There's been a lot of conflicting and confusing information floating around about Kobe Bryant's ability to become a free agent this summer. In an attempt to clear it all up, I'll wade through the situation in question and answer format.
First thing's first: Kobe can become a free agent this summer?
Yes. In the summer of 2004 the Lakers signed Bryant to a seven year contract (through 2010-11) with the option to terminate the contract early in either 2009 or 2010.
If Kobe terminates his contract early, when does he have to do so?
The deadline is June 30. Starting July 1 he's locked in for the 2009-10 season.
If Kobe opts out, he'll be a free agent and can sign with any team? Can the Lakers match?
If Bryant opts out he will be an unrestricted free agent who can sign with any team, including re-signing with the Lakers. Since he would be an unrestricted free agent, the Lakers can't retain him by matching a contract he signs with another team. If he signs elsewhere, then the Lakers lose him.
How much money can he sign for?
The NBA has a maximum salary, which is based on years of service. For a player like Bryant, with more than ten years' tenure, the league-wide maximum is currently $19,261,200 -- it changes every year, and the new maximum will be announced on July 7. There's also a personal maximum, which is 105% of the player's most recent salary. The player is allowed to sign for either the league-wide maximum or his personal maximum, whichever is greater.
Bryant's current salary is $21,262,500, and the most he can get in the first year of a new contract is his personal maximum, which is $22,325,625. He can receive raises up to 10.5% annually if he re-signs with the Lakers, or 8% if he signs elsewhere.
Note that Bryant's current contract calls for a salary of $23,034,307 in 2009-10, which is more than he can make in 2009-10 with a new contract.
So if Kobe becomes a free agent this summer, he has to take a pay cut?
Yes. He can make more money in 2009-10 by staying put.
Then why would he want to become a free agent this summer?
Assuming he wants to stay with the Lakers rather than move to a new team, the financial reason for becoming a free agent is to lock in more salary over the life of his contract. He's currently guaranteed the aforementioned $23,034,307 in 2009-10, along with $24,806,250 in 2010-11. He can lock in additional years after that if he signs a new contract now.
Although not very likely, there is always a risk of suffering a career ending injury such as blowing out a knee. If this happens, his basketball income will stop after the 2010-11 season. While opting out this summer means he will take a short-term pay cut, he makes up for it in the long run.
I understand that every year he plays, he risks injury. Is there any other reason to prefer this summer to waiting until 2010 or letting his contract run out in 2011?
The rules will be the same in 2010, so it'll simply be a matter of risk versus reward in choosing this summer or next summer.
Again, this assumes he intends to re-sign with the Lakers. If he wants to play the free agent market, many more teams will have cap room to spend in 2010 than this summer.
The last thing Bryant will want to do is let his contract run out and become a free agent in 2011.
Why is letting his contract run out in 2011 a bad idea?
The Collective Bargaining Agreement is due to expire in 2011. While the league has the option to extend the agreement to 2012, all indications are that they will let it expire in 2011. If Bryant becomes a free agent in 2011, he will negotiate his next contract under the terms of the next Collective Bargaining Agreement.
Given the current economic situation, the league's experience in 1998-99, and information that has made its way to the public, we can expect the next Collective Bargaining Agreement to be more in favor of the teams. It is therefore in Bryant's best interest to negotiate his next contract under the terms of the current Collective Bargaining Agreement.
One line of thinking might be to wait until 2010 to become a free agent, so his new contract will stretch into the next Collective Bargaining Agreement as far as possible under terms of the current agreement. The flip side to waiting until 2010 is that he risks a career ending injury in the 2009-10 season.
How many years can Kobe sign for?
Ordinarily he could sign for six years if he re-signs with the Lakers, or five years elsewhere. But since he's now 30, he runs up against the dreaded Over-36 rule if he signs a longer contract. The Over-36 rule doesn't explicitly limit contract lengths, but effectively does so by removing the financial advantage in singing a longer contract.
What's the Over-36 rule all about?
Without getting into all the gory details, the Over-36 rule closes a salary cap loophole. If a player is nearing retirement, one way to pay him more is by adding extra years to the end of his contract, which would be paid after he retires. The Over-36 rule assumes this is the case, and classifies any seasons after the player turns 36 as deferred salary. Deferred salary is accounted for in the early years of a contract, so the base salary in the early years has to be reduced in order for the contract to be legal. This is a circuitous way of saying that an older player can't earn more money in a longer contract than in a shorter contract.
Does the Over-36 rule affect Kobe? Is he that old?
Bryant turns 36 in August 2014, so the Over-36 rule comes into play if his next contract lasts into the 2014-15 season. So if he opts out this summer, a six-year contract is classified as Over-36. If he opts out next summer, a five-year contract is Over-36.
So Kobe can't sign a contract that lasts until he's over 36?
Well, he can, he just can't make any more money by doing so. Since there's no reason to sign a longer contract for no extra money, it effectively limits the length of the contract he'd agree to.
So put it all together for me. If he opts out, how many years is he going to sign for?
If he opts out this summer, he'd sign a five year deal. If he opts out next summer, he'd sign a four year deal. In both cases, he'd become a free agent again in 2014.
What total dollar amount are we talking about here?
Certainly enough to ensure he will continue to live the lifestyle to which he's become accustomed. A five year contract starting next season at $22,325,625 would total $135,070,031. A four year contract starting in 2010-11 would start at $24,186,094 and total $111,981,614.
