Posted by Neil Paine on July 16, 2010
Basketball Prospectus' Kevin Pelton has done some great research on the problems with handing out long-term contracts in the NBA:
"...It's not even the high cost of mediocrity that kills teams--it's the duration of it.
This jumped out at me over the course of compiling my position-by-position rankings of free agents. Sprinkled throughout these lists are players who have long since ceased to have any value to their team and have hung around solely because of their contract. [...] Often, like Antonio Daniels or the more extreme case of Cuttino Mobley, injury is a culprit. Sometimes, the player just aged. And occasionally, as in the case of Trenton Hassell, the contract was simply a mistake from day one.
...I see the takeaway as how teams can get themselves in trouble with the lengths of the contracts they offer as much as the yearly salary."
This is definitely true, and it's something the stats community has argued for a long time. True superstar free agent deals (Michael Jordan re-signing with Chicago in '96/97, Shaquille O'Neal signing with L.A. in '96, Kevin Garnett re-signing with Minnesota in '97, Tim Duncan re-signing with San Antonio in 2000, etc.) have largely been worth it. Likewise, low-cost players at the other end of the free agent spectrum invariably produce a good return on the investment: they come at no risk, and they’re usually just short-term deals, so if they flop, there are no long-term repercussions.
The middle class, however, is where ugly contracts are born. GMs have a long history of ignoring obvious warning signs when going after middle-class “established veterans”, which is why using the mid-level exception is usually a detriment to teams, not an advantage. The moral of the story is this: go all-in with your superstars, but when filling the rest of your roster, stick to the low-budget model of building through the draft and signing useful low-priced FA’s. And whatever you do, don't give long-term deals to middling players, because you will get burned.