Tuesday, July 8, 2008

What is the New Cap Number Going to Be?

Tonight the NBA releases the Salary Cap figure that all NBA teams are supposed to adhere to. Of course only a small number of teams actually use that figure as a cap (Memphis being one of them this year). What is important about the cap number however is not what teams will spend in salaries on their team but what number can teams use to make trades with the three teams under the cap.

If I lost you there I understand because it gets a little confusing. Let me explain. First off you need to know why there is a cap. Larry Coon who writes the excellent website NBA Salary Cap FAQ, describes a salary cap this way:

A salary cap is a limit on the amount teams can spend on player contracts, which helps to maintain competitive balance in the league. Without a salary cap, teams with deeper pockets can simply outspend the remaining teams for the better free agents. The basic idea is that a team can only sign a free agent if the total payroll for the team will not exceed the salary cap. So a team with deep pockets is playing on a level playing field with every other team.

The evidence bears this out: For the 2001-02 NBA season, the correlation between team payroll and regular season wins was about 0.13. In other words, there is nearly no correlation between salary and wins. By comparison, MLB (with no salary cap) had a much stronger correlation of 0.43 for its 2002 season.

That means that there is very little correlation between a team's payroll and their success in the league. That may come as a bit of a shock to those people who believe the Grizzlies can't be competitive with a low payroll. However the NBA doesn't have a hard cap (meaning teams can not go over the cap). The NBA uses a 'soft cap' and in fact very few teams actually stay under the cap at all.

So most teams are above the cap. What does that mean? Well when teams are above the cap they are limited to how much additional money they can spend on free agents. These 'exceptions' allow teams to sign free agents despite being over the cap. However they are not able to pay market value for those free agents.

Let me take a step back here for one second. When I say free agents I am not talking about a team's own free agents. Teams can resign their own free agents for any amount up to their maximum salary. This is to prevent teams stars from jumping ship simply because their former team couldn't match an offer by another team. This was closed in the current Collective Bargaining Agreement (CBA) with the Gilbert Arenas provision. It is called that because under the previous CBA a team could only offer their Early Bird Free Agents an average salary contract. Washington at that time was under the cap and offered nearly twice as much. Golden St could do nothing about it but as I said that loophole was closed. So when I refer to free agents I am referring to another team's free agent.

Of course there are exceptions to the cap (otherwise it would be a hard cap). The exceptions are relatively well known but if you would like a refresher course I suggest you reference Larry Coon again. What is important to know in general, and to Grizzlies fans in particular, is how teams can trade players to teams under the salary cap. Teams over the cap can trade players as long as the salaries of the traded players match to within certain parameters. Those parameters are explained here.

Since the Grizzlies are under the cap, way under in fact with approximately $12 million of available cap space (which could be reduced by $3 million tomorrow if the Gasol rumors are true) they are able to absorb larger contract without invoking the trade restrictions. Teams can trade for a player who doesn't make as much money (like one of our talented and still under rookie contract PGs) for a player making more money but doesn't fit into that team's future plans. So the Grizzlies are in a sense able to accept a traded player for one of their rookie contract players for up to the salary cap plus $100,000.

Now you see how the salary cap announcement can affect the attraction teams may have in a deal with the Grizzlies. Many teams are over last season's cap number but may not be over this coming seasons number. If they find themselves too far over the cap for this coming season they may desire a trade more. Memphis is one of the few teams that have talented young players, the cap space to absorb a higher contract and the need for both veteran players and specific position players. When two teams with needs get together deals can be done.

What goes into determining the salary cap? All basketball related income (BRI). Last winter was a tough time economically in the USA and there is every reason to assume that the tough economic conditions will have an adverse effect on the BRI which means some teams may find themselves in uncomfortable situations with the cap and therefore may be interested in making a trade to unload some salary. The more teams that feel that economic pinch the better opportunity the Grizzlies have to make a deal.

So pay attention to the number tonight. It could mean something good for the Grizzlies.

BallHype: hype it up!

1 comment:

Anonymous said...

Well Mickael Pietrus just signed with the Magic, so we can count him out. I thought he would be a good signing for us, but it's not a terrible thing that he's not available.