Economics of the Grizzlies

People want to know what the financial aspects of the deal with Minnesota means to the franchise going forward. It is a fair question. So I put my new assistant of economics (picture on right) to work on it in an attempt to figure it out.

First off everyone knows that the deal for this season changes the finances somewhat, but not enough to make a difference. Antoine Walker is scheduled to make $9,320,500 dollars next season. Marco Jaric will make $6,575,000 and Greg Buckner will make $3,759,259. Throw in the Mayo's slotted amount of $3,875,040 and add that to the returning players salaries plus an estimated $3 million for Marc Gasol and you end up with a total of around $44 million after subtracting out a buyout amount on Damon's contract.

The real question is what it means further down the line for the Grizzlies. Antoine Walker with his expiring contract is almost certainly gone. Buckner's contract has a team buyout as well. He will have the opportunity to earn that option but if not then he can be bought out for $1 million. I fully expect that buyout to be exercised so both Walker and Buckner are one year rentals that clear up cap space for next summer's sweepstakes. That means Memphis has a ton of money for next season.

Why is that important? Well first of all everyone should realize that Heisley is serious about not wasting money on marginal players but willing to spend money to players that can make a difference. Potential free agents who are young and fit the Grizzlies profile for the summer of 2009 include names like Trevor Ariza (LA Lakers), Leon Powe, Glen Davis (Boston) and Jason Maxiel (Detroit). These are younger players who could be good additions to the young Grizzlies as most have Championship level experience. Marvin Williams is in the shadow of Josh Smith but could be ready to take a step forward this season as well.

Or Memphis could draft a player (like Blake Griffin from Oklahoma), allow the young guns a chance to mature and take their chances for another season. With the additional draft pick being added to a team with only 1 player over 30 (and numerous player re-signings in the franchises future) perhaps spending FA money isn't a wise idea. After all, the best players will be kept by their current teams, you almost assuredly have to overpay to get the player you want and with the youth spread out over this team the likelihood of getting an impact player is greater in the lottery that the FA Market and a lot cheaper too.

In the summer of 2009 Rudy Gay, Mike Conley, Kyle Lowry and Javaris Crittenton all are eligible for contract extensions. Hakim Warrick will most likely be offered the qualifying offer and will be a restricted free agent. Can Memphis afford to extend a majority of these players, basically locking them up for four more years, and sign a free agent while still being in the smallest market in the NBA? People should be aware that the CBA shortened rookie deals so the 2006 class and the 2007 draft class now are both eligible for renegotiated contracts in the same season.

So with $35,336,586 approximately (not counting Mayo and Arthur's new deals, Marc Gasol's contract plus another likely lottery pick) tied up in option year or qualifying offers that summer and the knowledge that very soon as many as four players will be demanding new contracts, how much free cash does the team really have? Today we could hear the particulars of the Marc Gasol deal but assuming the $3 million deal is correct that puts the Grizzlies at over $38 million. OJ Mayo is slated to make $3,875,040 after being the #3 pick in the draft but actually that isn't a fixed number. Players can sign from 80% to 120% of that figure. It has become standard to pay rookies 120% of the slated number so that could put Mayo's salary at $4,650,000. That brings the Grizzlies salary cap number up to $42.5 million. Arthur would see his salary cap number rise from $970,000 to $1.17 million. That puts the Grizzlies up to nearly $44 million. Assume the Grizzlies have a top 5 pick next summer and we are close to $49 million. The cap number could be $57 million but not much more.

Then the new renegotiated contract issue becomes very serious. Do the Grizzlies go back above the salary cap to extend Rudy Gay and sign a big name free agent? Do they delay the negotiations and focus on signing a big name player during the riches of the Summer 2009 free agency?

Something to keep in mind when someone suggests we spend some money in free agency this summer.