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November 2, 2012
Transaction Analysis
Evaluating Extensions

by Kevin Pelton

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Besides being opening night for most teams across the NBA, Wednesday was also the deadline for teams to extend players entering the fourth year of their rookie contracts. With a couple of notable exceptions, that meant the class of players drafted in 2009 was up for extensions.

Dating back to 2003, there has been a consistent overall relationship between player performance during their first three NBA seasons and salary in the first year of the extension. While this varies from player to player, of course, each two WARP over the first three years is worth about $1 million in first-year extension salary above a fixed $2 million starting point. Here's what that formula says about the 2009 first round, as well as the eligible 2008 pick who did sign an extension.

Pk    Player              WARP    Pro    Act    Details
-------------------------------------------------------
 1    Blake Griffin       25.6   15.1   16.5    5/95
 2    Hasheem Thabeet      0.4     -    option declined    
 3    James Harden        21.3   13.0   13.9    5/80
 4    Tyreke Evans         9.8    7.4       
 5    Ricky Rubio          2.9     -    ineligible    
 6    Jonny Flynn         -2.3     -    option declined    
 7    Stephen Curry       21.6   13.2    9.9    4/44
 8    Jordan Hill          2.0     -    option declined    
 9    DeMar DeRozan       -7.9   -1.2    8.5    4/38
10    Brandon Jennings    20.7   12.7       

Pk    Player              WARP    Pro    Act    Details
-------------------------------------------------------
11    Terrence Williams   -1.4     -    waived    
12    Gerald Henderson    -2.6    1.4       
13    Tyler Hansbrough*     -      -       
14    Earl Clark          -3.5     -    option declined    
15    Austin Daye          1.1    3.2       
16    James Johnson        3.4    4.3       
17    Jrue Holiday        11.2    8.1    9.2    4/41
18    Ty Lawson           17.8   11.3   10.8    4/48
19    Jeff Teague          6.0    5.6       
20    Eric Maynor          0.7    3.0       

Pk    Player              WARP    Pro    Act    Details
-------------------------------------------------------
21    Darren Collison      8.0    6.6       
22    Victor Claver         -      -    ineligible    
23    Omri Casspi          3.1    4.1       
24    Byron Mullens       -1.7    1.8       
25    Rodrigue Beaubois    4.8    5.0       
26    Taj Gibson           7.8    6.5    7.2    4/32
27    DeMarre Carroll     -1.8     -    option declined    
28    Wayne Ellington     -5.1    0.2       
29    Toney Douglas        6.5    5.8       
30    Christian Eyenga    -1.5     -    waived    
 -    Serge Ibaka         19.1   11.9   11.1    4/49.4

*Hansbrough not listed as a member of the Pacers

For five of the eight players who signed extensions, the formula pegs their first-year salary within $1 million. Two of the three exceptions are pretty easy to explain; the last nearly broke Twitter Wednesday night when it was announced. Let's take a closer look at these extensions from best value to worst.

Ty Lawson, Denver (4 years, $48 million)
At the risk of overrating a member of the Nuggets--something we never, ever like to do around these parts--I think this deal has the best chance of being viewed as a bargain in a few years. The best comparison to me is Rajon Rondo's five-year, $55 million extension signed in November 2009. That deal, which I lauded at the time, was even better because the annual salary was even lower (starting at just $9.1 million) and Rondo the better point guard, but the real key was that Rondo's value exploded the following season. Had he hit the market, he would have commanded millions more. I think the same could be true of Lawson, who would have been one of the top restricted free agents next summer as an established, reliable point guard with more upside to explore. Denver now has 4/5 of its core locked up at reasonable prices through 2015, with Andre Iguodala--likely to opt out of his contract after the season--the only exception.

Serge Ibaka, Oklahoma City (4 years, $49 million)
Like Lawson, Ibaka settled for a sub-max offer, choosing security over the potential to make more as a restricted free agent. While Lawson would have had to compete with several other guards--the top four players who did not get extensions from this class in terms of WARP are all either point guards or combo guards--Ibaka would have been the best young big man available. It's conceivable that some team could have maxed out a 23 year old who is the league's leading shot blocker and developing into an offensive threat. As Grantland's Zach Lowe laid out earlier this week, Ibaka has important improvements he must make so his impact on the game is commensurate with his individual statistics. However, Ibaka's shortcomings are all the kind likely to straighten out with more experience, which is what makes him potentially so valuable over the next four seasons.

