Max-contract talks: A behind-the-scenes look from NBA execs, agents

Max-contract talks: A behind-the-scenes look from NBA execs, agents

Business

Max-contract talks: A behind-the-scenes look from NBA execs, agents

While the negotiations for a maximum contract may seem simple since the dollar amount is set, there’s quite a bit of back and forth that still occurs behind the scenes in order for a player and team to finalize a deal. The front office and agent still have plenty of things to negotiate, and the player needs to decide where he’s going to go if he has multiple max offers on the table.

When a big-name individual is considering his free agency options, many people are understandably impatient. Fans, executives, media and even other players want the process to move quickly. However, the player is making a decision that not only affects his career, but also his lifestyle, family and legacy among other things. The contract also needs to be ironed out, so it’s a process that can take time. HoopsHype talked to several NBA executives and agents about max contract negotiations, and they spoke off the record because they were sharing sensitive information.

“What people don’t understand is that there are so many layers to any contract – let alone a maximum contract,” one agent said. “You need to be thorough and evaluate everything in-depth. Players work extremely hard in order to have options, so it’s only right that they consider them and do their due diligence when this time comes. This is an important decision that impacts every aspect of their life.”

Before getting into the different things that get negotiated, it’s important to understand that not all max contracts are the same. A player with 0-to-6 years of experience is eligible for 25 percent of the salary cap, a player with 7-to-9 years of experience can make 30 percent of the cap and a player with 10 years or more of experience can make 35 percent of the cap. There are also things like “Bird rights” that allow a player to earn more money (they get an 8 percent annual raise rather than 5 percent raise) and sign a longer deal if they stay with their current team (they can sign for five years rather than four).

These things were put in place because NBA owners were attempting to prevent stars from leaving their incumbent franchise since the last decade featured so much player movement. All of this is negotiated between the NBA and the players’ union during the drafting of the Collective Bargaining Agreement.

“People think it’s really easy to represent a max-level player – and it is easier than other kinds of contracts because you have a ton of leverage – but there’s still a lot of analysis that goes into it,” one agent said. “You need to figure out how long you want to lock into the deal, you need to be aware of how to structure the deal since the percentage of the salary cap he can get changes depending on the player’s age, and you need to make sure the payment schedule is favorable. Just because the money is set since it’s the maximum amount, there are other things to be negotiated. And the better the player, the more leverage you have.”

Agents are trying to help their player find the best deal possible, but this is obviously subjective.

“The negotiation depends on the player and his priorities,” former agent Matt Babcock said. “Some players prefer the security of a long-term, guaranteed contract; in most cases, that would be my personal preference. Some players opt for two-year contracts with a player option for the second year, allowing them to keep their options open and get the largest possible max contract every summer. A player’s priorities may change as they get older or if they suffer a serious injury that makes a one-and-one deal much riskier too. LeBron James is a perfect example of this, as his recent contracts with the Cavaliers were set up as short-term deals that allowed him to keep his options open. Now, his latest contract with the Lakers is a four-year deal and only the final season is a player option. Priorities change.”

Regardless of the player’s priorities, there are certain things agents will push for that give the player additional leverage or flexibility throughout the deal.

“In a dream situation, you would want to get your player the most money possible and you’d have all the money guaranteed, upfront payments, a no-trade clause, a trade kicker and player options every single year,” one agent said with a laugh. “Outside of those things, there really aren’t too many things you can ask for in those negotiations because there are limits. And there are certain things that are the same in every single contract, whether it’s a $2 million deal or a max deal. There are certain paragraphs will be the exact same. The love-of-the-game clause, for example, will be in every single deal along with other portions of the contract. Every deal has certain things built in, but are plenty of things that you have to negotiate.”

For the league’s top players, they can get picky when it comes to their deal.

