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Monday, July 08, 2013

Omer Asik and Jeremy Lin's contract situations



In light of one or both of these two being about to be traded, there exists a new realm of questions about this two unusual, nearly-novel deals.

The questions surround what they're being paid, and what they're being charged to the salary cap. People don't know which set of figures to believe, and the confusions stems from the fact that those two questions actually have two different answers.

"Salary" and "cap number" are usually assumed to be synonymous with each other on account of the fact that they normally are, with rare exceptions. Occasionally, exceptions can be found in buyout agreements (I believe, though cannot say decisively, that the Blazers were still playing Shawn Kemp up to and including last season), but not with valid contracts. These deals, then, are an exception. And that's why they need clarifying.

Using the Arenas provision, Lin and Asik signed for the most Houston could give them over three years - $25,123,938. The contracts called for them to be paid an even $5 million in 2012/13, $5.225 million in 2013/14, and $14,898,938 in 2014/15. For the purposes of where we're going, it doesn't matter how these figure was arrived at, only what they are and where we're going.

The cap number for these contracts calls for that $25,123,938 contract to be split evenly across all three years, i.e. $8,374,646 each season. This is true despite of the actual payment schedule being what it is above. So when someone asks "what are Lin and Asik getting paid?", the answer could be either, technically. On a literal interpretation of the question, the payment schedule is the right answer. Yet when people ask that, what they really want to know, even if they don't know there's a difference, is what is their cap number. That's the one that matters to anyone who isn't actually cutting the cheques.

The confusion as to which is correct stems from a now-irrelevant provision of the Arenas rule, whereby had Chicago and New York matched the deal, their cap hit would have mirrored the payment schedule. This was widely reported at the time, and as such, passed into the public conscience in a conflicting manner. But it's something that should be disregarded. That was something that didn't happen, cannot now happen, and thus is irrelevant. From now until the date the contracts expire, Lin and Asik will have cap numbers of $8,374,646 in each season, along with being paid $5.225 million this season and $14,898,938 next. This is true no matter which team they are on - even if Asik is traded back to Chicago, $8,374,646 will remain the cap number. While owners looking to trade for them must be mindful of the latter, it is the former figure which is used for all cap calculations, and thus trade permutations. So when you see their cap hit listed as $8,374,646, this is the one that matters. This is the figure around which outgoing salary in trade, cap room, proximity to luxury tax, and all that jazz, is calculated from. This, then, is the correct figure.

And yes, this also applies to Landry Fields. His actual salary will be $5 million 2012/13, $5.225 million 2013/14, and $8,525,000 in 2014/15. Don't shoot the messenger.



While we're on the subject, let's address one other thing regarding these three signings - they were NOT "Poison Pill" deals. They were deals done what we used to call, and for no apparent reason stopped calling, the Arenas provision. The mechanism known as the "Poison Pill" provision is completely different, and regards what happens when you trade someone whose rookie contract you have extended, before said extension kicks in. It is unrelated here, and yet from somewhere, the term seems to have transitioned to the Asik, Lin and Fields cases.

4 comments:

  1. I think people use "poison pill" in the more generic sense; an onerous contract term that forces you to walk away from an asset that you value. They may not necessarily be confusing it with the rookie extension rule.

    ReplyDelete
  2. Sure, but that's rather problematic, given that the poison pill label had already been assigned a specific use in the vernacular of CBA-related conversation (if not the actual CBA).

    ReplyDelete
  3. Omer Asik is the Phil Jones of basketball. Play style too, but just look at his face.

    ReplyDelete
  4. Mark, Awesome explanation. I wrote up a relevant little piece about the Arenas rule.

    .

    http://basketballmetastrategy.blogspot.com/2013/02/how-did-arenas-rule-meant-to-protect.html

    ReplyDelete

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