Draft pick value explained.

[thecampster]

http://sports-ak.espn.go.com/nba/story/_/id/23837465/kevin-pelton-weekly-mailbag-including-2018-nba-draft-lottery-trades

 

Okay so we've had tons of conversations this week with people not understanding the negative value of bad contracts vs the value of draft picks.  This writer does a very good job of explaining what it would take to wrestle a pick away from a team that needs to unload a bad salary. It is much less than you might think.

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  Kevin Pelton, ESPN Staff Writer

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"Rumors suggest the Memphis Grizzlies are considering using the No. 4 pick to get out of the Chandler Parsons deal and the Denver Nuggets are thinking similarly with No. 14 and Kenneth Faried. That seems like a steep price for the No. 4 pick but reasonable for No. 14. Do you have a way to assess the amount of cap space a team would have to take on to acquire certain picks?"

-- Jonathan Dennis

Over the next two seasons, I project Parsons' production to be worth about $4 million, while he'll make more than $49 million in salary. So the net value of Parsons' contract is about minus-$45 million.

The financial value of draft picks is no longer what it was a few years ago because of the way the current collective bargaining agreement increased the salaries for first-round picks. This year's No. 1 pick will make an estimated $8.1 million as a rookie (the exact value will be determined by where the 2018-19 salary cap comes in), nearly 40 percent more than Ben Simmons made as the No. 1 pick two years ago ($5.9 million).

As a result, using the method I outlined here, I estimate the net value of an average No. 4 pick as $19 million, not nearly enough to match the negative value of Parsons' contract. Even if Luka Doncic falls to No. 4, his net value there ($36 million) is not quite enough on its own.

Memphis could even things up by agreeing to take on another player whose contract offers negative net value. For example, Wesley Matthews (net value minus-$16 million) for Parsons and the rights to Doncic scores as a positive move for the Dallas Mavericks. Or if the Grizzlies want to stay in the mid-lottery, Parsons plus Doncic to the Orlando Magic for Bismack Biyombo, Jonathon Simmons and the No. 6 would be reasonable value.

Faried's smaller salary ($13.8 million) does not offer nearly as much negative value, projecting as about a $9 million overpay. The No. 14 pick rates as more valuable than that ($11.5 million), so the Nuggets could reasonably expect to get something else (say, a pick in the middle of the second round) in a trade.

[thecampster]

The point of which is the negative value of Parson's contract is so bad, it isn't even worth taking back the #4 pick (per their calculator). Far from it. Their calculations would make a swap of 30 + Baze for Parson's + 4 as a huge loss for the Hawks.  This explains why they haven't unloaded it yet and what they should expect.

Per their calculator, Parson's is nothing more than a $2 million/year player, while Baze is more like an $8-10 million per year player.  So Baze's negative is closer to -$20 million while Parson's negative value is $45 million.  Meanwhile, a typical 4 pick outplays his contract by about $8 million and pick 30 is basically a wash (crapshoot).  So even a trade of Baze and 30 for Parson's + 4 is technically a $17 million dollar loss for the Hawks.

[High5]

Interesting numbers, but it seems a bit strange to focus on the short-term value of a trade that's obviously meant for future success. 

[thecampster]

No, it really isn't as each team still has to deal with the cap. Taking on a player and his salary hampers everything you do in the future.  Parsons is 1/4 of the team cap. He's a serious anchor.

[High5]

Just now, thecampster said:

No, it really isn't as each team still has to deal with the cap. Taking on a player and his salary hampers everything you do in the future.  Parsons is 1/4 of the team cap. He's a serious anchor.

I agree with that, but it's the value assigned to the play of the draft picks during their first two seasons that doesn't make as much sense to me. You make the trade expecting to take a hit over the next couple of seasons so you can be much better beyond that.

[Threezus]

5 minutes ago, High5 said:

I agree with that, but it's the value assigned to the play of the draft picks during their first two seasons that doesn't make as much sense to me. You make the trade expecting to take a hit over the next couple of seasons so you can be much better beyond that.

Thatand i would argue the cap space value for a team just starting a rebuild compared to a team thats needing that cap to sign a elite player is different as well.   That 45 million to us over the next year or 2 means nothing seeing that we are only using it to get good prospects while still losing.  So if we can use it to get a elite tier prospect in a stacked draft.  Compared to using it to get say 2 guys that are in the 18 to 30 range over the next year or 2.   Then im using it on the chance at a superstar all day long for sure.

[capstone21]

1 minute ago, falconfan13 said:

Thatand i would argue the cap space value for a team just starting a rebuild compared to a team thats needing that cap to sign a elite player is different as well.   That 45 million to us over the next year or 2 means nothing seeing that we are only using it to get good prospects while still losing.  So if we can use it to get a elite tier prospect in a stacked draft.  Compared to using it to get say 2 guys that are in the 18 to 30 range over the next year or 2.   Then im using it on the chance at a superstar all day long for sure.

