Hours before the Atlanta Hawks begin the 2016-17 regular season, they finalized a four-year extension with new starting point guard Dennis Schroder worth $62 million guaranteed, according to ESPN's Zach Lowe and Marc Stein.
Did the Hawks overpay or make a good deal?
What does it tell us about other potential NBA free agents, such as Kelly Olynyk, Steven Adams and Rudy Gobert?
Let's take a look.
Valuing Schroder's production
Based on my three-year wins above replacement player (WARP) projections, based on the results of my SCHOENE projection system and projected rating in ESPN's real plus-minus (RPM), Schroder's extension should be an excellent value for Atlanta.
Schroder is projected for 4.6 WARP in 2017-18, the first season of the extension, and 5.6 in 2018-19. Based on forecasts for the NBA salary cap, that production is worth an estimated $21.6 million in 2017-18 and $26.2 million the following year. His total projected value over that span, $47.8 million, is more than 50 percent above the $31 million he'll make those two years in base salary. (He'll be able to earn an additional $2 million per season in incentives.)
So why would Schroder extend now? As valuable as he might have been next summer as a restricted free agent, Schroder would have been gambling on his performance this season. If he struggled or suffered an injury, Schroder risked being buried in a deep class of point guards.
As many as eight starting point guards could be free agents next summer, including All-Stars Stephen Curry, Kyle Lowry and Chris Paul, and next year's draft is also unusually strong at point guard. So even though it appears the new NBA collective bargaining agreement will be more favorable to restricted free agents, Schroder wasn't sure to do better on the open market.
Given that context, it's hard to disagree with Schroder -- who has made just $7.5 million on his rookie contract, including this season -- opting for the security of a deal that pays him like an unproven player with the potential to be an average starter. Including incentives, his contract could be identical to the one the Hawks gave starting shooting guard Kent Bazemore this summer, as well as ones signed by Orlando Magic center Bismack Biyombo and Portland Trail Blazers wing Evan Turner.
Maintaining cap flexibility
With Schroder's extension, Atlanta now has $68 million in salary for 2017-18 (next season) committed to starters Schroder, Bazemore and Dwight Howard and reserves DeAndre Bembry, Malcolm Delaney, Taurean Prince and Edy Tavares (whose $1.0 million salary is non-guaranteed).
That means if All-Star forward Paul Millsap opts for free agency over his $21.5 million 2017-18 salary -- seemingly a lock so long as Millsap stays healthy -- the Hawks could clear somewhere in the neighborhood of $35 million in cap space if they renounce their remaining free agents (starting wing Kyle Korver and a handful of veteran reserves). That should be more than enough to sign a max free agent.
The Hawks could have created even more space by waiting on a new deal for Schroder for next summer, but the new CBA may reduce the incentive to wait. In his piece naming Schroder one of this season's most intriguing players to watch, Lowe noted that cap holds for free agents like Schroder coming off their rookie contracts may increase under the new rules.
If that plays out as Lowe suggests, Schroder's cap hold next summer as a restricted free agent would have been $8.1 million, meaning Atlanta sacrificed between $7.4 and $9.4 million in cap space to extend Schroder now, depending on whether the incentives in his contract are considered "likely" to be achieved or not.
Should the Hawks end up re-signing Millsap next summer, they likely won't have cap space until the summer of 2019, when Howard's $23.8 million salary comes off the books.
More extensions to come?
With five days left until the Oct. 31 deadline to extend rookie contracts, just three players have signed extensions: Schroder, Giannis Antetokounmpo and C.J. McCollum. While Antetokounmpo and McCollum were easy to value at (McCollum) or near (Antetokounmpo) the maximum salary, Schroder's deal could help set the market for other potential extensions.
Schroder's extension could serve as a comparison point for other 2013 draft picks who have shown promise but have yet to establish themselves as quality starters, like No. 3 pick Otto Porter, No. 13 pick Kelly Olynyk and No. 21 pick Gorgui Dieng. No. 22 pick Mason Plumlee also could be in a similar salary range.
A handful of players -- No. 2 pick Victor Oladipo, No. 8 pick Kentavious Caldwell-Pope, No. 12 pick Steven Adams and No. 27 pick Rudy Gobert -- likely won't settle for the amount Schroder got. But the way the CBA may change, cap holds and restricted free agency could give their teams more incentive to extend those players between now and Oct. 31.