The NBA: Where High-Demand Expiring Contracts Happen

Clearly, this is the prize player at this year's trade deadline.

The biggest name at this year’s trade deadline wasn’t Antawn Jamison, who is touted as the final piece that will push Cleveland to a championship. It wasn’t DeShawn Stevenson or Caron Butler, who have helped Dallas to a ten game win streak. And it wasn’t Marcus Camby, who plugged the gaping hole Portland had at center.

No, the biggest name this year was Tracy McGrady, an aging star recovering from knee surgery who not only wasn’t earning many minutes, but was asked by the Rockets to stay away from the team until they could find a trade partner.

Yes, that’s right, the most coveted trade asset this season was a player who is a mere shell of his former self. To be fair, however, the reason he was in such demand wasn’t because of his basketball skills. It was his $23 million dollar contract.

It’s a sad truth, but for many teams in the NBA, the game is more about dollars and cents than X’s and O’s. You may have heard, but there’s a recession on. Money is tight, even for millionaire owners. As often as they can, many of them are looking to cut expenses and save a little bit of money to offset costs. They can raise ticket prices to earn extra cash, or look for ways to save on hotels and airfare. But player salaries – their major expenses – are very difficult to tinker with. As per the NBA’s collective bargaining agreement, players’ contracts are guaranteed. Once a contract is signed, ownership has to pay the money out, regardless of the player’s performance.

McGrady is a perfect example. When he signed his contract in 2004, $23 million per year sounded pretty reasonable. (It was actually only $21 million at the time, but slowly increased each season.) After all, McGrady was one of the league’s biggest names. He and Yao Ming were expected to anchor a new dynasty in Houston. Instead, the Rockets famously failed to escape the first round until McGrady went out for the rest of the 2008-09 season with microfracture surgery.

But when T-Mac’s performance started to fall well below his pay grade, what options did Houston have? His contract was guaranteed. They couldn’t re-negotiate with him, and they couldn’t cut him. They could have waived him, but his contract would still remain on the books, taking up salary cap space. All they could do was hold on to him, unless a trading partner appeared.

And one did, although it wasn’t until the final year of his contract. Expiring contracts are worth their weight in gold to financially struggling owners, since they come off the books at the end of the year. Once the contract expires, you can use the cap space to sign any player you want – or, more importantly, you can leave it unused and save some money. And when you’re trying to trim payroll, $23 million dollars can go a long way.

Next season, we could see another interesting situation. Portland’s Joel Przybilla, already out for the season with a torn patellar tendon, went in for surgery this week after re-injuring his knee when he slipped in the shower. (As a Blazers fan, it kills me to even type that sentence. It’s been an awful year for Portland fans.) He is unlikely to be back next year, and may be done for his career, since he’s already 30. If doctors declare his career to be medically over, most of his salary will be reimbursed by an insurance company. That gives you an expiring contract worth just over $7 million, and you even get most of the money back. You can expect teams looking to shed salary to leap at the chance to pick up Przybilla’s contract, likely giving Portland a promising young player (or players).

So is there a way to solve this? Can we make the most valuable and coveted contracts the ones belonging to the best players rather than guys who aren’t playing? One easy way to solve the problem would be to make contracts non-guaranteed. If a player is injured, let the team waive him and get him off the books, or at least buy him out at a reduced rate. If a player is playing poorly, cut him. Get rid of him and let another team pay him the market rate. This way teams aren’t hamstrung by unwieldy contracts and can rebuild quickly. Sounds good, right?

Well, the players probably won’t think so. It’s hard to imagine the players’ union voluntarily giving up guaranteed money. But the idea of a non-guaranteed contract isn’t foreign to pro sports. The NFL doesn’t guarantee its contracts to its players. If a player isn’t playing as well as the team would like, they cut him and move on. It happens all the time. Do you think that motivates guys to play a little harder? I bet it does. It’s possible, and even likely, that we’ll see ownership pushing for this when they start negotiating the new CBA next year.

That’s why expiring contracts are so valuable—it’s about the only way to cut salary, short of just waiting for players to leave in free agency. The value is in what was traded for it. Usually to get it a team has traded away longer-term contracts that would tie up that money for years to come. And while the salary dump takes a year to take effect (until that massive contract expires), it still eventually cuts the payroll and saves money.

But the real question is, is this even a problem? After all, there’s plenty of demand for large expiring contracts. Knicks fans are ecstatic that they have McGrady, because it opens up so much cap space next season for someone like LeBron James, Dwyane Wade, or Chris Bosh. And you can imagine the Rockets are excited to have McGrady’s contract off the books in exchange for a young hotshot like Kevin Martin. So isn’t everyone happy? As an analyst, I’m not, since I’m stuck reporting on inactive players as trade bait, but if it’s just me, I imagine the NBA is okay with that.

But next year, when you see teams clamoring to pick up Przybilla or New York’s Eddy Curry, who is set to earn over $11 million in the last year of his contract despite being, well, awful, you’ll know exactly why. You won’t have to like it – I probably won’t – but you’ll at least be able to understand it.