“In most cases, a player who’s able to generate a max offer from their team can most likely generate a max deal from several other teams as well,” Babcock said. “This gives the player and the agent ultimate leverage in negotiations, which is why max contracts are generally very player-friendly deals. A few months ago, Bob Myers was asked in an interview about Kevin Durant’s upcoming contract negotiation and he said something like, ‘We’ll give him whatever he wants!’ Not only was Bob saying they’d pay Durant whatever he wanted, Bob was also making it clear that the Warriors’ front office would be willing to structure the contract however Kevin and his reps wanted. He let Durant’s camp know that they could put together the deal and it’d get done – regardless of the structure or length.”

You want flexibility for the player and as little flexibility for the team as possible,” another agent added. “With any contract, not just max contracts, you also have to compare the cost of living and the tax impact in the various places he’s considering.”

This is where things become frustrating for many executives. Big markets typically have an advantage not only because players want to live in a city like Los Angeles or New York, but also because they offer the player off-court opportunities, a big stage, more endorsements, a huge fan base and other perks. As the agent mentioned, they inform the player of places where the cost of living is lower – such as the two states with teams where there’s no state-income tax (Florida and Texas).

“What really sucks is that the rules put into place don’t make it any easier for the incumbent team to keep their players,” one NBA executive said. “There’s no advantage to staying home. Also, we don’t mitigate for taxation in any deals either. Teams in Texas and Florida have an advantage because there’s no state income tax. Now Miami is an attractive destination and a guy can make more money there? That’s not a level playing field. Their money goes further than a smaller-market team’s money. That’s where perhaps the league should give smaller market teams more money to spend to counteract a Miami, since their money is going further than mine, just to make it a level playing field. It’s unfortunate.”

One former NBA general manager, who admitted that “being one of Nike’s ‘chosen teams’ is important” in our recent behind-the-scenes article on endorsement deals, also pointed out that small-market teams have to build differently.

“Market definitely matters,” the former GM said. “In the first max contract [when a player is restricted], it doesn’t matter much. In the second deal, you know there’s only certain places a guy will go. Certain franchises have to build their team knowing they aren’t a destination for second-contract max players.

“You aren’t going to see franchises in certain cities build around the premise, ‘Okay, let’s have two max-level spots available for next summer.’ They don’t get max-level players. Portland is never going to use that approach. That’s not who they are and it’s not how they’re going to win. Look at how Utah is built. It’s all about growing their own players from within and making them understand how wonderful it is there. [Jazz GM] Dennis Lindsey is basically using the San Antonio method, which makes sense because he came up with the Spurs. Utah is a smaller market that isn’t ‘sexy,’ so that’s the best approach. The teams that try to get multiple max slots are in big markets like New York or Los Angeles. It’s tough for small-market teams. There’s no way in hell that Giannis Antetokounmpo is staying in Milwaukee for his second deal. I would bet everything I own that Giannis leaves Milwaukee.”

Two of the agents interviewed for this article also predicted that Antetokounmpo would leave for a different market when it comes time for his next max-level deal.

One thing that teams don’t typically offer players during a max-contract negotiation is a no-trade clause. In recent years, players like Carmelo Anthony and Kobe Bryant had the clause, but there isn’t a single player who currently has one in their deal. There are still some situations where a player has the power to veto a deal due to CBA rules, but that’s different from a no-trade clause.

The former GM believes the NBA should get rid of no-trade clauses, explaining that they are too player-friendly. He also believes trade kickers, which bump up a player’s pay by a certain percentage in the event of a deal, can sometimes be viewed as an incentive for a player to push for a trade rather what it was originally intended to be – a clause that gives them peace of mind that they won’t be dealt.

