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November 2, 2010
Transaction Analysis
Evaluating Extensions

by Kevin Pelton

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Monday night at 11:59 p.m. was the deadline for teams to extend the deals of first-round picks entering the final year of their rookie contracts. What was expected to be an uneventful day turned out to be surprisingly busy, with three players joining their two classmates from the 2007 Draft who had already signed extensions (Chicago's Joakim Noah and Oklahoma City's Kevin Durant). With the inevitability of a new Collective Bargaining Agreement looming at season's end, the extensions have important ramifications for several franchises and the league as a whole.

Atlanta Hawks

Signed center Al Horford to a multi-year contract extension. [11/1]

Horford's extension was the most predictable of the three signed Monday. To date, he's been the second-best player in this 2007 class, having finished as the runner-up to Durant for Rookie of the Year honors and joining him at last year's All-Star Game. Horford ended up getting a five-year, $60 million contract (per the Atlanta Journal-Constitution, which broke the news) that looks fair for both player and team.

The two sides could each use the extension for the same value Noah earned from the Bulls as a benchmark. The former Florida teammates have had similar NBA careers to date; WARP views the difference between them as barely one win (in Horford's favor) over three years. It also suggests, using past rookie extensions as a guide, that Horford and Noah are worth about $10 million in the first year of an extension. Both got precisely that, using a 10 percent annual raise for comparison purposes (in practice, Horford's extension is a flat $12 million per year).

I would take Horford over Noah, in large part because he is more than a year younger but also due to a superior offensive skill set that I think gives Horford more room to grow in seasons to come. From that perspective, Horford's new deal is the better bargain. Still, it may cause some problems for the Hawks down the road. Atlanta now has more than $60 million in salary committed for 2011-12, a total that does not include free-agent-to-be Jamal Crawford. Mike Bibby's contract expires after next season, which would give the Hawks some breathing room, but if this core proves unable to compete in the second round of the playoffs, Atlanta will have a tough time upgrading it without moving a key piece. Tough decisions are ahead for the Hawks as the residue of giving Joe Johnson $120 million over the summer.

Memphis Grizzlies

Signed guard Mike Conley to a multi-year contract extension. [11/1]

I don't think anyone saw this coming. The assumption was that Conley would head to restricted free agency, with a chance to prove his worth during his fourth NBA season. The fact is we still don't know what Conley will become. Conley has been one of the league's weakest starting point guards to date, but he only turned 23 last month and is off to a promising start to the season. However, those arguments tend to favor keeping an open mind on Conley, not committing at least $40 million to him over the next five years and up to $45 million (per the Memphis Commercial Appeal).

In a vacuum, this is a bad deal, not a horrendous one. There's a chance Conley "gets it"--that's not uncommon for point guards of his age. If we compare him to Houston's Aaron Brooks--another 2007 draftee who will become a restricted free agent because the Rockets decided not to do any extensions in advance of the new CBA--it is necessary to keep in mind that Conley is still two years younger than Brooks was last season, when he emerged as a productive starter. There was a real chance that Conley would have a good campaign that would have made him a valuable commodity on the open market. Surely, that was the scenario the Grizzlies feared after having to overpay Rudy Gay as a restricted free agent over the summer.

The outside circumstances are what really make Conley's extension so problematic. The new Collective Bargaining Agreement looms large on this front. Unless a team believes strongly in the possibility of rollbacks in existing contracts (which Ken Berger of CBSSports.com confirmed on Monday the league will seek), now is not the time to be offering questionable contracts given the probability that the new CBA will be more favorable to teams. Conley might be worth $8 million a year under the current model, but it's unlikely he will be as valuable a year from now.

Beyond that, Memphis has even more dominoes that are affected by this move than Atlanta. The Grizzlies' two best players, Marc Gasol and Zach Randolph, will both become free agents at season's end. Meanwhile, an extension for promising O.J. Mayo will be on the table next summer. Memphis can't pay everyone and field a competitive bench. Of the Grizzlies' five starters, Conley would be fourth at best in the pecking order, and only with a conservative assessment of Randolph's age. So why extend him now before contracts for Gasol and Randolph have been resolved?

