Why second-round NBA draft picks might get paid more than first-rounders this year
Jordan Mickey had high hopes for the 2015 NBA draft, but his agent warned him: If you fall outside the top half or so of the first round, you’re better off going in the second round. Teams picking high in the second round offer a better fit and more flexibility.
Mickey heard the message.
He just didn’t care.
“The recognition, guys want to say they were a first-round pick,” Mickey said. “That’s something I wanted.”
“I just felt that, the way I play, I deserve it.”
Mickey slipped out of the first round to the Celtics at No. 37. Like many players, he still carries a grudge for the teams that passed on him.
“It’ll probably be with me until I’m done playing the game,” Mickey said.
What separates Mickey from other second-rounders: He received one of the biggest perks usually afforded only to first-rounders – a higher salary – despite going in the second round.
It’s the product a salary cap increasing higher than ever imagined when this Collective Bargaining Agreement was signed, and this summer’s projected $94 million cap will intensify the effect. Expect several 2016 second-round picks to make more than some of their first-round counterparts next season.
First-round picks are bound by a salary scale negotiated by the league and union into the 2011 CBA. The scale is a set amount for each pick, increasing slightly each year. Teams can pay a player between 80% and 120% of his scale amount, and 120% is so common, it’s practically the set number.
Second-round picks are free to negotiate any contract. Teams must use cap space or an exception – e.g., mid-level or minimum-salary – to sign them.
So, with the salary cap skyrocketing, the proportions for first-round picks have become out of whack. In 2011, the first year of the CBA, the No. 1 pick earned 8.86% of the salary cap ($58,044,000). If the salary cap comes in as projected this year ($94 million), the No. 1 pick will earn 6.28% of the salary cap. That same effect is felt throughout the first round.
Meanwhile, second-round picks are free to partake in the newly available TV money.
There’s an unsaid – sometimes, said – tension behind every contract negotiation between teams and second-round picks. To retain a second-rounder’s rights, a team must extend him a required tender. A required tender is a one-year contract offer, and because that’s the only requirement, it’s always for the minimum and fully unguaranteed.
Teams want to sign players to longer contracts with little to no guaranteed money. That way, if the player pans out, he’s cheap and can’t go anywhere. If he doesn’t pan out, he can be waived for minimal cost.
Second-rounders have varying interests. Some want a long-term deal with more money guaranteed or scheduled if not released. Others want to hit free agency sooner, so they can bargain with all 30 teams rather than just the one that drafted him. For most, both desires apply. Receive enough over a long-term contract, and free agency becomes far less important. Face a cheap long-term deal, and the player can always threaten to sign the required tender.
K.J. McDaniels, the No. 32 in the 2014 draft, famously accepted the required tender rather than sign long-term with the 76ers. He then signed a three-year, $6,523,127 deal with the Rockets last summer. Despite getting just the minimum his first year, McDaniels has already made more than half of the players selected in the first round ahead of him. Next season, he’ll pass a few more in earnings. Plus, he’ll either become a free agent a second time before 2014 first-rounders do so once (if Houston declines his 2017-18 team option to make him restricted) or an unrestricted free agent before scaled 2014 first-rounders (if Houston exercises his team option).
McDaniels’ plan carried risk. If he got cut in his first training camp, he could’ve walked away with nothing.
Still, there’s already a school of thought that players are better off going early in the second round rather than late in the first, that the freedom to negotiate a shorter contract trumps the lower initial salary.
Now, second-round picks can probably have their cake and eat it too – a higher initial salary and more freedom.
Precedent runs deeper than Mickey
Mickey became the first second-round pick under this CBA to sign the year he was drafted and earn more his first year than a first-round pick.
Players that were stashed overseas had done it, but their stock changed from the time of the draft – either because they developed or were ready to jump to the NBA. We’re looking at only players to sign the year they were drafted.
Mickey actually made more than four first-round picks last season: No. 27 pick Larry Nance Jr., No. 28 pickR.J. Hunter (Mickey’s own Celtics teammate), No. 29 pickChris McCullough and No. 30 pickKevon Looney.
Put another way, Mickey received 1.67% of the 2015-16 cap. The No. 20 pick Thursday will receive 1.66% of the projected 2016-17 cap.
