clock menu more-arrow no yes

Filed under:

Patience may pay off for Greg Monroe

New, comments

The Sports Business Journal reports that the league will have a new TV rights deal in place before next season, and that helps explain why Greg Monroe was willing to forgo millions of dollars in guaranteed money.

Kevin Jairaj-USA TODAY Sports

Greg Monroe is either a genius or an idiot. A player sacrificing money for happiness or a selfish malcontent. An overrated bum who should ride the bench or gifted young player with supreme confidence in himself.

All of that because he decided to do something slightly unprecedented -- turn down in excess of $50 million guaranteed on a new multi-year contract and instead sign a one-year, $5.5 million deal and explore unrestricted free agency next season.

So what's the right diagnosis of this decision? Well, it's hard to say. On this very site we've argued that it's president Stan Van Gundy's first big blunder, that Monroe might re-sign next year and according to a poll, 75 percent would start Josh Smith at power forward ahead of Monroe.

New TV Deal a Game Changer

A little clarity was offered, however, with the news from Sports Business Journal that the league was nearing terms on a new TV contract that would be put in place before the 2015-16 season that would see the deal more than double from just under $1 billion to more than $2 billion annually.

We've covered this ground before, but long story short a doubling of the TV deal would mean a huge rise in the salary cap, which is based on revenues. Dan Feldman at Pro Basketball Talk and Piston Powered does the quick back-of-the-envelope math and determines that this would mean a salary cap jump in the range of $16 million.

That would take the cap at $79 million and might be conservative as it doesn't account for expanded revenue sharing from local TV deals, licensing, merchandise, etc.

A Player's Market

To put it mildly, the NBA is flush with cash. And Monroe is poised to enter a seller's (read: player's) market. Half the league was already projected to have significant salary cap space next offseason and if you shocked the system with an additional $16 million per team influx of available cash, teams would have more money than players to spend it on. And because the new CBA includes shorter contracts their will be less concern about being hamstrung with bad contracts for extended periods.

In terms of Monroe, let's examine what a new salary cap landscape would mean for his free agency. First, we have to consider what he turned down. There are no confirmed offers but there was an indication that the Pistons offered him roughly $12 million per season on a long-term deal and a later offer that promised to make him more than Josh Smith's $13.5 million number.

Monroe haters already considered it an overpayment, thinking the defensively challenged big man was worth nothing more than a starting salary of, say, $10 million. The Monroe fans looked at the market, considered how rare a young, offensively gifted big man is and had no qualms with needing to pay Monroe the post-rookie max which would run about $14.7 million in year one. Monroe, reportedly, was seeking a maximum contract and also was ready to turn one down from Detroit.

By taking the qualifying offer Monroe was sacrificing somewhere around $7 to $9 million. So regardless of Monroe's actual motives, any new deal that would allow him to recoup his $9 million and allow him to be happy would be awfully hard to argue with.

Monroe Contract Offers

Time to dive into the numbers. Lets assume the maximum annual raises of 7.5 percent per year on three offers that roughly reflect where the different camps saw Monroe's value.

Salary
*in millions

Low Middle High
Year 1 $10.00 $12.00 $14.75
Year 2 $10.75 $12.90 $15.86
Year 3 $11.50 $13.80 $16.97
Year 4 $12.25 $14.70 $18.07
Year 5 $13.00 $15.60 $19.18
Total $57.50 $69.00 $84.83

You can see that even though we're talking about small difference in initial salary, by the end of any deal we're talking about real money here.

Percentage of Cap

So what if we factor these numbers into world with that new TV contract? Well, let's compare the percent of the salary cap Monroe would take up in year 1 of these deals.

Year 1 Old Cap New Cap
$10.00 15.87% 12.65%
$12.00 19.05% 15.19%
$14.75 23.41% $18.67%

It now becomes easier to see the reason that Monroe is willing to take the gamble on the qualifying offer. Putting aside a career-threatening injury there is little downside to waiting a year and going into the market as an unrestricted free agent.

From a cap perspective, the "reasonable' middle-ground offer from the Pistons represents a bigger hit on the cap than what a maximum contract would represent in a bigger salary cap environment next year.

Monroe's agent David Falk had reportedly lined up a maximum contract for Monroe, but raises are limited when going to a new team whether outright or through sign-and-trade to 4.5 percent and can be for four years on a new team compared to five years on an incumbent team. So let's take another look at a Pistons max deal, and a max deal with another team. Then repeat it assuming he could get the same thing again next season.

Possible Max Deals

Salary
* in millions
Pistons Max
2014-15
New Team Max
2014-15
Pistons Max
2015-16
New Team Max
2015-16
Year 1 $14.75 $14.75 $18.49 $18.49
Year 2 $15.86 $15.41 $19.88 $19.33
Year 3 $16.97 $16.07 $21.27 $20.16
Year 4 $18.07 $16.74 $22.66 $20.99
Year 5 $19.18 -- $24.04 --
4-Year Total $65.65 $62.97 $82.30 $78.97
5-Year Total $84.83 -- $106.34 --

As you can see the difference in four-year values range at around $20 million, plus Monroe is already banking his $5.5 million this year so even if he isn't considered a "max" player next year he could recoup that $7 to $9 million loss rather easily.

And even if he is paid like a $12 million player next year he will be given what is equivalent to what a maximum-contract player would have been paid this year, which is a roughly $12 million difference. And he also gets to choose his own destination and figure out where he wants to spend the prime of his career.

So, yes, there is risk. There is risk of injury and a risk that the NBA will do something to prevent a huge one-time influx of cash from flooding a single free-agent market. But the downside is minimal when considering how big the upside is. So maybe Monroe wants to leave as soon as possible, or maybe he just knows that the financial risk is minimal and having the most flexibility next year is to his advantage both professionally and financially.

Will He Stay or Will He Go?

When Vincent Goodwill of the Detroit News originally wrote about Monroe being OK with taking the qualifying offer, he included an interesting quote from one of his sources:

Monroe reportedly doesn't have anything against the Pistons or new coach/president Stan Van Gundy. In fact, the source said, Monroe "likes Van Gundy and likes what he says," but added that Monroe "needs proof (of Van Gundy's vision)."

This doesn't necessarily jibe with the recent reports about Monroe not wanting to be on the team and using the qualifying offer to get out as soon as possible.

So what would "proof of Van Gundy's vision" look like? If we're speculating lets just go full-on, best-case scenario.

Lets say reports are correct and the Pistons were willing to match a maximum offer sheet for Monroe. Lets say that the Pistons under Stan Van Gundy are much more effective on the floor and start winning games. Lets say that the team figures out how to utilize both Monroe and Andre Drummond and maybe even Josh Smith to a high capacity. Lets say that Detroit wins 45-50 games and makes some noise in the playoffs. And that in the end Monroe is happy in Detroit and Detroit is happy with Monroe and is again willing to offer him a max deal.

Detroit can still offer Monroe the most money by far. They can offer the most years and higher annual raises. That max deal he turned down would have been worth $84.83 million and next year could be worth $106.34 million. That's an extra $21.51 million. Not bad for a player taking the unprecedented step of sacrificing $7 to 9 million.

Does this mean he's coming back? I wouldn't bet on it. Four years of losing, dysfunction and mismanagement is a lot to overcome. But from Monroe's perspective, perhaps this was an easier decision than people are making it out to be.