Carmelo Anthony Leaving the New York Knicks…A Potential Blessing In Disguise

So rumor has it that if the New York Knicks fail to progress beyond the second round of the playoffs, then Carmelo Anthony will opt out of his current deal, to go sign with the Los Angeles Lakers. For those Knicks fans, who fear the potential loss of Anthony, you might want to read this piece by Tom Ziller. I want to look at this differently. How much would losing Anthony actually hurt the Knicks’ going forward? Could losing Anthony end up as a beneficial outcome for New York?

Let us look at the scenario where Carmelo Anthony opts out of his current deal and resigns for a full maximum level contract. Assume that the salary cap will rise to $62.1 million as Larry Coon tweeted. While Anthony will have finished his 11th season in the NBA, his service time will not play a role in the contract’s first year salary. When it comes to maximum contracts signed by free agents, the first-year salary is 105% of the previous year’s salary, at least. Unless the projected basketball related income (BRI) skyrockets, 105% of Anthony’ previous salary will exceed 35% of the salary cap [1].

The NBA projects that the salary cap will increase $3.6 million going into 2014-15. Let us take a conservative route on the salary cap ramifications of Carmelo Anthony’s contract, by assuming it will continue to rise at $3.6 million a season [2]. From Sham Sports, the Knicks will pay a little less than $21.5 million dollars to their superstar in 2013-14. If he opts out and resigns, his contract will look something like this:

Year Age Salary ($ Millions) Raises
2014-15 30 22.56048585 105% of 2013-14 salary
2015-16 31 24.25252229 107.5% of 2014-15 salary
2016-17 32 25.94455873 115% of 2014-15 salary
2017-18 33 27.63659517 122.5% of 2014-15 salary
2018-19 34 29.32863161 130% of 2014-15 salary

The Knicks could sign Anthony to a 3-year extension, which would require Carmelo to opt in for the 2014-2015 season, and would look like this [3]:

Year Age Salary ($ Millions) Raises
2014-15 30 23.742225 100% of 2014-15 salary
2015-16 31 24.929336 105% of 2014-15 salary
2016-17 32 26.799036 107.5% of 2015-16 salary
2017-18 33 28.668737 115% of 2015-16 salary

To cover all of our bases, let us say that Anthony becomes a free agent after 2014-2015 and signs a five-year maximum level contract. Observe the albatross:

Year Age Salary ($ Millions) Raises
2014-15 30 23.742225 100% of 2014-15 salary
2015-16 31 24.929336 105% of 2014-15 salary
2016-17 32 26.799036 107.5% of 2015-16 salary
2017-18 33 28.668737 115% of 2015-16 salary
2018-19 34 30.538437 122.5% of 2015-16 salary
2019-20 35 32.408137 130% of 2015-16 salary

Now here we have how much of the salary cap Carmelo Anthony would take up in each of the three scenarios:


Now consider this. In the summer of 2015, the Knicks only have J.R. Smith ($6.2 million), Raymond Felton (Player Option for $3.9 million), Iman Shumpert (qualifying offer of $3.7 million but a cap hold of $6.5 million [4]), Pablo Prigioni (non-guaranteed) and Tim Hardaway Jr. ($1.3 million team option) on the roster. The may have one or two 2nd rounders from the 2014 Draft and a 1st round pick from the 2015 Draft on the roster. The Knicks may have an opportunity to trade Felton (if he picks up his option) and J.R. Smith if they need to carve out more space and/or acquire cheaper, younger talent by acquiring draft picks. Some potential free agents for 2015 include names like Rajon Rondo, Kevin Love (if he declines his player option), Marc Gasol, and Roy Hibbert (if he declines his player option). In 2016, Mike Conley Jr. could be on the market as well [5]. Both years will also have their crops of restricted free agents coming off rookie deals (2015 = Class of 2011 and 2016 = Class of 2012). The Knicks could exploit teams who lack flexibility due to the cap or luxury tax [6] and sign a young talent.

Specifically, let us look at the most likely big name free agents in 2015 and 2016: Rondo, Gasol, Love, Conley.  All four players will be in the 7-9 years in the NBA tier of maximum contracts: Rondo = 9th, Gasol = 7th, Love = 7th/8th, Conley = 9th. Potential max deals for these players would entitle them to 30% of the salary cap (as 105% of their final year salaries will wind up less than 30% of the cap…especially using this cap projection). Also, if you have already read footnote 1, you know that the starting salary of any one of those contracts would actually take up less than 30% of the cap. A rough estimation would put their starting salaries at around $18 million. While Anthony would receive 7.5% raises, these players would only receive 4.5% raises, helping to avoid the luxury tax and maintain flexibility. All these players are younger than Anthony (5/29/84) as well: Rondo (2/22/86), Gasol (1/29/85), Love (9/7/88), Conley (10/11/87). If you want to further the argument, you could say that Rondo (shooting ability) and Gasol (age) might not even command maximum-level contracts on the free market [7].

If Anthony resigned with the Knicks, and they had just Shumpert, Hardaway, Smith, Felton, a 1st rounder from 2015, and a 2nd rounder from 2014, the Knicks would likely have room for one max contract. Maybe, if they manage their cap to perfection could they resign Anthony and have room for two max players [8].

If the Knicks let Anthony go, they could go after one max player in 2015, another in 2016, and have plenty of cap space to either make trades, sign quality roles players, etc., depending on the nature of Shumpert’s contract extension.

