end up losing him because they have other contracts they need to consider -- this has nothing to do with contract structure or poison pills 

("poison pill" contracts aren't used very often, and they usually aren't very desirable to players, because they're backloaded, making that money worth less in today's value... when a player will have several suitors, like Hayward, he doesn't have to settle for a funky contract structure -- unless he's willing to take less money to play elsewhere)

this is the quote, he's simply saying Hayward would probably be cheaper now than next year...

"Restricted free agency ensures the Jazz an opportunity to match such an offer, but they are risking either losing Hayward outright or overpaying out of necessity. The cost of passing on a deal now could be the difference of a few million a season. "

dmitriylaktionov
dmitriylaktionov

@BryanCustard @anotherlevelsports Effort is there although he lacks foot speed. Average to slightly below average just by watching a couple of Jazz games. I will have to check defensive metrics to see how we grades out as a defender.