Based on that precedent, more than third of the first round could make less next season than a second rounder.
There are deeper ways to evaluate a second-rounder’s contract than first-year salary as a percentage of the salary cap. Future salaries, length, guarantees, options and incentives all matter. But for a quick reference, we’ll go by first-year salary as a percentage of the salary cap.
Several second-round picks under this CBA – Mickey, Richaun Holmes, Chandler Parsons, Draymond Green, Joseph Young, Montrezl Harrell, Allen Crabbe, Jerami Grant, Joe Harris, Roy Devyn Marble, Kyle O’Quinn Tyler Honeycutt and Damien Inglis – have signed the year they were drafted and received a first-year salary relatively higher than what at least one first-rounder projects to make this year.
Here’s everyone on the same scale, the highest paid second-rounders colored by year with 2016 first-round picks interspersed in black:
- 2015: green
- 2014: blue
- 2013: silver
- 2012: yellow
- 2011: red
Previous contracts inform future contracts. If numerous second-rounders previously received starting salaries greater than 1.20% of the cap, agents will demand similar amounts this year. Those amounts will just happen to be worth more than first-rounders can receive.
A couple related factors beyond simply a higher cap conspire to boost second-round salary even further this year:
1. Nearly every team will have cap space. Because teams don’t receive an exception for second-round picks, many teams just didn’t have the ability to pay a second-rounder more even if they wanted to. That will rarely be an excuse now.
2. Many players are locked into contracts signed before the new TV money kicked in. That leaves more money for everyone else.
Well, almost everyone else. The rookie scale prevents first-rounders from enjoying the windfall.
Meanwhile, second-rounders will cash in.
The No. 30 pick will make $1,171,560 next season if he signs in the NBA. How many second-round picks can say “Give me $1.2 million (or more), or I’ll sign the required tender” and have the team acquiesce? I’m betting on several. Plenty of teams will have that much money lying around without a place to spend it, maybe even needing to spend it to reach the floor. Securing their own second-rounders seem as good a use as any.
It’s too late to change the system for this year, but either side can opt out of the CBA after next season by giving notice by Dec. 15, 2016. The rookie scale should be revisited in the next agreement.
A simple solution: Tying the rookie scale, like the cap itself, to revenue rather than ascribing a prefixed amount. Owners avoid the hassle of draft confusion, and players get more money to the players that deserve it.
“There’s no question that the contracts, the salary scale for first first-round picks is outdated,” said agent Mark Bartelstein, who represented two first-round picks who made less than Mickey last year (Larry Nance Jr. and R.J. Hunter).
But what about in the meantime?
Prepare for second-round saga in ’16
The 2016 draft is already hectic with several players having wide draft ranges. The second-round issue only adds uncertainty.
Will agents try to steer their players from the first round to the second round?
“If you’re projected to be a low first-rounder, it would be absolute lunacy not to work out with teams in that range, because you can easily fall,” said agent Keith Kreiter, who represented Richaun Holmes, the second-highest-paid second-rounder last year. “If you don’t work out for teams in the lower first and they pass on you, and some teams in the 30s end up passing on you – there’s no guarantee they’ll take you – then you’re in the 40s and 50s and you could be running the risk of straight minimums with very little guaranteed.”
Though there’s more money to be made in the high second round, there might be big downside to falling further. For players on their first NBA contracts, playing it safe makes some sense.
“A first-round deal isn’t so terrible in this world,” Kreiter said.
But there’s still wiggle room to work the system.
“One of the things I could see happening is you have a wonderful workout for a team in the 30s, high 30s, a team says, ‘Would you be willing to shut it down, and we’ll take you?’” Kreiter said. “There are some people that would maybe take that risk, although it’s a huge risk.”
Until Thursday, the question is which players this affects. Then, with everyone selected, it’ll turn into the magnitude of the effect.
How many second-rounders get more favorable contracts than first-rounders? How much more favorable? Will second-round negotiations become more contentious with more at stake?
It could become chaos, and Mickey is the trendsetter.
“It’s always a great thing to be the first at something,” Mickey said. “Hopefully, other players can do it.”
I suspect plenty will.