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The Effects of the New TV Deal on New Orleans

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If you guessed positive, you're right!

Brad Penner-USA TODAY Sports

Monday morning the NBA announced a new nine year, $24 Billion television and digital rights deal with ESPN and Turner. The previous agreements, set to expire after the 2015-16 season, were for eight years and $7.4 Billion according to Ken Berger for CBS Sports. The most immediate effect is going to be on the salary cap, which could rise to over $88 Million in the summer of 2016.

Berger's own number, provided by team executives, is a staggering $91.2 Million. The salary cap this season, for a reference point, is just over $63 Million. Potentially there is an increase of $25-28 Million in the salary cap coming in the next two years; nearly a 40% increase over the 2014-15 salary cap.

Smoothing Increases

During the course of the press conference Adam Silver was asked about the effect this could have on the salary cap. Silver mentioned that he intended to meet with NBAPA Executive Director Michele Roberts later on Monday to begin discussing "smoothing" out the increase.

This topic of "smoothing" has been written about recently by Zach Lowe.

The bubble may not burst for a long time. Sports Business Journal reported this morning that the NBA is close to an agreement with ESPN and Turner on a new national TV rights deal that could crack $2 billion per year on average — up from approximately $900 million under the current agreement, which runs through 2015-16. That could wreak havoc with the salary cap, since the cap level is tied to overall league revenues. Grantland reported in late July that the league is trying to avoid any mammoth one-year jump in the cap level, since such a leap would make it difficult for both players and teams to build long-term plans. Some team executives are inquiring this morning whether the league might bake some of projected TV revenues, scheduled to kick in for the 2016-17 season, into the 2015-16 cap to smooth the increases.

The Blazer's Edge took a deep dive into potential smoothing a couple weeks ago. At that point the estimated 2016-17 salary cap used (no smoothing) was $85 Million. Instead of jumping from $66M in 2015-16 to $85M in 2016-17 their estimate jumps to $71M in 2015-16 to $80M in 2016-17 and getting the rest of the increases caught up in 2017-18. In essence in order to smooth the increase without taking money from the players (which the Players' Association will reject outright) this method "borrows" some of the increase from the 2016-17 increase and accelerates it to 2015-16.

It is important to note that many of the above calculations use the average over the nine year deal; $2.67 Billion. As Zach Lowe notes in his rapid reaction piece up mere hours after the official announcement the number for 2016-17 the league disseminated to teams is actually $2.1 Billion.

The plans as of now are to start at $2.1 billion in 2016-17, the first year of the deal, and escalate in even year-over-year increments to a peak of $3.1 billion in the final year, per sources who have reviewed a memo the league sent to teams today.

Working with that number a salary cap (without smoothing) around $85M in 2016-17 seems like a fair enough place to start.

Anthony Davis Extension

It does not make a ton of sense to reinvent the wheel. For an incredibly in depth analysis of AD's next extension go read this piece on Bourbon Street Shots. It walks you through all the finer points on AD's extension and free agency options. Here are the big points in my mind.

The NBA might have a lockout or strike in the summer of 2017. Anthony Davis has the option to lock up well in excess of $100 Million guaranteed in the summer of 2015. The earliest AD can be an unrestricted free agent is the summer of 2017. The inability to predict exactly what might happen, combined with now decades of the owners in professional sports taking labor to the cleaners in negotiations it is entirely reasonable to expect Davis to sign an extension next summer.

Will it be for five year or four years with a fifth year option? Will it be for the full 30% (assuming Davis qualifies) or a lesser amount (as both Paul George and Kyrie Irving signed for)? Those questions will be decided upon in those negotiations.

The Rose rule (30% of the cap instead of 25%) kicks in if Davis stars the All-Star game in 2015 and 2016, makes an All-NBA team in 2015 and 2016, or is named the MVP in either season. It cannot be a combination of things. Two All-Star Starts, or two All-NBA teams (not defensive, All-NBA), or an MVP. Considering the popularity of Dwight Howard, Blake Griffin, and Kevin Durant in the Western Conference it might be safe to rule out Davis starting the All-Star Game this year. Realistically we're down to making consecutive All-NBA teams (possible, but not probable) or winning the MVP (far fetched).

Add all this information together (with the data from Bourbon Street Shots) and we've got four rough contract starting points.

With Smoothing Davis starts somewhere between $19M and $22.75M with some rounding. Without smoothing Davis starts between $20M and $24M. This range (between $19M on the low end and $24M on the high end) is where we will estimate Davis's contract beginning in 2016-17.