If the Knicks deal Felton and Smith for either picks or in salary dumps, they could sign three max players in 2015. Given my projection of a $65.7 million salary cap, Shumpert ($6.5 million), Hardaway ($1.3 million), a 1st rounder ($1 million), with 12 rookie minimum salary cap holds (let us say 500K a piece for a total of $6 million) gives the Knicks $40.9 million in cap space. The Knicks could have a maximum of $57.9 million.

They can approach this number by trading J.R. Smith and, if need be, Raymond Felton, buying second round picks for cash, dealing that first round pick for 2nd rounders, and dealing any 2014 2nd round picks for 2015 second round picks [9]. If these moves yield six second round picks for the Knicks, then the Knicks would have $54.4 million in cap space. To sign Rondo, Love, and Gasol to max contracts, that would suffice.

Obviously, the Knicks would be pushing all their chips to the center of the table going after three max free agents in 2015. The Knicks would have a high probability of success in an effort to resign Carmelo Anthony and possibly add another maximum contract, which would keep the Knicks relevant in the playoffs. And I love Carmelo as a player. I think you can win a title with him as your best player, just like the Dallas Mavericks won in 2011 with Dirk Nowitzki. However, with this new CBA, his age, and his salary going forward, it seems improbable, if not impossible, to build that type of team around him [10]. So, if the Knicks want to contend for a title, sooner rather than later, it may be best to let Carmelo Anthony go, sooner rather than later.

1) From Larry Coon’s Salary Cap FAQ on how maximum salaries are calculated (Section 16): “They use a different cap calculation to determine the maximum salaries, which is based on 42.14% of projected BRI rather than 44.74%. In 2005 the sides negotiated a different formula for setting the salary cap but not maximum salaries, so the two became decoupled, and this continued in the 2011 agreement. For this reason the maximum salaries are not actually 25%, 30% or 35% of the cap, and instead are a slightly lower amount. For example, even though the salary cap for 2011-12 is $58.044 million and 25% of this amount is $14.511 million, the 0-6 year maximum salary is actually $12,922,194. In addition, for 2012-13 a 5.8% increase in maximum salaries was agreed to, even though the salary cap stayed the same as 2011-12.” If you want to be an NBA fan, this is a must read.

2) This extrapolation feels wildly optimistic for the Knicks. But who knows? A lot of this will hinge on the new TV deal that will start during the 2016-17 season. The current deal nets the NBA $930 million dollars. With sports programming becoming the most valuable commodity on television (the one thing people feel they must watch live, gives advertisers a reliable source of consumers, etc.), the NBA could potentially make a killing. Also, there is a chance for increased competition from Fox and NBC (who are starting/rebranding their own dedicated sports channels, Fox Sports 1 and NBC Sports Networks) which will only further drive up the price. Personally, I hope the NBA goes back to where it belongs.

3) From Salary Cap FAQ on extensions of veteran contracts (Section 58): Veteran extensions are limited to four seasons, including the seasons remaining on the current contract. Even if the extension is signed in late June, the current season counts as one full season toward the total.

4) Cap holds for free agent cap holds for Larry Bird free agents coming off rookie scale contracts are 200% (above league average salary) or 250% (below league average salary) of the player’s previous salary.

5) Ok…bear with me…if LeBron James declines his Early Termination Option for the 2014-15 season, then he can become a free agent in 2015 (by declining his 2015-16 player option) or 2016. This is how I imagine a conversation between LeBron James and me would go:

Me: Hey, LeBron.

LeBron: (Who the hell is this guy?) Hi?

Me: Great Finals, LeBron. Came close to losing that one. I’m surprised that you guys pulled it off especially when you guys rely on aging role players like Shane Battier and Mike Miller. And your second-in-command looks nowhere like the player he once was.

LeBron: Yeah, it was tough and we won it as a team. Hey I gotta…

Me: So what are the chances of a player like you and a team like the Knicks ending up together?

LeBron: It’s difficult to say, I mean the Knicks haven’t shown much ability in managing the salary cap and I have this thing I have to…

Me: Hit me with it! Just give it to me straight! I went through all of 2008-2010 hoping that you would sign with the Knicks. The least you could do is level with me this time. What are our chances?

LeBron: Not good. (He just keeps talking)

Me: You mean not good, like Andres Biedrins making a making a free throw?

LeBron: More like John Mellencamp winning an Oscar.

Me: So you’re telling me there’s a chance…YES! (Runs off to place a bet on LeBron to the Knicks)

6) What a refreshing change of pace that would be!

7) I would still give these two max deals (barring some major injury). If we have learned anything about skills in the NBA, it is that you can go from terrible shooter to competent or even very good shooter (see: Jason Kidd). When it comes to Rondo, I think he can become a competent jump shooter so that it is no longer a liability. With Gasol, his intelligence, passing, size, footwork, etc. (the skills that make him the best two-way center in the NBA) will remain as he ages. As long as he stays in shape, he should have a fantastic latter half to his career. If you can get these players for less than the max when they are on the market, it is a steal.

8) The Knicks would have to deal Smith and Felton (if he did not opt out) and acquire a gaggle of picks (preferably 2nd round picks to increase cap space). And even then, one would likely have to be done through a sign-and-trade.

9) Miami exploited this loophole to sign James, Wade, and Bosh. A vacant roster spot carries with in a cap hold equal to the rookie minimum salary. If that vacant roster spot is filled by an unsigned second round pick, the cap hold is 0.

10) I still do not understand why the Knicks did not amnesty Stoudemire instead of Billups in order to go after Chandler. You could say the Knicks would not want to pay Stoudemire the money owed to him; however, they would not pay it all at once; they would not pay all of it, as the team he signed with would have taken some of the burden; James Dolan is not exactly foreign to the idea of spending a lot of money for players who did not see the court for the Knicks.

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