Deconstructing the Tristan Thompson Contract Negotiations

Brian Windhorst broke the news Monday morning. Tristan Thompson and the Cavaliers are still $14 million dollars apart in contract negotiations. As corporate standoffs go, this one’s starting to get testy. By most accounts, the two sides have until the start of training camp (Oct. 1st) to get a deal done, though the Cavs do have a provision in the CBA to stretch the qualifying offer past that date to continue negotiations. (Cleveland did it with Andy on ’07). Surprisingly, many fans I’ve talked to come down in favor of the Cavs’ position, that the standing offer of $80 million over five years remains a fair one that approximates TT’s market value. I’ve heard bitter rebukes from Cavs fans of the once beloved Thompson along with his agent, Rich Paul, who believe TT is worth $94 million over five years. Chris Broussard tweeted yesterday that Rich Paul has indicated he has “lowered” his demands to 3 years/$53 million (or about $1.1 million per year less than the “max”). As many noted, this doesn’t feel like progress.

An old Bolshevik, I regularly side with labor in these types of disputes. I have no problem with Tristan negotiating for all the money that he can get. But even I have my limits. As a Cavs fan, I’m wary of anything that gets in the way of my team’s long term stability and window of opportunity for greatness. Further, by playing hardball and endangering that window, TT and Rich Paul are getting perilously close to a position where they’re costing themselves money instead of making more.

It’s not hard to see the Cavs’ point of view in this dilemma. With every million dollars extra they spend this offseason, they’re racking up $3-4 million in luxury tax payments. As WFNY’s Jacob Rosen estimated in August, if the Cavs sign TT at the qualifying offer of $6.9 million, they pay $34.6 million in taxes. If they sign him at the max $16.4 million this season (with annual 7.5% raises), they pay $77.3 million in taxes this year, a difference of $59.1 million in 2015-2016 taxes and salary. It’s no wonder the Cavs would prefer to pay less. By their way of thinking, a backloaded $80 million deal could save them $10 million in tax payments this season, and possibly help keep them out of the dreaded “repeater” tax bracket in the future. The CBA makes it very difficult to operate if you’re repeatedly over the tax apron, both from a budget standpoint and from an operational standpoint, hence the Cavs’ desire to stay out of it. If the Cavs could avoid the tax apron in 2016-2017, it would help their bottom line immensely. Every dollar saved in contract negotiations will matter.

David Griffin and Co. also have to feel that paying north of $16 million per year for a player who does not start is… excessive. TT didn’t have a fantastic regular season. He was decent, but only his offensive rebounding numbers were great. Yes, he improved his individual defense and his stats were decent: 15.99 PER, a .86 RPM (16th for centers), and of 11.4 points, 10.8 rebounds, and 1 block per 36 minutes. TT had some fantastic games in the playoffs, and he does have the ability to switch onto guards, but his only elite skill is offensive rebounding. As I’ve said before, Ed Davis does what Tristan does and only makes $6.6 million a year. Rich Paul would counter that TT played like a top line NBA big man in the playoffs after Kevin Love got hurt.

Further, it appeared early in free agency that Thompson and the Cavs were close to an agreement, and that Draymond Green’s deal affected the negotiations. It’s all conjecture, but judging from the comments that Rich Paul has made throughout the free agency process, he’s been moving the goal posts as other players have signed contracts. It can be impossible to negotiate with someone who keeps looking around at what else is happening in the market, and who feels that they can always get a better deal. Maybe trying to make Dan Gilbert eat as much tax as possible is Rich’s silent revenge for the Comic Sans letter.

From TT and Rich Paul’s point of view, they are negotiating for maximum money. And, it’s not their problem if that stance costs Citizen Sans even more. TT has a couple things going for them. First, the NBA salary cap is going to explode. It is set to be around $90 million in 2016-2017, and $108 million in 2017-2018. (To give you an idea what this means, the five year contract LeBron likely signs in 2017 will be for around $189 million.) The maximum yearly salary next summer for an unrestricted free agent is going to be around $22.5 million per season with annual raises of 4.5%, which makes a four year maximum deal signed next summer worth… about $94 million. Let’s take the five years, $80 million the Cavs are offering now, and the four years, $94 million that Paul thinks he can get TT next summer. Add the $6.9 million dollar QO that TT would have to play for in 2015-2016, and that adds up to $100.9 million: a difference of about $21 million over what Cleveland’s offering. The $21 million dollar question becomes “how much could Thompson really get on the open market next year?”

To answer that question, let’s look at teams that are going to have the cap room next year to sign TT next year, courtesy of BasketballInsiders.com. There are a lot of them. Then we’ll break them down by group.