“It’s an absolutely criminal advantage in the favor of the player. If you give a player a no-trade clause, they have you by the balls,” the former GM said. “They can do whatever the f**k they want and there’s nothing you can do to force that player into listening to you or doing what you need him to do. And if they aren’t happy, they can hold a gun to your head and say, ‘I’ll only accept a trade to this one team,’ and you’re going to get pennies on the dollar. I don’t understand why owners ever agree to it. How much sense does it make to give that to a guy? Most of the really good players make more money if they’re traded because they have a big trade kicker, so they have an incentive to want a trade! Another team can give them even more money and handle all the relocation costs and kiss their a** – they’ll be completely coddled. Some teams do things that are totally against the rules like give the guy way more flights than he can get and fly the players’ family out private… They’re going to have their a** kissed to such an amazing degree that being traded isn’t a big deal for those superstar players. It’s a big deal for a minimum player, it’s a big deal for a lot of players, but not them. It’s almost the dream scenario for some guys, and the organization is getting absolutely f****d in the deal, which is why you can’t put yourself in that situation! The no-trade clause is the dumbest clause that exists in any deal. It’s the only clause where the player can do anything and the organization can just be completely screwed over.

“But the problem is that because the no-trade clause does exist, there is certainly a level of player who is so important that all 30 teams would give it to him if he makes it his mission to get a no-trade clause. If the player is so good that they can get it from most teams, what you have to lean on in the negotiations is, ‘Look, that sets a precedent and we don’t do that kind of thing here. We’ve never done it and never will.’ That’s what made San Antonio’s approach so good and so important, and it’s why they were able to get so many talented guys to leave money on the table. They always negotiated from the position of, ‘Yeah, we don’t do that here.’ People knew they didn’t do certain things. Every organization should decide on list of non-negotiable things, but it’s tough. The owner needs to be confident enough in the plan and believe in it. Everyone needs to be on the same page. If everyone has agreed that the organization will never give a player a no-trade clause, for example, and then a maximum or super-maximum player leaves because he can’t get a no-trade clause, the owner needs to be comfortable with that and look at it like, ‘Well, he was never with us anyway. He didn’t do things the way we do.’ It takes a lot of trust and everyone being on the same page.”

When asked about no-trade clauses, agents acknowledged that they’ve become nearly impossible to land – even for the biggest of superstars.

“You’re never going to get a no-trade clause,” one agent said. “You can try – a handful of guys have gotten one – but you probably aren’t getting it. Everyone would love to have one, though.”

One issue that has become concerning to some executives is that players are getting paid max-level deals before they’ve won anything, which can create some bad habits. The former GM recalled one summer when his team drafted a teenager in the lottery who was immediately given a lucrative NBA contract and shoe deal that combined to total nearly $100 million in guaranteed money over several years. This was before he had ever stepped on an NBA court and he had never won at a high level at any point in his life.

“We’re seeing this win-or-suck method of building teams and some organizations are giving maximum contracts to players who haven’t proved they can win basketball games,” the former GM said. “Paying someone a ton of money before they’ve proven that they’re the difference between your team winning or losing basketball games is terrifying. They’ve never had to prove they can win in the NBA or that they care about winning, then we’re giving them money. What’s their motivation? What’s the carrot that’s being dangled in front of them? They’ve never won and I’m proving I don’t care by paying them after a ton of losing. I’m rewarding their empty stats. I’m rewarding you for being the best player on a sh** team. If you’ve never won, how am I supposed to know that you’re ever going to covet winning? When a high-profile rookie joins a bad team, they are given a nice salary and shoe deal from day one and they’re handed a starting role. They never have to earn anything. What’s going to make him flip that switch and suddenly make him start caring about winning and being a team player?

When you’re giving the max to a player who has never won anything, it sets a bad precedent and I think it’s is a really big problem in today’s NBA. You often hear that teams are worried a guy will get complacent and stop working as hard once he gets paid. Well, I think this is an even bigger problem. If you pay a young guy who just puts up empty stats, he may never care about winning. Why would he? He’s going to stick with what’s gotten him a max contract, a huge shoe deal and all of that stuff.”

One of the most interesting max negotiations in recent years was between the Philadelphia 76ers and Joel Embiid. The 76ers gave Embiid a five-year, $148 million, but the two sides also came to an agreement on an injury provision: If Embiid re-injures his foot or back and misses at least 25 games or plays fewer than 1,650 minutes in a single season, Philly has the option of waiving him and saving a ton of money.