Yes, I would make the trade for that reason... we are currently in a development position and can afford to take Parsons contract for the next two years.  Lining up Bamba, Porter or JJJ next to Luka would be a huge get for our future

[Threezus]

2 minutes ago, capstone21 said:

Yes, I would make the trade for that reason... we are currently in a development position and can afford to take Parsons contract for the next two years.  Lining up Bamba, Porter or JJJ next to Luka would be a huge get for our future

Yes it would   Prince, Collins, Luka, and 1 of those 3 would be a ridiculous start to the rebuild and i would be pretty pleased wit the outlook for our future in a few years.  Because we are only keeping adding to that group with young players the next few years.

[thecampster]

18 minutes ago, High5 said:

I agree with that, but it's the value assigned to the play of the draft picks during their first two seasons that doesn't make as much sense to me. You make the trade expecting to take a hit over the next couple of seasons so you can be much better beyond that.

Sure, let me explain that. What they did is they have a chart that equates value to stats.  Produce X amount of stats, worth Y value.  Then they subtract your contract from that production value to establish your positive or negative value. They took the average production of players at each draft slot and placed an expected value for that slot then subtracted the salary for the slot. In this case, they said slot 4 has a positive 8.1 million value (over the first 3 years of the contract). The initial value of the contract is 4.833 million for slot 4. A typical 4 pick plays at $4.833 million + (8.1/3 = 2.7) million = $7.533.  So in other words, they expect the 4th pick in the draft to produce his first year at the same rate as a $7.533 million/year vet. 

To put this in plain terms.  Yes they could keep the pick and Parsons and they would get ($7.533 + $2) or $9.533 million production for the next 2 years at a cost of $28.833 million per year. or they could sell the pick and parson for a 2nd rounder. Then take that $28.8 million and get 2 legitimate free agents who produce at an expected $14 million/year player rate. They could get a $25 million per year star free agent and one $3 million dollar vet. It is safe to say that a $25 million star player is a sure thing over a rookie who may or may not be a bust. But this is why the values are what they are.  This type of thinking is the exact thinking GMs are using when making these trades. They have the same/similar calculators to determine value.

[High5]

3 minutes ago, thecampster said:

Sure, let me explain that. What they did is they have a chart that equates value to stats.  Produce X amount of stats, worth Y value.  Then they subtract your contract from that production value to establish your positive or negative value. They took the average production of players at each draft slot and placed an expected value for that slot then subtracted the salary for the slot. In this case, they said slot 4 has a positive 8.1 million value (over the first 3 years of the contract). The initial value of the contract is 4.833 million for slot 4. A typical 4 pick plays at $4.833 million + (8.1/3 = 2.7) million = $7.533.  So in other words, they expect the 4th pick in the draft to produce his first year at the same rate as a $7.533 million/year vet. 

To put this in plain terms.  Yes they could keep the pick and Parsons and they would get ($7.533 + $2) or $9.533 million production for the next 2 years at a cost of $28.833 million per year. or they could sell the pick and parson for a 2nd rounder. Then take that $28.8 million and get 2 legitimate free agents who produce at an expected $14 million/year player rate. They could get a $25 million per year star free agent and one $3 million dollar vet. It is safe to say that a $25 million star player is a sure thing over a rookie who may or may not be a bust. But this is why the values are what they are.  This type of thinking is the exact thinking GMs are using when making these trades. They have the same/similar calculators to determine value.

I understand all of that. What I meant was, I don't think the value of that draft pick in their first two seasons is very important. You don't make the trade hoping Doncic or any other rookie can come close to outplaying Parson's negative value. You make the trade for all of the years after Parsons is off of the books. 

[thecampster]

Yes, but because rookies are only on the team 4 years before free agency...its a crap shoot.  If the rookie outplays his draft ranking, there will be a free agent market and unless you are one of the premiere destinations in the league, he'll be gone. If he underplays, it wasn't worth it.  Free agents are known commodities and more of a sure thing.

[JTB]

14 minutes ago, thecampster said:

Yes, but because rookies are only on the team 4 years before free agency...its a crap shoot.  If the rookie outplays his draft ranking, there will be a free agent market and unless you are one of the premiere destinations in the league, he'll be gone. If he underplays, it wasn't worth it.  Free agents are known commodities and more of a sure thing.

Aren’t they all restricted after that first 4 years? I believe so . 

Therefore when they first hit free agency as long as ressler isn’t a cheap ass we just resign him or match whatever deal AND since they are talking about being done with 1+1 contract deals soon I think it’s smart to take on parsons contract 

[thecampster]

1 minute ago, JTB said:

Aren’t they all restricted after that first 4 years? I believe so . 

Therefore when they first hit free agency as long as ressler isn’t a cheap ass we just resign him or match whatever deal AND since they are talking about being done with 1+1 contract deals soon I think it’s smart to take on parsons contract 

2+1+1 not 4+1. They are under contract for a max of 4 years.