Group 1: Never gonna happen: This group includes the the Spurs, Warriors, Clippers, Thunder, Nuggets, and 76ers. The first three teams can’t afford him. The Thunder will need all their money to re-sign Westbrook and Durant, and if that falls through, they aren’t going to be looking for big men. The Nuggets have Faried already, and if they move him, they’ll be in full on rebuild mode with no incentive to add a big contract. The Sixers are too cheap, and TT makes no sense with the presumptive big man trio of Okafor, Noel, and (hopefully) Embiid.

Group 2: Highly Unlikely: Pelicans, Jazz, and Grizzlies already have very skilled power forwards and very good or at least very expensive starting centers as well as well (or at least will, in the case of the Jazz). It’s hard to imagine these three teams giving TT a lot of money. In the Grizzlies case, they’ll need all their money for Conley and their free agent swing men. Things change quickly in the NBA. An injury or trade could make these teams viable, but it’s a long shot.

Group 3: Doesn’t make sense from a basketball standpoint. The Suns, Knicks, Wizards, Nets, Bucks, Pistons, T-Wolves, and Heat all feature lane clogging centers who are most effective close to the basket. TT doesn’t fit well offensively with Chandler, Robin Lopez, Gortat, Brook Lopez, Monroe, Drummond, Pekovic, or Hassan Whiteside. While Tristan’s defense and ability to play both positions fit with any team, I have a hard time seeing him on those squads. (TT in the triangle… UGH). The Bucks could use TT, but they already have John Henson and Jabari Parker. The Pistons will be saving their money for Drummond, and while I could see Pat Riley chasing TT just to spite the Cavs, the Heat already have Bosh. Thompson doesn’t make a ton of sense there either. Though “not making sense” never stopped any of these teams from pulling the trigger on a contract before…

Group 4: It’s just weird. The Kings and Raptors have strange situations. Sacramento is a mess, but they could finagle the room, and TT could play with DeMarcus Cousins. Tristan’s professionalism would be a positive influence. The Raptors have supposedly been rumored to be interested in Thompson, but they would have to lose DeMar DeRozan (which might happen anyway), and renounce the rights to Terrence Ross. TT doesn’t make a ton of sense next to big V, but when the Raps go small with Carroll at the four, TT will work at center. They would have a solid defensive five in Today’s NBA for late game situations. Don’t rule Toronto out. It’s his home country.

Group 5: TT would be a solid fallback for The Rockets, Bulls, Hawks, and Celtics. Dwight could walk from the Rockets; we don’t ever know what he’s doing. The Bulls are facing impending free agency of Joakim Noah and Pau Gasol (player option). In Atlanta’s case, if Horford leaves, TT would make sense as a replacement big. In Boston’s case, yes, they have eight power forwards, now. But next year? Sullinger, Lee, Zeller, Amir Johnson, and Jerebko are all free agents or have non-guaranteed contracts. TT might work and they’d have the cap room to sign him.

Group 6: He fits. This is the important one. The Pacers, Mavericks, Magic, Blazers, Hornets, and Lakers are prime Thompson destinations. The Pacers are desperately undersized this year with Ian Mahinmi and Lavoy Allen as their projected starting bigs. With $46 million in cap room for a player who absolutely fits Indiana’s gritty mold, TT would be a natural. Dallas has the room, the pedigree, and the need to sign TT. He works there as well as anywhere, and Cubes loves overpaying big men. The Magic are still developing Aaron Gordon, and the similarities are there, but a Vucevic, TT, Gordon, big man rotation is legit. Vucevic has a faceup jumper, Aaron Gordon shoots threes, and TT would jump-start their defense. Also, TT seems like a Scott Skiles type player (and Channing Frye does not). The Blazers could pair Tristan with Myers Leonard, who’s become an outside threat, and Ed Davis to form a solid three man rotation. Ed Davis is a bit redundant, but the Blazers have a boatload of cap room and will be hard pressed to find someone to sign with them. Davis is easily movable (on a bargain contract). The Lakers have the room and who knows what is happening with Hibbert.

So Tristan fits on six teams, could be a good second option for four of them, and he could conceivably play for 20 NBA teams. The next question is, who would pay him the max? In looking at the top available free agents for 2016, TT would have to be ranked no worse than the 15th best. Many teams would rank him in the top ten for his rebounding, his professionalism, his defense, and his durability. Even if his per 36 numbers aren’t overwhelming, his best attribute is that he doesn’t miss games, having played in 82 of them in each of the last three seasons. That’s an increasingly rare commodity these days. Plus, the guy generates a 3-4 extra possessions a game. The Pacers, maybe more than anyone, would be very inclined to pay him a lot of money, given their small market, their cap room, and the fact that they’d be weakening a division rival. Plus, Thompson fits that roster. All it takes is one team.

