A Look at High Stakes Restricted Free Agency
Restricted, unrestricted, qualifying offers, matching, what does it all actually mean? Is there something bigger in play?
There had been discussion around the Kings community for some time about the possibly acquisition of the Knick’s Nate Robinson, discussion that most remember began before the trade deadline last February. The appeal of Robinson is obvious: he’s a brass scorer who never backs down and a former dunk champion who talks trash and catches fire despite his short stature. Robinson is the type of crowd igniter that Arco lives for, and the thought of him becoming Bobby Jackson with a windmill probably sounds pretty enticing to Kings fans. Yet the Kings have passed so far and have no indication of signing him. Without divulging into that decision too much (done well by Zach a few days ago), his contractual situation brings to light another trend that has defined this off season: restricted free agency. This off-season has seen some interesting plays by teams both retaining RFAs and making moves for them, ranging from huge pay raises (Marin Gortat staying in Orlando), over paying for someone else’s players (Jarrett Jack moving to the Raptors) and ongoing sagas (the Knicks Robinson, and David Lee). Whereas almost all the unrestricted free agents were picked up in the beginning of free agency, almost all the restricted ones sat by quite phones, and some still do. Bucks PG Ramon Sessions had a breakout year in 2008-09 and hasn’t even entered his prime yet, isn’t that the type of player worth spending’ long-term money on? Is it more drama with team’s finances? How can a promising player like Lee whose proven to be productive remain unsigned while guys like Rasheed Wallace and Brandon Bass are getting their name called by championship contenders and the Kings are signing undersized, injury ridden former college stars?
Free agency is pretty easy to understand, but a player with “restricted” status has a little wrinkle that complicates his situation. Restricted free agency is granted to players following the fourth year of their rookie contract and free agents who have been in the league three of fewer seasons. The one caveat of having your free agent restricted though is you must offer him a “qualifying offer” i.e. a one year contract at 125% of the previous one. Rookie contracts are based on draft position, which explains why some qualifying offers are so low, like David Lee’s. If a team chooses not to extend the qualifying offer that player becomes an unrestricted free agent. This happened with the Buck’s a Charlie Villenueva, allowing him to go to Detroit without any interference from Milwaukee, something Joe Dumars thought was a good thing.
Once a team extends this qualifying offer they have the right to “match” any offer given to the RFA over the course of free agency by other teams. If a RFA signs with a new team, its not a contract initially but called a “offer sheet”, and the original team has 7 days to agree to pay the player the contract the other team stipulated and he has subsequently agreed to. There is no back and forth negotiation between the teams, so if a player signs an offer sheet and it’s matched, that is his new contract. Teams don’t need the RFA’s permission to match, and this can lead to tough situations, as with Marcin Gortat who probably would prefer to start for Dallas than backup Dwight Howard in Orlando.
Because of this system restricted free agency becomes sort of a poker game, because teams have limited opportunities to obtain these players, most of whom are very young. Players can sign extensions before becoming restricted free agents (like LeBron and D-Wade) or teams can offer restricted free agents maximum qualifying offers (a max contract) that essentially guarantees they keep their player, which is what Brandon Roy wants Portland to do before next off-season. Strategy is crucial to this process, because teams are incurring risk when offering a contract or matching an offer sheet, due to the nature of RFA market value. It’s difficult to know what offer a team would match, and what offer they wouldn’t. This is complicated by the fact that teams looking to steal RFAs have effectively one chance to do it. Thus deciphering the right amount for an RFA is difficult, and two fold. Underpay, and you’ve just opened the door for the original team to retain their player at a discount price while also ruining your chance at getting a player you wanted. Overpay, and you’ve essentially outbid yourself out of fear for being matched. The market value of a player is what someone is willing to pay them, not necessarily what they sign for. Just because A-Rod is getting paid $275 million doesn’t mean that’s his market value, it just means it’s what the Yankee’s value him at. If a couple other teams offered him that same contract, it is his market value. This is what makes restricted free agency so important for original teams, they already have the player under contract and if they match on offer they can assume they have a built in market evaluation of the player’s worth. This doesn’t mean they have to sign him, but they’ve effectively just seen the river of the RFA poker hand, it’s then their choice if they’re in or not.