All rookie contracts signed with first round picks have a term of two guaranteed years with two separate one-year team options for seasons three and four. If the team wants to exercise the first team option, it must do so during the period from the day following the end of the player’s first season through the immediately following October 31. If the team wants to exercise the second team option, it must do so during the period from the day following the end of the player’s second season through the immediately following October 31. (See Exhibit A for the Rookie Salary Scales through 2020-21.)

First Round Picks. A first round pick will be a Restricted Free Agent (that is, will be subject to a right of first refusal in favor of his prior team) following the expiration of his Rookie Scale Contract if the team exercises its third and fourth year option and makes a Qualifying Offer to the player.

Yes restricted, but a team can bid his rookie team out of the market which is what typically happens.

[NBASupes]

Great thread @thecampster

[bleachkit]

If we are going to take on bad money to get more draft picks, this is the year to do it. 

[AHF]

4 hours ago, thecampster said:

Then take that $28.8 million and get 2 legitimate free agents who produce at an expected $14 million/year player rate. 

That math works for me at the earliest not next year but the year after.  I don't think we have any intention of signing "legitimate" long term free agents this offseason which reduces the cost for us compared to a team trying to make the playoffs next season.

4 hours ago, thecampster said:

Yes restricted, but a team can bid his rookie team out of the market which is what typically happens.

Stars are the best long-term value and they are best found at the top of the draft so there is a special premium for potential value in the RFA years of a contract with high upside picks.

4 hours ago, thecampster said:

Free agents are known commodities and more of a sure thing.

Free agents still carry heavy risk profiles.  The best players don't become free agents in most cases until at least their 3rd contract.  That leaves you with a pool of higher risk, less desirable players.  Free agents are far from a "sure thing" as the contracts of Turner, Bazemore, Noah, Mozgov, Asik, and many many others including Mr. Parsons demonstrate.

I think this is an excellent thread but would be more willing to do a deal like this anyway given the time horizon before I am anticipating we will become serious free agent bidders (for me at the earliest the last year of Parson's deal).

[thecampster]

30 minutes ago, AHF said:

That math works for me at the earliest not next year but the year after.  I don't think we have any intention of signing "legitimate" long term free agents this offseason which reduces the cost for us compared to a team trying to make the playoffs next season.

Stars are the best long-term value and they are best found at the top of the draft so there is a special premium for potential value in the RFA years of a contract with high upside picks.

Free agents still carry heavy risk profiles.  The best players don't become free agents in most cases until at least their 3rd contract.  That leaves you with a pool of higher risk, less desirable players.  Free agents are far from a "sure thing" as the contracts of Turner, Bazemore, Noah, Mozgov, Asik, and many many others including Mr. Parsons demonstrate.

I think this is an excellent thread but would be more willing to do a deal like this anyway given the time horizon before I am anticipating we will become serious free agent bidders (for me at the earliest the last year of Parson's deal).

Well, when you look at Parsons' deal (for the Hawks cap), Parsons becomes a salary holder for the people coming off deals in 2 years (Prince, Bembry). In 2 years when his salary comes off the books, you just shift that salary (part of it) to Prince and Bembry if he ever shows out. So for us he actually makes sense but not for almost every other team.

[JayBirdHawk]

This just just shows we shouldn't be giving Memphis a ton of value to get the #4 pick not with that much money coming in.

I understand the premise, but now would be the time to do it since we are rebuilding and his money will be coming off the books the same time as Bazemore and Plumlee just in time for when Prince and Bembry, the 1st of the 'keepers' will be coming off their rookie contracts looking for their next contract.

[JTB]

4 hours ago, JayBirdHawk said:

This just just shows we shouldn't be giving Memphis a ton of value to get the #4 pick not with that much money coming in.

I understand the premise, but now would be the time to do it since we are rebuilding and his money will be coming off the books the same time as Bazemore and Plumlee just in time for when Prince and Bembry, the 1st of the 'keepers' will be coming off their rookie contracts looking for their next contract.

Ok but don’t we have an amesty or something like that, that we can use?

why not get Parsons ...use the amnesty on his God awful contract to take the amount down per year in what we would owe him that way if the rookies we select at 3 & 4 do turn into rising stars it won’t be as tough to sign them.

is that not possible?

[AHF]

9 minutes ago, JTB said:

Ok but don’t we have an amesty or something like that, that we can use?

why not get Parsons ...use the amnesty on his God awful contract to take the amount down per year in what we would owe him that way if the rookies we select at 3 & 4 do turn into rising stars it won’t be as tough to sign them.

is that not possible?

Amnesty doesn’t really exist anymore.  You would stretch the cap hit instead over a longer period of time which is the opposite of what we would want to do.  Take the hit now when we don’t expect to need the money and have it gone by the time we envision competing/contending.