Is the world ready for a Big Four in South Beach?
As ESPN.com's Brian Windhorst and Marc Stein reported, there's a movement within the Miami Heat organization to recreate the conditions of 2010 and stack the decks to ensure the flexibility to add another big name superstar to their ranks: this time, New York Knicks small forward Carmelo Anthony.
There are going to be a plethora of articles describing why Anthony's addition will either be the greatest free-agent addition of the modern era or an awful fit. But how can Miami even put itself in a position to acquire Anthony while keeping LeBron James, Chris Bosh and Dwyane Wade? Here's a quick primer:
The contracts in question
Technically, none of the four principals are free agents yet. Anthony, James, Bosh and Wade all have what are known as early termination options, or ETOs, which basically allow them to get out of their contracts prematurely (as opposed to the more common player option, which allows players to extend their contracts for an extra year).
Basically, they have to formally notify their respective teams and the league that they intend to terminate their contracts and become free agents this summer. For Anthony, the deadline for such action is June 23, eight days before the start of free agency. Here's what they'd all be giving up (courtesy of ShamSports.com):
If they all exercised their ETOs, but chose to sign new maximum allowable deals elsewhere (no Bird rights):
If they all exercised their ETOs, but chose to resign with their own teams for maximum allowable (full Bird rights):
As you can see, they'd all be giving up considerable sums of money of varying magnitudes. In Anthony's case, he's potentially passing up on the ability to sign for $129 million in guaranteed salary in New York.
Meanwhile, Wade (who's had his share of injury concerns over the last few seasons) would be passing up close to $42 million he's already guaranteed by not exercising his ETO (or subsequent PO), a sum he's not likely to approach on the open market over the next two years.
The "little guys"
You can make a compelling argument that the Big Four stand to reap countless millions by aligning with one another, making the decision to forgo the massive amounts of salary listed above academic. However, for the Heat to maximize their cap flexibility, they'll need some concessions from smaller time players who don't have the type of external revenue streams that the stars have, namely:
• Udonis Haslem, who has a player option worth $4.6 million for 2014-15.
• Chris Andersen, who has a player option worth $1.4 million for 2014-15 (the equivalent of veteran's minimum).
While Andersen almost certainly will be able to command a veteran's minimum deal (if not more) in free agency, Haslem likely will be opting out of the last "more than minimum" contract he'll ever make; at this rate, he'd need three seasons of veteran's minimum to make up for the one year of salary he'd be forgoing -- a tough pill to swallow if he was anywhere else other than Miami, playing for an organization with a reputation of rewarding loyalty.
Beyond those two contracts, the only other money on the books for 2014-15 will be Norris Cole's fourth and final guaranteed year at $2 million and Justin Hamilton's nonguaranteed $816,482 (which almost certainly will be waived).
Rising cap, cap holds and cap space
The salary cap this year was $58.679 million, but the early expectation is that it will jump to around $63.2 million for 2014-15. Depending on the results of the fiscal year-end basketball related income (BRI) audit, that number might be even higher. But for the purposes of this exercise, let's assume it'll be at $63.2 million.
That means, assuming all parties opt out of their deals (and poor Mr. Hamilton is waived), the Heat are looking at only Cole's money on the books, which means they'll have $61 million in cap room, right?
Wrong.
The NBA, in its infinite wisdom, created the concept of a "cap hold" to prevent a certain type of cap machination to circumvent the spirit of the rules. Basically, the cap hold is a placeholder for players a team expects to sign in the future. For Miami, this includes:
• the projected salary of their first-round pick (26th overall, slotted at $958,100)
• minimum salary of empty roster spots (slotted at $507,336 per spot)
• the cap holds for all impending free agents who haven't been renounced or signed a new deal (either in Miami or elsewhere)
The third point is the big one: In essence, it's not enough for Miami to have all those expiring deals; they have to renounce their free agents (thus losing their Bird rights), sign them to new deals or hope they sign somewhere new in order to remove the cap holds. How big are those cap holds, you ask?
James:$20.0 million
Bosh: $20.0 million
Wade: $19.6 million
Haslem: $8.2 million
Mario Chalmers: $7.6 million
Shane Battier: $6.2 million
Etcetera, etcetera.
As you can see, those placeholders quickly swallow up the projected cap space. Renouncing players like Battier and Chalmers is a relatively simple affair: There's probably no need for Bird rights to bring them back (i.e. you can re-sign them cheaply). However, for the big fish, renouncing means you can no longer offer them five-year deals (which is good news for the Heat in the case of Wade, but bad news in the case of LeBron).
So, Miami either needs to have a plan in place for the Big Three to opt out and accept markedly lower deals automatically (to preserve Bird rights), or the Heat can renounce them, opening up all the cap space to wheel and deal without Bird rights.
If the Heat choose the latter course of action, they are looking at roughly $8.1 million in cap holds (Cole's salary, projected salary of the 26th pick and eight minimum roster charges), giving them about $55.1 million in cap space to divvy up.
Who gets what?
Even Steven
Splitting the pie up evenly four ways gives each member of this new Big Four a starting salary of $13.8 million -- a first-year, $7 million price cut for the three "Heatles," and an almost $10 million cut for Anthony.
Overall, you'd be asking Anthony to forgo more than half his total possible earnings, and for the Big Three to forgo almost half. Even when comparing non-Bird right deals they could get, they are passing up a significant amount of cash. Moreover, they'd only be armed with the room midlevel exception ($2.7 million in 2014-15) and minimum deals to field the rest of their roster. A further cut (say, accepting deals starting at $12 million) would give them $7 million AND the room midlevel to go free-agent shopping or trade for help (namely at point guard and center), but that would be an even bigger ask of four superstars.
Welcome to Miami
A different strategy would be to employ the tactic the Heat used in 2010: Give the new guy more money (especially since he'd be the one giving up the most money):
This is a more equitable way of sharing the "loss" of potential income, while still giving them the $7 million in excess cap space to hunt for talent.
Other scenarios
The Heat could elect to give Wade more (as a reward for taking the biggest cut last time around) and structure his deal to descend in future years; they could pay them all flat rates with shorter deals (giving them an opportunity to win titles, then disperse); or they could pay James the lion's share (as the unquestioned best player on the team).
In any circumstance, two things are certain:
• The Big Four will have to take sizable cuts in order to play together and still have enough left over to bolster the roster.
• Haslem will have to be OK with forgoing a big check he'll probably never recoup in exchange for a minimum deal and sporadic minutes.
Those are big requests to make, even for a master salesman like Pat Riley. But it might be enough to give the Heat franchise a reboot the likes of which we've never seen in the NBA.