The problem with the debate on Tristan. He’s right on the edge of “max” territory for a fifth year play. The dollar amounts are irrelevant now to NBA agents. The number to focus on is the percentage of the salary cap and the percentage of the “max salary” in the year the player is signed. This offseason, 11 players got the max or very near max per year deals: LeBron, Kawhi, Marc Gasol, Aldridge, Love, Butler, DeAndre Jordan, Brook Lopez, Wes Matthews, and Enes Kanter. Four players got most of the the max, Goran Dragic (92%), Draymond Green (87%), Dwyane Wade (87%), and Reggie Jackson (85%). The 15th best contract in this year’s free agent class belongs to Reggie freaking Jackson.

If Tristan Thompson is the NBA’s 15th best free agent next summer, he’s worth at least 85% of a max contract by the market that was set this summer. Heck, if you compare him to Enes Kanter, Tristan’s worth a max contract right now.

For argument’s sake lets take 85% and multiply it by next year’s max four year deal, $94 million. You get $79.9 – a conceivable contract offer for TT next summer. Add the $6.9 he’d play for in 2015-2016, and you get a total of $86.8 million (an average of $17.36 mil per year). That’s the lowest number in Rich Paul’s head for a five year deal this year. I’ll guarantee it. Because if he’s healthy and productive, someone will pay Thompson $20 million a year next summer.

And I know you’re thinking, “Tristan isn’t better than Draymond Green. Why should they pay him more?” I’m sure Rich Paul will tell you its not Tristan’s fault that Draymond’s agent didn’t realize what he was worth, or that Draymond didn’t wait till the market was set, and took a bad deal. Of course, Draymond wants to be with a championship roster long term, and he has a lot of loyalty towards a team that developed him as a second round pick. Every contract is different…

I know. You read the title of this article, and you’re thinking, “well, so far, it doesn’t appear Paul is costing Tristan any money.” You have a point. Rich is encouraging Tristan to take a chance – to bet on himself if the Cavs don’t pony up. Sometimes that works out. Sometimes it doesn’t. Jimmy Butler bet on himself last year, turning down a four year, $44 million dollar extension offer, and ended up with a $95 million dollar max deal. He made himself an extra $41 million.

Last summer Rich Paul had mixed results. He had restricted free agents Eric Bledsoe and Kevin Seraphin hold out for more money late into the free agency period. Bledsoe ended up with a 5 year, $70 million dollar deal, instead of the $60 million dollar deal. But Seraphin signed the $3.8 million dollar qualifying offer, and then had a bad season. Kevin ended up getting a one year $2.8 million dollar deal from the Knicks this summer. This offseason, Rich’s client, Norris Cole, “settled” for the $3 million qualifying offer instead of a longer term deal for lower money. Seraphin should find a new agent.

Both of these examples point to a problem with Paul’s tactics. When players hold out this long, they can’t practice much for fear of injury. They can’t play. Especially for big men, that hurts rhythm and conditioning. The tactic seems to have hurt Seraphin. And who knows how much TT lost in endorsements by not playing for Team Canada this summer (not to mention the fact that they could have used him against Venezuela- a devastating loss).

The potential for poor conditioning illustrates the biggest risk of all: that Tristan will sign the QO and then (God forbid) have a major injury this season. Given his history, that seems unlikely, but it’s always a possibility. Thompson can take out an insurance policy to protect him in this case, and I’m sure he will. But that eats into the bottom line as well. Those policies aren’t cheap.

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That $53 million dollar rumor from yesterday? It presents somewhat of a middle ground. It puts the yearly average around $17.7. But I’m sure the Cavs would want it backloaded to save on their tax bill, and I’m sure Paul wants the last year to be a player option, which means he wouldn’t want it backloaded. Of course, from the Cavs’ point of view, the only reason they’re willing to pay a huge tax bill this season is to lock up Thompson long term. Ugh. There are too many variables, people.

And neither side of this has many other palatable options. If TT takes the QO, Cleveland can’t trade him this year without his approval because the receiving team wouldn’t have his Bird rights. I suppose Cleveland could find a suitor now, sign Thompson to a big deal before the season, and then trade him in December, but there are great risks with that: the biggest being that he gets hurt or plays like crap, and the Cavs are stuck with him.

Maybe Thompson takes the qualifying offer. If he did, would Thompson really walk next summer? I’m skeptical, but Thompson and Paul seem like resolute fellows. Thompson, if healthy, will get offers. The Cavs might not get the ability match.

But most any economist would tell Tristan to take as much as he can get now and look forward to his next contract. The risks of holding out and losing the big payday are too great. The Cavs have to know this too. Every day TT sits on his butt, he becomes less valuable to them. Rich Paul’s Kim-Jong-Un-style negotiating tactics may have won Eric Bledsoe a big contract, but they failed in Seraphin’s case, and they may end up costing Tristan Thompson “generation changing” money. Further, I wonder if teams will be wary of drafting Rich Paul clients, knowing that they’ll have to negotiate with an “irrational actor” game theorist in four or five years. Meanwhile, just settle on $86.8 million and get TT in camp, please, gentlemen. It’s the “fair market” deal.