Bringing baseball into the discussion is interesting because a similar strategic situation unfolds with the posting system for international players. Red Sox’s fans will remember (now with some pain) their braintrust paying $51.11 million just for the exclusive right to negotiate with Daisuke Matsuzaka. We will never know what teams were willing to bid for the Japanese star, but its safe to assume that the Red Sox were bidding against themselves, especially in regards to the extra $1.11 million. Although their strategy is evident and they undoubtedly knew what they were doing, auctions do this to prices for scarce resources. In this case Dice-K was scare, and an auction for his value inflated the price. In essence restricted free agency can do the same thing. Team’s effectively bidding against themselves in auction-like situations like this is a constant issue in sports labor negotiations, usually inflating the value for players and promoting lavish spending (examples are A-Rod’s infamous contract with the Rangers and maybe the Kings extensions of Beno and Cisco). If teams are submitting offers to players in hopes of outbidding the RFA’s original team, and this offer is matched, bidding has still occurred and the market value has been raised. This contract is viewed by other players, and affects their decisions with regards to their own contract. Last year Ben Gordon chose to take a qualifying offer because he felt he should have been paid like the other top RFAs of his class. Did this decision pay off?
Restricted free agency is a great evaluation of a team’s decision making, and exposes their player evaluation. Just because the Pacers wouldn’t match Jack’s contract doesn’t mean that he can’t justify it for the Raptors. Kings fans will remember Petrie stealing John Salmons away from the 76ers for a very reasonable salary, and considering his production for us and his role in our trade, it seems that was a wise RFA move for the Kings. Traditionally teams fear losing out on RFAs, and so more times than not retain them to save face and protect themselves. Sure, its nice for the Magic to have Gortat as a backup center, but some would argue that matching Dallas’ offer was as much about safeguarding a potential asset from other teams. Gortat has become a very expensive insurance policy, and in signing him to this contract the Magic have raised the contractual expectations of backup centers all over the NBA. Dallas and Orlando have changed the market. Was it worth doing this and signing Brandon Bass instead of retaining Hedo?
Most GMs are constantly worried about their jobs and rightfully so. One could sight many examples of decision making aimed at short term stability and marginal success to protect their position. Matching a team’s offer gives a GM a couple outs, to continue our poker analogy, because there is a precedent for the contract, and it ensures that he isn’t exploited by another team. But this kind of behavior raises the price of players. In this off season most teams have refused to do this, and the risk of signing a player and losing him scares teams off. An offer sheet counts against a team’s cap for a week, effectively halting their signing of other free agents. Teams aren’t wiling to play in this risky poker match with small stacks and a lot on the line.
Another huge reason that teams aren’t going after RFAs is because outside of a qualifying offer they must be signed to a multi year deal. The Kings are being smart in not tying up their 2010 cap space for a player like Robinson or even Lee. Sure it would be nice to grab one of them, or even someone like Marvin Williams, but it would also mean sacrificing next summer’s options. Additionally if they let RFAs sign qualifying offers, they will become free agents next year anyways. It’s never reassuring to fans for their team to have the potential to make moves to get better and not do them. The Kings have demonstrated throughout this off season, that it’s not about making a jump to a lower draft pick, it’s about creating a foundation to sustain success. Their restraint to not jump and try to simply save face and drum up some local support shows that the team has a plan and they are sticking too it. Would I have enjoyed little Nate dunking in his green jersey next season? Absolutely. But not at the cost of delaying our next trip to the playoffs. Over the next year almost every team will be preparing for this free agent bonanza (amidst economic hardship), and its going to give teams like the Kings many options, because these resources won’t be as scarce as before. Sure, it would be ideal to build around LeBron, but there are a bunch of guys that I would love to add to our current mix. The Kings will have the opportunity to go out and make a splash next year. The hope all Kings fans have is that they will bring their chips to the table.