NBA free agency: Christmas in July

In a free market, prices for commodities eventually come to a perfect equilibrium that maximizes the benefit to both customers and suppliers. But the NBA is far from a free market. Free markets don’t have salary caps. Free markets don’t have moratoriums. Free markets don’t have maximum salaries, rookie scales, and luxury taxes. And most importantly, free markets do have what is known as perfect information. This means that both sides, customer and supplier, know everything about the product being sold and the benefits it will confer. The concept of perfect information in the NBA is laughable.

When it comes to free agency negotiations, agents are the suppliers, GM’s are the customers, and players are the commodities. As we covered yesterday, each player/commodity has a specific market price depending on their skills, stats, abilities, and experience. An agent’s job is to get their client a contract which will pay higher than the market price in annual salary. A GM’s job is to get the best value for their contract dollar. GM’s are not in the business of low-balling necessarily; they’re just trying to maximize the skill, ability, and experience of every commodity on their roster. Agents try to sell their clients based on their best possible performance. GM’s evaluate commodities based on their expected performance. The information is less than perfect because neither side actually knows how the player will perform once the contract is signed. Every free agent contract is a gamble. Sometimes that gamble pays off for both team and player. Sometimes it just pays off for the player. Either way, for several current NBA free agents, Christmas will come early this year because they’re in for a significant raise. Here are some of the players in the market who are about to get paid.

Nikola Pekovic

2012-13 Salary: $4,460,000

Predicted FA Annual Salary: $9,500,000

There’s no way around it, Nikola Pekovic is a beast. He’s a great scorer in the post and a very good rebounder. He led the NBA in points in the paint this season. His agent will no doubt try to market him as a 27-year old seven-footer with 20-10 potential. And that pitch very well might get Pek overpaid. If teams legitimately view him as a 20-10 guy, he could get a Hibbert-esque contract this summer. But Pekovic is not Roy Hibbert. He blocks less than one shot per game and hasn’t yet averaged 10 rebounds per game. His rebound rate, 15.9, is by no means elite (45th in the NBA.) But paint scoring and toughness are rare qualities in the NBA, and because he possesses them, Pek could get more money per year that what the Skills Market model has predicted. But it’s not likely he’ll ever be a 20-10 player, and any team who pays him like one is definitely overpaying.

J.R. Smith

2012-2013 Salary: $2,806,452

Predicted FA Annual Salary: $11,000,000

Smith’s predicted value is based on his production in the 2012-13 regular season only. That was far and away J.R.’s most productive period in the NBA. There is more than a small chance he will regress next season. Regression certainly reared its ugly head in the playoffs when Smith was almost useless for the Knicks. The Skills Market model is based on production, not efficiency. So Smith’s eight-figure value is owed to the fact that he scored 18 points a night, not the fact that he shot only 42% from the field. As a scorer, Smith has incredible potential. He gets to the line nearly four times per game. He is the NBA’s seventh best isolation scorer in terms of points per game. Everyone higher than him on that list makes at least $13 million per year. I think J.R. will likely get a short-term deal for $10 million per year or a longer-term deal for somewhere in the neighborhood of $8 million. While there is certainly not perfect information regarding Smith’s production next season, both sides of the negotiating table know there’s definitely risk and volatility involved, and thus Smith will probably get less than his market value.

The Suns are reportedly contemplating showing Smith the dough, according to the New York Post.

Nate Robinson

2012-13 Salary: $854,389

Predicted FA Annual Salary: $5,400,000

Nate Robinson played this season on a veteran’s minimum contract. Filling in for Derrick Rose, he became one of the most exciting players of the postseason and really showed what he could do with playing time and a coach’s confidence. Robinson would be a great backup point guard/off-the-bench scorer for team looking to invigorate its second unit. I see him getting a near-full mid-level exception from a team under the luxury tax line.

Carl Landry

2012-13 Salary: $4,000,000

Predicted FA Annual Salary: $7,500,000

Landry has always been a productive player. He’s bounced around more in his first six years than almost any player in NBA history.  Landry’s combination of offensive efficiency, post up scoring, offensive rebounding, and getting to the line almost ensures he’ll get every bit of his predicted value in the free agent market. Carl is a player who brings a lot to the table and takes very little off of it. He’s nearly a risk-free proposition.

Jarrett Jack

2012-13 Salary: $5,400,000

Predicted FA Annual Salary: $7,500,000

David West

2012-13 Salary: $10,000,000

Predicted FA Annual Salary: $12,000,000

Both Jack and West were players proved themselves worthy of a payday in both the regular season and playoffs. Two years ago, West, who was recovering from injury, took a short-term deal with Indiana to prove he was back and fully capable. He did that and then some this season. I could see him taking extra years for less money annually to secure his long-term future in Indiana, though he could still easily get his predicted value in the open market.

Jack has bounced around so much that it’s easy to forget he’s only 29. He proved he has the ability to start or be a great back up point guard for a team. He has a diverse array of skills that will more than warrant a raise of a couple million bucks.

Brandon Jennings

2012-13 Salary: $3,179,493

Predicted FA Annual Salary: $8,000,000

Jennings has hinted that he’ll extend his contract with the Bucks. What type of annual salary he’ll get is still up in the air however. Jennings has averaged 17 points and nearly six assists per game in Milwaukee. He gets into passing lanes, knocks down threes, and maintains a 2-to-1 Assist to TO ratio. Jennings’ is certainly worth his predicted value, but I suspect he’ll get more from Milwaukee. The Bucks made two things very clear this offseason. First, they planned to keep either Jennings or Monta Ellis, but not both. Second, they tried to extend Monta first, indicating that he was their primary choice. Now that Ellis has opted out, Jennings has all kinds of leverage over Milwaukee. I wouldn’t be surprised if he got something close to Rajon Rondo’s deal in Boston.

Paul Millsap

2012-13 Salary: $8,603,863

Predicted FA Annual Salary: $10,000,000

Millsap had a terrible contract year. His scoring, rebounding, and efficiency all fell off. Had he maintained his production from the previous two seasons, he would be looking at David West-level money this offseason. As it stands now though, Millsap probably won’t garner much more than $10 million especially with cheaper options like J.J. Hickson and Carl Landry on the market. The only way he’s getting more is if his agent convinces some team that a change of scenery will magically change Millsap into a double-double machine. That’s not a terrible sales pitch considering how crowded Utah’s front court has been along with the terribleness of the Jazz’s guard play.

Check back with us tomorrow as we review the free agents who are in for a financial reality check when the moratorium ends next week.

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