Blake Griffin, L.A. Clippers (5 years, $95 million)
Griffin was the lone Class of 2009er eligible for the Derrick Rose Rule, allowing him to make up to 30 percent of the salary cap during the first year of his extension rather than the usual 25 percent. The Clippers quickly granted him that and made Griffin their designated player, giving him a five-year contract. All of this was a complete no-brainer. The formula says Griffin is worth only $15.1 million next season, but of course that's because Griffin missed his entire first year in the NBA due to injury. Since then, he's been a max player.

James Harden, Houston (5 years, $80 million)
I wrote about Harden on the Unfiltered blog the other day. Suffice it to say that questions about whether he is worth a max deal (and the designated player option) are significantly overstated and likely to die down quickly if he keeps playing as he did in his Rockets debut on Wednesday night.

Taj Gibson, Chicago (4 years, $32 million)
Despite the fact that box-score stats fail to do justice to Gibson's contributions, his actual extension matched up pretty well to the projection, at least in terms of guaranteed base salary. (Incentives could push the deal's value up to $38 million.) Gibson is paid reasonably for a starting power forward, which presumably he will be at some point during the contract--no later than when Carlos Boozer's deal expires in the summer of 2015, and possibly sooner yet if the Bulls make the drastic move of using the amnesty provision on Boozer. As compared to the rest of the players who got extensions, Gibson has less potential because of his age; at 27, he may already have reached his peak. That's OK with Chicago because of Gibson's value as a defender. Last season, his regularized adjusted plus-minus was best in the league, per Jeremias Engelmann. Gibson isn't that good, of course, but he's worth $8 million a year.

Jrue Holiday, Philadelphia (4 years, $41 million)
Holiday stands at the opposite end of the age spectrum from Gibson, his former rival when they were at USC and UCLA. While the players have identical NBA experience, Gibson is nearly five years older than Holiday, who was the league's youngest player as a rookie. So it's important to keep in mind that the 76ers aren't paying Holiday for what he's been so far during his career, or even what he is right now, but what he will become over the course of the extension. The formula still shows Holiday as worth about as much as he got from Philadelphia, so there's a solid chance we could look back on this extension as a fine value for the Sixers. I would compare this to the extension Mike Conley signed with Memphis two years ago. Ripped at the time in these parts and more passionately elsewhere, that deal has worked out well for the Grizzlies as Conley has continued to grow. Lo and behold, Conley appears as one of Holiday's four best comps at the same age per SCHOENE.

Stephen Curry, Golden State (4 years, $44 million)
Going strictly by the numbers, no extension was a bigger bargain than the one signed by Stephen Curry. Over the last three seasons, he ranks slightly ahead of Harden in terms of WARP, pegging him as a max-type player. Yet this contract is still fraught with risk because of Curry's chronic ankle injuries. After surgeries each of the last two summers, he still rolled his ankle in a preseason game without any apparent contact. To get value out of Curry, the Warriors have to be able to keep him on the court. Depending on how his season went, Curry could have been a max free agent or had a tough time getting a four-year offer from a wary market. So I feel like this is a fair compromise for both sides.

DeMar DeRozan, Toronto (4 years, $38 million)
That brings us to the one extension signed Wednesday that is difficult to justify. I hate for this to become statheads against DeRozan, who is by all accounts a good guy and a hard worker, reasons Bryan Colangelo rewarded him with a contract extension. However, DeRozan has emerged as one of the ultimate examples of players overvalued by traditional stats. He supplies the emptiest 17 points per game in the league, scoring inefficiently because of his reliance on long two-point jumpers and contributing little elsewhere. DeRozan just turned 23, so it's far too early to conclude that he won't be able to turn those long twos into threes or find other ways to become an efficient scorer. At this point, that conclusion is more a hope than a likelihood, especially since DeRozan has gone the wrong direction statistically over the course of his three seasons in the league. There's just no justification for paying a player who has contributed so little value like a core piece. Since the NBA went to its current model for extensions to rookie contracts, no player has been extended with so many negative WARP; in fact, no player who rated below replacement over their first three seasons had been extended since Primoz Brezec in 2004.

Kevin Pelton is an author of Basketball Prospectus. You can contact Kevin by clicking here or click here to see Kevin's other articles.

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