Tanking is Over, Long Live the Process

Tanking has been a pest for the NBA for over a decade, but no team embraced tanking as blatantly as the Philadelphia 76ers. 47 wins over 246 games, winning one out of every five games over three years, was rewarded with four young players with very cheap rookie contracts: Joel Embiid (4 years / $20M), Jahlil Okafor (4 years / $21M), Ben Simmons (4 years / $27M), and Markelle Fultz (4 years / $37M). 

While being able to force players like Embiid and Simmons to join the team (against their will) for upwards of 9 years is valuable, most of the value of the draft pick is being able to have these young, good players locked into a very cheap contract. 

Joel Embiid’s career to date shows how powerful these cheap contracts really are. Embiid, until his third year, did not step foot on the court, providing no value for two full seasons, and only played 31 games in his third year. But in year four, he was an All-Star, Second Team All-NBA, and helped lead the Sixers to a 52-win season – the most of any Philly team since Allen Iverson lost in the 2001 Finals.

Embiid made $6.1M in 2017-18. This microscopic contract allowed the Sixers to sign JJ Redick to a ballooned 1 year / $23M deal, and give Robert Covington a large extension while remaining under the salary cap. Having a player who performs at a level of a $25-$30M player for just $6M is how great teams are constructed. 

Since the Sixers’ three-year run was a public shame for the NBA, the league made significant changes to attempt to ensure that no team would tank that blatantly again. The most obvious change to fans was the lottery reform – in 2019 the NBA significantly worsened the chances of the worst team getting the top pick.

Odds

In the first year of this change, the #1 pick went to the team with the 7th-worst record, the New Orleans Pelicans, who drafted Zion Williamson, and the #2 pick went to the 8th-worst, the Memphis Grizzlies, who took Ja Morant. But the NBA also made another significant adjustment to stamp out tanking – by drastically increasing rookie compensation. 

Joel Embiid’s draft pick slot earned him $20M in his first four years. With the new changes for rookie contracts, if he were selected in the 2020 Draft, he’d be making much more. Whoever is picked at #3 over in the upcoming draft will earn $37.5M over four years, almost double Embiid. The #1 pick will make $46M over four years, over $20M more than Ben Simmons’ top pick contract that was signed in 2016.

Using the NBA’s pre-COVID projected salary caps for 2020-2024, the 2020 #1 pick will make 43% more than Simmons as a share of the salary cap. If you reduce the future projected salary caps by just 10%, as a COVID adjustment on NBA revenue, the 2020 #1 pick will make 58% more than Simmons. 

It’s hard to visualize what exactly a percentage of the cap is really worth. Over Ben Simmons’ rookie contract, he on average made 6.58% of the salary cap, while the unnamed 2020 #1 pick will make 9.14%. Below are some comparisons of these different salary cap percentages as shown by different unrestricted free agents from the 2019 offseason.

6.5 FA.png9 FA

Being able to put names to numbers helps illustrate the difference between the Simmons contract and the new world order for rookies – and teams. 

In order for a 2020 #1 overall pick’s rookie contract to be as valuable per dollar as a 2016 #1 overall pick, the player picked must produce 40% more value over the first four years. Generally speaking, it is unlikely that rookies will suddenly be more productive than they had been in the past (Luka Doncic notwithstanding). What that means is that assuming a prospect is the same level of talent as previous years, the prospect will be significantly less valuable in his first four years under contract. 

So what happens when the prospects are even worse than a previous year in this new era? Enter the 2020 NBA Draft, which draft analysts have suggested is the worst draft in over a decade. There is now legitimate risk for a number of top picks to be negative assets. 

ESPN’s Kevin Pelton over the past five years has created a projection system for NBA Draft prospects before they come into the pros, that projects how many wins above replacement a player will generate for the first 5 years of their career. Using this alongside a $/win metric that was generated by Steve Ilardi and Jerry Engelmann, two ESPN writers who had previous work for NBA teams, we can project how the 2020 class of rookies might look with their bigger contracts.

Here are the top five picks from Sam Venecie of The Athletic’s most recent mock draft and what their projected values are, over the length of their potential deals, from Pelton and Illardi/Engelmann.

2020 value

Of course, not every draft with these new contract rules will lead to four out of the five draft picks having negative value contracts. The 2021 Draft, for one, is tracking to have one of the best prospects in recent memory in Cade Cunningham, as well as several top tier players in Jonathan Kuminga, Jalen Green, and Usman Garuba. But even these studs will struggle to produce as much value to their team as Ben Simmons did to the Sixers.  

NBA teams will have to pivot their thinking, and valuation of future picks, based on both the new odds and the new contracts. Going forward, it will be harder than ever to get the #1 overall pick, it will be harder than ever to make sure the player selected is a positive value on his first deal, and it will be harder than ever to have a max caliber player that outperforms a max contract. 

Tanking is dead. Look what they did to the Process.

by RJ Garcia, Northwestern University

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