Eric Gordon's Player Option

The other big domino to fall is Gordon's player option. Gordon has a $15.5M player option for 2015-16. Does he pick it up after this season? My expectation is he does without qualification. If he has a great season then he looks to build on it and cash in during the spending bonanza known as the summer of 2016. If he has another injury-filled campaign he picks it up because no one is paying him $15.5M to play basketball again.

I want to believe that there is a scenario where Gordon excels this season and opts-out to gain long term security. But that goes against everything we think of when discussing elite athletes. Gordon is a competitor and his environment demands a level of ego beyond mere bloggers or even white collar professionals. If he has a season where he returns to his pre-NOLA form why try to sign for big dollars (up to 30% of the cap with seven years experience) with a $66.5-72M (estimated smoothing) cap when he can angle for the same percentage of an $80-$85M cap?

Omer Asik in Free Agency

This is the final piece of the puzzle. Unfortunately we have no hard evidence of how Asik pairs with Davis yet. Establishing what his value is also becomes difficult. The old contracts of similar big men (between DeAndre Jordan's 4 year/$43 Million and Tiago Splitter's 4 year/$36 Million to ballpark it) are not entirely accurate. Take a look at how absurdly cheap Tyreke Evans looks just 12 months later WITHOUT a massive increase in the cap.

Do we start at Marcin Gortat's $12 Million per year annual average for a big man like Asik? Much will be made of Asik missing 34 games last season. It is important to note that out of 345 possible appearances (including playoffs) those are the only 34 games Asik has ever missed. While Asik missed 31 consecutive games due to knee problems his other three games were coaching decisions (two early in the season during disagreements with his utilization, and the final game where he sat because Houston had nothing to play for).

If the Pelicans have a successful season this year Asik is most likely going to be an enormous reason why, even if he does not fill the box score. He will turn 29 next summer. While big men age well in this league (especially big men like Asik who do not rely on athleticism) it might be difficult for Asik to turn down stability into his mid-thirties. Is a 5 year, $50-55 Million offer enough to entice Asik to spend the remainder of his prime beside Anthony Davis?

Time for Tables

No, this is not the WWE and I am not one of the Dudley Boyz. Instead of throwing you through a cheaply constructed folding buffet table get ready to have Microsoft Excel hurled at your eyeballs. Ready?

No Smoothing

Pos Age 2014-2015 2015-2016 2016-2017
Eric Gordon SG 26 $14,898,938 $15,514,031
Jrue Holiday PG 24 $9,904,495 $11,095,507 $11,786,518
Tyreke Evans SG 25 $11,265,416 $10,734,586 $10,203,755
Ryan Anderson PF 26 $8,491,500 $8,500,000
Omer Asik C 28 $8,374,646 $11,000,000 $11,000,000
Anthony Davis PF/C 21 $5,607,240 $7,070,730 $20,000,000
Austin Rivers PG 22 $2,439,840 $3,110,796
John Salmons SF 35 $2,000,000
Alexis Ajinca C 26 $981,084
Luke Babbitt SF/PF 25 $981,084
Jimmer Fredette SG 25 $948,163
Darius Miller SG/SF 24 $915,243
Jeff Withey PF/C 24 $816,482
Russ Smith PG 23 $507,336 $845,059 $980,431
Patric Young PF/C 23 $507,336 $845,059
Total 25.13 $68,638,803 $68,715,768 $53,970,704
Salary Cap $63,065,000 $66,500,000 $85,000,000

There are a couple assumptions here. First, Asik re-signs for a deal averaging $11 Million a year this summer. Second, Eric Gordon does not opt-out and plays through his contract. Third, there is no smoothing and the salary cap leaps up to $85 Million. Finally, Davis does not qualify for the Rose Rule 30% contract.

There are a lot of rough edges and rounding done on these numbers (Asik's, Davis's, the salary cap itself) to make this easily digestible. The big takeaway here is if there is no smoothing the Pelicans do not have much in the way of salary flexibility this summer unless Eric Gordon walks. Even declining the fourth year team option for Austin Rivers (suggested as a dilemma for the Pelicans by Zach Lowe) it does little to open any functional cap space. Asik's cap hold (regardless of smoothing or not) is over $12.5M.

There are two ways the Pelicans might have some cap space. First, they could renounce Omer Asik (and everyone else not under contract). Doing that next summer combined with declining Rivers's option opens up just south of $10M in space. That's not ideal. Second, Eric Gordon could opt-out. I cannot stress enough how remote I believe that possibility is from occurring. Under that scenario the Pelicans could have roughly $12-15M in cap space depending on what they do with Austin Rivers.