Phoenix Suns

Signed forward Jared Dudley to a multi-year contract extension. [11/1]

When we think about rookie extensions, it's usually in terms of star players for obvious reasons. Yet every year, it seems like there are one or two low-profile deals that get done for players drafted later in the first round. Dudley is this year's example, getting a five-year, $22.5 million contract according to the Arizona Republic.

Quietly, Dudley ranks sixth among 2007 first-round picks in career WARP (just ahead of Conley). Brooks was the only eligible player who has statistically been more valuable and did not sign an extension. Dudley emerged last season as a key piece of the Suns' bench and has continued in that role despite the addition of Josh Childress. It looked at one point like Dudley might be the odd man out, but now he and Childress figure to step into larger roles when and if Grant Hill moves on or decides to retire.

From Phoenix's perspective, the money--$4.25 million guaranteed per year, so somewhat less than the mid-level exception--isn't bad at all. The concern here is the length of the contract. At the risk of running this point into the ground, five-year contracts for role players are a terrible idea. The Suns have been guilty of extending their commitments more than anyone, having signed Childress and Channing Frye to five-year deals over the summer. The only other team with three non-star players on the books for so long is Miami, and the Heat has a good excuse--Miami had to use long-term contracts as a selling point to make up for its limited cap space after signing the Big Three.

What makes this especially painful is that the Suns were unwilling to guarantee five full years to Amar'e Stoudemire over the summer. Phoenix's concerns over how Stoudemire's knee would hold up years removed from microfracture surgery were valid, but history has shown us that giving long-term deals to non-stars is equally risky in its own right.

San Antonio Spurs

Signed guard Tony Parker to a multi-year contract extension. [10/30]

The Spurs don't have to worry about extending their 2007 first-round pick, since Tiago Splitter just made his NBA debut yesterday. However, San Antonio still made an extension splash on Saturday by locking up Parker with a new deal. Instead of being one of the jewels of the next free-agent class, whenever that might be, Parker will make nearly $50 million over four seasons, according to Yahoo! Sports' Adrian Wojnarowski.

The Spurs have been shelling out money in a manner that seems atypical of their front office's conservative style. Last summer's new contract for forward Richard Jefferson (who opted out of the final year of his previous deal) made sense to the extent that San Antonio traded off a higher luxury-tax bill up front in exchange for a longer deal for Jefferson. Still, the combination of the two moves and an extension signed by Manu Ginobili last spring means the Spurs have committed to their core for an extended period. San Antonio now has somewhere in the neighborhood of $65 million guaranteed to 10 players for the 2011-12 season and will not be able to clear substantial cap space when Tim Duncan's current contract ends in the summer of 2012.

I think there are a couple of inferences to be drawn here, one obvious and one much more ambiguous. What is clear is that the Spurs like their core and feel it has multiple seasons left to compete for a title. Since I picked San Antonio to win the Western Conference, I suppose I agree.

What the Spurs' strategy also implies to me is that they are planning for a new CBA in a different way than other teams. Locking up existing players is consistent with an expectation that the league will go to a hard salary cap but grandfather in teams that are already over the cap. That is, as I understand it, what happened when the NBA first implemented the modern salary cap prior to the 1984-85 season, and Berger indicated such a possibility is one of many offers the league is considering. In that case, it might make sense to have as much talent under contract as possible.

Parker still qualifies under that tag. It's odd that Gregg Popovich had to remind the media on Saturday that Parker is just 28, since he's a year removed from the best season of his career. But Parker has been around so long that his down 2009-10 was perceived more as the beginning of his decline phase than a fluky, injury-marred campaign. The emergence of George Hill gave San Antonio options at the point, but the Spurs are a better team with Parker starting at the point and Hill capable of backing up both guard positions. Meanwhile, Parker might have emerged as the best free agent available depending on what happened with a possible Carmelo Anthony trade, so there was legitimate urgency for San Antonio to get a deal done.

The 2010-11 Pro Basketball Prospectus is now available in paperback form on Amazon.com. For sample chapters and more information, see our book page.

Kevin Pelton is an author of Basketball Prospectus. You can contact Kevin by clicking here or click here to see Kevin's other articles.

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