$135 million is a lot more than $112 million...
The $135 million includes 2009-10, and the $112 million doesn't. Add the $23,034,375 salary from his current contract to the latter figure, and his total earnings through 2012-13 becomes $135,015,989. The total dollar amounts are only about $54,000 apart.
So far we've been talking about Kobe becoming a free agent and signing a new contract. Can his contract be extended without going through free agency?
Yes, Bryant's contract is eligible to be extended at any time. An extension may lengthen a contract to five seasons, including any seasons remaining on the current contract. In other words, he currently has two seasons remaining on his contract, so he's eligible for a three year extension. If he waits another year he'll have one year remaining, so he can get an extra four years. The rollover date from two years remaining to one year remaining is July 1.
Please tell me we don't have to worry about the Over-36 rule if he signs an extension...
No such luck. The Over-36 rule applies to extensions as well.
Fortunately, if he signs his extension by June 30 he can only add on another three years, which will be up before he turns 36. So an extension signed now won't be affected by the Over-36 rule.
But if he waits until after July 1 and extends his contract by four years, the last season will commence after he turns 36. So he can't make more in a four year extension than he would make in a three year extension.
The net effect is that he would sign a three year extension, whether he does it this summer or next.
So how much money are we talking about with an extension?
The salary in the first year of an extension can be as high as 10.5% above the last season of the current contract, but it can't be above the player's maximum salary. Raises can be as high as 10.5% of the salary in the last year of the current contract.
Since an extension would take effect in 2011, and the maximum salary for the 2011-12 season won't be announced until July 2011, they pencil in the 10.5% raise, and amend the amount downward if necessary when the maximum salary is announced.
So assuming the economy recovers, the NBA starts making lots of money again, and the maximum salaries go through the roof, an extension would start at $27,410,906 and total $90,867,153 over three seasons.
If Bryant's maximum salary instead turns out to be 105% of his previous salary, then his extension would be amended downward to start at $26,046,562 and total $86,344,353.
You say we won't know the maximum salary until the extension takes effect. Which is more likely, a $90 million extension, or an $86 million extension?
The latter amount. It's hard to imagine the NBA's income going up so much that the maximum salaries increase to accommodate a full 10.5% raise for Bryant.
But even the latter amount isn?t certain. Remember, we will probably have a new Collective Bargaining Agreement in 2011. If they change the rules for computing the maximum salaries in the next CBA, Bryant could find himself earning even less in his extension (remember, the next agreement is likely to tilt more in favor of the teams).
So compare the total salaries in an extension to opting out and becoming a free agent. Use the more likely $86 million figure.
With $47,840,625 remaining on his current contract, an extension for $86,344,353 would bring the total to $134,184,978 through 2013-14.
Putting it all together, we have:
Option 1: Become a free agent in 2009: $135,070,031
Option 2: Become a free agent in 2010: $135,015,989
Option 3: Sign an extension with the Lakers: $134,184,978
So it makes more sense to become a free agent than to sign an extension?
Just a little -- the totals are pretty close to each other. But his income is certain if he opts out this summer or next and re-signs as a free agent. If he signs an extension, then his salary may depend on the rules in the next agreement.
What about his option years? If he signs an extension, does he keep them?
If he extends his contract, his options in 2009 and 2010 are eliminated. He is free to negotiate new options that become available before the last year(s) of the extension.
You've talked about how much the rules allow Kobe to sign for. But can the Lakers really afford that much?
That's unclear, especially in a down economy. We're looking at a salary around $30 million when Bryant is 35. An NBA team is a business first and foremost, and it's unclear whether they could turn a profit if they pay him that much and put a competitive team around him, even in L.A.
So what could they do differently?
One option would be for Bryant to accept smaller raises, or even a flat contract. Another is to accept a lower starting salary.
Are you kidding me? Ask Kobe to accept less money?
One possible argument for becoming a free agent and agreeing to a lower salary this summer is that it gives the Lakers more flexibility to re-sign their other free agents -- Lamar Odom, Trevor Ariza and Shannon Brown. Since the Lakers are taxpayers, for every dollar Bryant sacrifices, the Lakers save two dollars. If this money is reinvested in their free agents, it could help keep the championship team together, and perhaps address other weaknesses.
Is there any reason to think he'd do it?
Other players have done so, including Kevin Garnett, Tim Duncan, and even Magic Johnson.
But when asked a few years ago if he'd accept less money like Garnett did, Bryant responded that Garnett should accept less, noting that Garnett had never won a title.
Has Bryant's attitude changed in the meantime? He hasn't said anything to give us any indication either way.
But for a player who is often regarded as selfish, and who finally led his team to the title once surrounded with the right teammates, sacrificing for the sake of his team might be the ultimate gesture to overcome that stigma.
Is it really an either/or decision between Kobe getting paid or keeping the team together? Do they really have to let either Lamar Odom or Trevor Ariza go if Kobe doesn't sacrifice?
Let's be clear -- the Lakers have never said that this is the case. They have not made any indication that they will ask Bryant to take less, or are even thinking about it along those lines.
So what do you think will actually happen?
In my opinion the Lakers, fresh off a title, will spend what it takes to retain Odom, Ariza and Brown. They will then look to shed salaries elsewhere, either before the season or at the trade deadline. Bryant will not opt out of his contract this year, but will do so next year and sign a maximum contract that lasts through the 2013-14 season.