Regardless, the following summer in 2016 the Pelicans could have a lot of space. Even re-signing Ryan Anderson to terms similar to Asik's contract could yield over $12M in cap space when the cap jumps up. This is where getting Jrue Holiday and Tyreke Evans on contracts which cross over the new television deal really plays dividends.

Smoothing

Pos Age 2014-2015 2015-2016 2016-2017
Eric Gordon SG 26 $14,898,938 $15,514,031
Jrue Holiday PG 24 $9,904,495 $11,095,507 $11,786,518
Tyreke Evans SG 25 $11,265,416 $10,734,586 $10,203,755
Ryan Anderson PF 26 $8,491,500 $8,500,000
Omer Asik C 28 $8,374,646 $11,000,000 $11,000,000
Anthony Davis PF/C 21 $5,607,240 $7,070,730 $19,000,000
Austin Rivers PG 22 $2,439,840 $3,110,796
John Salmons SF 35 $2,000,000
Alexis Ajinca C 26 $981,084
Luke Babbitt SF/PF 25 $981,084
Jimmer Fredette SG 25 $948,163
Darius Miller SG/SF 24 $915,243
Jeff Withey PF/C 24 $816,482
Russ Smith PG 23 $507,336 $845,059 $980,431
Patric Young PF/C 23 $507,336 $845,059
Total 25.13 $68,638,803 $68,715,768 $52,970,704
Salary Cap $63,065,000 $72,000,000 $80,000,000

This possibility opens up slightly different opportunities. If some of the increase is smoothed into next summer the decision now to pick up the option on Rivers becomes more difficult. The team could have slightly less than $5M in cap space in addition to the room exception (roughly $2.8M) next summer. Or they could pick up the option, keep players' Bird Rights, operate above the cap and have both the full Mid-Level Exception (nearly $5.5M) and the Bi-Annual Exception (just under $2.2M).

The ideal situation would be for Eric Gordon to opt-out and the league to smooth the increase. The team could keep Austin Rivers and have copious amounts of cap space to fill the the small forward position (moving Tyreke Evans into the starting lineup). This chart below is a unicorn, but I want you to see it just in case everything goes right for the Pelicans.

Pos Age 2014-2015 2015-2016 2016-2017
Eric Gordon SG 26 $14,898,938
Jrue Holiday PG 24 $9,904,495 $11,095,507 $11,786,518
Tyreke Evans SG 25 $11,265,416 $10,734,586 $10,203,755
Ryan Anderson PF 26 $8,491,500 $8,500,000
Omer Asik C 28 $8,374,646 $11,000,000 $11,000,000
Anthony Davis PF/C 21 $5,607,240 $7,070,730 $19,000,000
Austin Rivers PG 22 $2,439,840
John Salmons SF 35 $2,000,000
Alexis Ajinca C 26 $981,084
Luke Babbitt SF/PF 25 $981,084
Jimmer Fredette SG 25 $948,163
Darius Miller SG/SF 24 $915,243
Jeff Withey PF/C 24 $816,482
Russ Smith PG 23 $507,336 $845,059 $980,431
Patric Young PF/C 23 $507,336 $845,059
CAP HOLDS $2,100,372
CAP SPACE $19,808,687
Total 25.13 $68,638,803 $72,000,000 $52,970,704
Salary Cap $63,065,000 $72,000,000 $80,000,000

It might be a new financial world but having almost $20 Million in cap space is nothing to sneeze at. Yes other teams would have lots of room too, but those teams would not have Anthony Davis.

Tying it Together

The best possibility involves both the NBA smoothing and Eric Gordon choosing to be a free agent after this season. If Gordon opts in regardless of smoothing the Pelicans will likely have just the mid-level exception and the bi-annual exception to work with; unless for some catastrophic reason the front office decides to let Omer Asik walk.

Either way the Pelicans could be patient and enter into the summer of 2016 with some deal of cap space. The exact amount will be dictated by what long term money they commit to in the summer of 2015 and if they attempt to keep some combination of Omer Asik and Ryan Anderson.

A new GM, should the Pelicans clean house after the season, may not be as enamored with either player. There are (and should be) questions asked about the value of investing so much in the backup to Anthony Davis as he enters his prime.

The Pelicans might have some flexibility if the league opts to smooth the salary cap increases beginning next summer. They almost certainly will in the summer of 2016 with a decision to make on how much to invest in the front court. Anthony Davis will be here, but the supporting cast (despite what you might read) is far from set in stone. Consider this season more of an audition to see who remains instead of the beginning of some dynasty. Anthony Davis is not yet 22 years old. The dynasty part comes later.