“He’s clearly a max-level player from a talent standpoint,” Babcock said. “However, due to his medical history, I would assume most of the conversations between the 76ers and Joel’s representatives revolved around ironing out the language for protections on his pre-existing injuries [should they surface again and sideline him]. This is not a simple task for the team or the agent.”

“Everything is a function of leverage,” another agent added. “If the team wants things like a guarantee based on the player’s production or weight or health, you can push back on those things if you have leverage. That’s why agents are always trying to get a similar offer from another team because that gives you so much leverage. If they insist on some of those incentive-type guarantees [and you don’t have another offer] then it becomes a negotiation and you see if they’ll make other parts of the contract more favorable to bridge the gap.”

This kind of negotiation is extremely difficult because the player obviously wants as much security as possible given his injury history, but the team wants to be extremely cautious and have an out in case their highest-paid player isn’t able to play. This an example of the kind of power a team has while negotiating a deal.

“I don’t think people realize the level of power and control the team actually has, especially on the first contract,” the former GM said. “You’re giving someone a life-changing amount of money and the first time you do that with a player, you typically hold the hammer. You can negotiate certain points like trade kickers, no-trade clause and the types of insurance you do. When a player is on their first deal, the leverage you have as a team is much different. The player usually just wants to get the deal done because, again, it’s life-changing money.

“On the second contract, if a player is getting a max contract then that probably means there is more than one team willing to offer that same deal. On that first deal, you’re the only one able to give him the life-changing money, for the most part, and a guy is typically going to take the life-changing money no matter who he is. Unless you’re LeBron James, Kevin Durant, Steph Curry, James Harden and Anthony Davis, [passing on the money] is a risk.”

The former GM did point out that certain stars may not be on the same top-tier level as someone like James or Durant, but they have a shoe deal that’s so lucrative that they have leverage when they enter their NBA contract negotiations.

“Kyrie Irving makes so much money from his signature shoe that the money [he’d be leaving on the table to exit Boston] doesn’t matter as much to him as it does to other players, so he can play a different game when it comes to negotiating,” the former GM said. “His shoe deal actually plays a big role in things. A team isn’t doing him a favor by giving him max money. The team can’t say, ‘Look, I’m offering you $252 million and you can’t get that anywhere else.’ Kyrie could literally say, ‘Yeah, I don’t care. I’ll make that up with my shoe deal.’ That signature-shoe money gives him so much leverage in negotiations. He could ask for a no-trade clause, by way of example. That’s how much leverage he has because of the Nike money. When you’re the incumbent team and you’re negotiating with a guy who has a signature shoe and a ton of teams would line up to give him whatever he wants, you have significantly less leverage. You’re in a really tough spot.”

Another league insider pointed out that because a company like Nike can hand out such enormous, long-term deals, players are extremely loyal to them (and greatly influenced by them too).

“A player may make more money from their shoe deals than from their NBA deals over the course of their lifetime,” said one league insider. “Sometimes, players are willing to sacrifice some money during NBA-contract negotiations because they know they have a ton of money coming in from their shoe deal. But you wonder, ‘Who is the player loyal to?’ Suddenly, the shoe company may become a factor when decisions are made. Because there’s no salary cap in those negotiations, a company like Nike can give a player as much money as they want and as long of a contract as they want [whereas] NBA teams obviously can’t do that. The relationship between the player and his shoe company is probably more stable and long-lasting than the player’s relationship with their franchise too. There are plenty of examples of players who have lifetime shoe deals, so it can be a relationship that continues long after the player has retired. It’s more common to see a player change teams than change shoe brands.”

From a front-office perspective, the former GM said that pursuing a max-level player is different from a mid-level player for several reasons.

