HoopsHype explains: How do two-way contracts work?

HoopsHype explains: How do two-way contracts work?

Business

HoopsHype explains: How do two-way contracts work?

The NBA’s new two-way contract, introduced in the latest Collective Bargaining Agreement, is the largely expected result of teams increasingly either partnering up with or owning G League (D-League until the 2017-18 season) franchises. For the start of next season, 26 NBA teams will have a one-to-one affiliate in the G League, compared to just 19 two years ago.

Previously, from an NBA franchise perspective, a big problem with the developmental league was the lack of player control. Teams could pay up to $50,000 for a training camp invitation, find a player they really like and sign him to a contract in the D-League, only for that player to be picked up by another franchise at some point in the season. D-League teams may have been partners, and teams could pour resources into players and coaching staff, but ultimately any other team could sign players from the affiliate without restrictions.

Two-way deals are technically supposed to address that issue and allow teams to retain a one-to-one relationship with a player to sign him to an NBA contract. NBA rosters are capped out at a maximum 15 players (with a minimum of 12), and going forward teams will be allowed to have up to two additional flexible roster spots, bringing the total to 17 players on an NBA roster.

The new setup is also extremely cost-effective for teams. Players under a two-way contract aren’t counted against the salary cap, and will be restricted free agents after their deal expires. A two-way contract can only be up to two years, and no bonuses, extra compensation or options for future years can be included. The NBA season is split into 170 days, and a player on a two-way deal can only spend 45 days with their NBA team receiving the minimum salary, which is set at $815,615 for the 2017-18 season. The rest of the 125 days, the player will be paid at the rate of their G League salary capped at $75,000. In a best-case scenario, the salary math works out to roughly around $280,000.

From the player’s side, the advantageous part is that two-way contracts introduce up to 60 new jobs in the NBA with salaries that are slightly more competitive compared to what could be received overseas. Many players (particularly U.S. born), want to stay in America to chase their dream of playing in the NBA and two-way contracts – on the surface at least – give them a better opportunity to do so.

Better in theory than practice

In reality, two-way contracts aren’t some magic pill that will necessarily help teams uncover the next Yogi Ferrell at a higher frequency, and it’s no guarantee that we’ll see more stories of undrafted players like Wesley Matthews and Jeremy Lin turning into big-time NBA players. Instead, it’s better to think of two-way deals as a highly flawed tool that some smart teams will be able to leverage to their advantage, while most won’t. For players as well, the NBA’s new contracts might end up being harmful in many situations while a few might succeed because of them.

The game theory in being a fringe NBA player, as almost every player who signs two-way deal is, is a relatively interesting one. It’s difficult to have a developmental league in an international sport, since the top international teams are far richer and have the money to attract the next-best talent after the NBA. It’s very difficult to build a farm system for those particular players. In fact, there is a group of about 20 players currently in the EuroLeague who are probably good enough to play in the NBA, but don’t have the economic (or lifestyle) incentive to do so – players like Sergio Llull and Nando de Colo.

Take the example of Ekpe Udoh, who just signed a two-year contract worth $6.5 million with the Utah Jazz. In 2014-15, in his age-27 season, Udoh averaged 3.9 minutes per game for the Los Angeles Clippers with a contract just under $1 million, after which Udoh headed to Turkey to play for Fenerbahce for $1 million per season. Udoh won the EuroLeague championship in 2016-17 and was named the EuroLeague Final Four MVP.

Receiving a ton of accolades, having an awesome deal on taxes and hanging out on Spanish beaches drinking mojitos in your spare time can certainly beat out being the 15th man on NBA roster.

NBA teams have a ton of scouts watching European basketball, checking out under-20 FIBA tournaments, etcetera. If you’re good enough to receive a bigger NBA contract, teams will be in contact for sure.

On the player side, two-way contracts can actually restrict NBA success. If the best players who are most likely to land in the NBA eventually are signed to these deals, it also means they can sign a proper deal with only one team.

Imagine being a rim-protecting big stuck on a two-way contract with a team that already has three players in front of you, whereas another team that could have previously signed you has multiple injuries to their frontline and would need another center for the last four months of the season. The best opportunity of your lifetime (with guaranteed playing time) could easily slip through your fingers. While the (up to) 60 players on two-way contracts might not be the “next best” 60 players exactly, restricting player movement will hurt some of the top fringe players from ever landing in the league on long-term contracts with life-changing money.

This precise problem extends out to teams, who won’t be able to freely sign those players either.

The fact that two-way contracts aren’t as player-friendly as they might appear might also incentivize some shenanigans with player agents. To get the most money out of being a two-way player, players would have to receive some type of under-the-table agreement to actually play out the full 45 days available to them on an NBA roster. Most players drafted in the second round also tend to be, at best, borderline NBA players and who gets selected can be influenced by how friendly of a deal they will accept. This is not a smart way for an NBA franchise to operate generally – since they should pick the best player who they believe can develop into a real contributor – but considering teams sell picks for cash considerations even today, gaining slight monetary advantages pointlessly is something teams will exercise in.

Altogether, two-way contracts can be considered a mixed bag. There’s slightly more money to go around for the players, a few extra playing and practice opportunities with an NBA team and increased control for franchises. A player or two will blossom through this new system, and then praise will be heaped on what a great opportunity two-way contracts provide. But the downsides are real, and it’s hard to say if adding two-way contracts to the NBA overall makes a tangible positive difference for the league and fans.

You can find Mika Honkasalo on Twitter @mhonkasalo.

, , , , ,

LATEST

More HoopsHype
Home