In a max situation, you’re only competing against the attractive teams that have a max slot at a given time, which narrows things down quite a bit,” the former GM said. “You may be competing against three teams, so my pitch is very much tailored to why my situation is better than those three teams. With a mid-level player, you may be competing against 20 teams since they all have the mid-level exception to offer.”

It’s not uncommon to see an agent try to ask for a max-level contract, even if his player is far from worthy.

“The existence of ‘the maximum contract’ makes everybody ask for it, even if the player isn’t even a near-max player,” the former GM said. “The dumber the agent, the more likely they are to do that. But it absolutely happens where an agent starts the conversation by saying they want a max deal and you’re just blown away. When it happens and the guy isn’t even close to a max-level player, you just say, ‘Yeah, that’s out of the question.’ In most cases, that ends [the max talk] quickly. But there are a lot of situations where the agent will say, ‘Max or nothing.’ And for the players who aren’t max-level guys, that’s a disservice to the player because it’s hurting them and how much they could actually earn.”

This is a battle for many agents as well. Even if an agent is being realistic with a client and giving them the actual range of offers they’re likely going to get from teams, rival agents will try to get in that player’s ear and tell him they could get him more. Often, agents who poach clients will sell the individual (or someone close to him) on being able to get him a max-level or near-max deal – even if that’s extremely unlikely. Honest evaluations and realistic targets can sometimes hurt an agent because players are uber competitive and confident people down to their core. If another agent pushes the right buttons and persuades them into thinking their value is higher than it really is, they can manipulate them into leaving their agent.

There are some situations where an agent may be doing a poor job and actually undervaluing his client, so it is in the player’s best interest to leave. Maybe they can get a better, more expensive trainer with another agent and they can make drastic improvements that increase their value. But, oftentimes, agents use unrealistic numbers to poach a player and then the new agent ultimately delivers a very similar deal to the one the player would’ve otherwise gotten.

There are plenty of examples where players have believed they’ll get a max deal, but it didn’t happen. Isaiah Thomas, for example, thought he was poised for a max-level or near-max-level payday when he was on the Boston Celtics. Instead, he sustained injuries and signed a minimum deal with the Denver Nuggets this offseason. DeMarcus Cousins also thought he’d be in for a monster payday, then he tore his Achilles and settled for a small deal with the Warriors this summer. Injuries are unpredictable and can significantly hurt a player’s earning potential.

“I think a lot of people just assume some players will get a max contract, but there are a lot of times when it doesn’t happen,” said Eric Pincus, a salary cap expert who contributes to NBA TV, Bleacher Report and Basketball Insiders. “In 2016, a lot of guys got a max deal so some people – including some players – thought that would just continue. That obviously hasn’t been the case. But next summer should be better, as way more teams have cap space available. Still, I would say don’t assume anyone will be a max-contract player aside from the very top players in the league.”

One agent pointed out that the Warriors’ dominance could also prevent teams from going all-in and offering max contracts. Basically, he believes teams are building for the future rather than the present because it’s considered inevitable that the Warriors will win at least one more title.

“Most teams don’t want to pay players the max,” one agent said. “I think it’s going to be harder and harder for players to keep getting the max from teams. As long as one team is winning every year, some executives or owners think, ‘Why would I give out max contracts if we can’t win it all?’ They’d rather sign deals they can get out of or sign tradeable contracts. I think you’ll start to see more of that, as long as one team is so dominant.”

It remains to be seen if this is true – or how long the Warriors’ amazing run will last. However, if we have learned anything, it’s that teams typically spend money when they have it – even if it doesn’t make the most sense in the long-term. That’s what went wrong in 2016, when the salary cap drastically increased due to the NBA’s new television deal. Teams were handing out huge contracts left and right.

Next summer will be the first offseason since 2016 that quite a few franchises will have max-level money to spend (since many of the 2016 deals are starting to come off the books). We’ll see if teams hold back this time around, as this agent predicted, or if they rush to splurge on free agents as they’ve done time and again.

, , , , , , , , , , , , , ,

LATEST

More HoopsHype
Home