Memphis Grizzlies week one NBA Free Agency report: Mike Miller, the Courtney Lee trade and the tough summer market

Spruce Derden-USA TODAY Sports

The Mike Miller saga, Re-visiting the Courtney Lee trade, and Why the rising Salary Cap makes Free Agency a long game.

Mike Miller: How Far Apart Are They?

Reports circulated this week that Memphis offered Miller something in the range of 2 years $5mm-$6mm total, while Miller is seeking the 4 year Full Mid-Level Exception. The Grizzlies have only 3 mechanisms to re-sign Mike Miller:

1). Veteran Minimum salary - because Miller was still receiving amnesty money from Miami, this is how Memphis signed Miller last year. Though he counted less than $1mm against the Grizzlies salary cap, Miller actually made in excess of $5mm, and stands to do so again this year. Miller's amnesty money runs out after this year, which is why he wants to secure years. This renders the minimum salary option a non-starter.

2). Bi-Annual Exception - A two year contract starting at just over $2mm per year would be the perfect scenario for the Grizzlies, but one they apparently have already moved past. If they have offered Miller an annual salary in excess of $2.5mm, it seems the Grizzlies have offered...

3). The Mid-Level Exception (MLE) - This mechanism is worth just over $5mm a year for a maximum of four years, and can be split among multiple players. It appears that the Grizzlies and Miller are now just haggling over how much of the Mid-Level Exception Miller he eats up, and for how many years.

Again, Miller is making somewhere around $6mm this year no matter what, so what is truly at stake is his salary in year two and beyond.

If Miller was willing to play for any of the thirty teams, my guess is he could find an offer for the MLE, maybe at 3 years. But Miller doesn't want to play anywhere. He wants to win a championship, and that is shallow pool of suitors. He can't return to the Heat; the Pacers are capped out; the Clippers have already used their MLE; the Spurs and Thunder could offer the full MLE, but doing so would run contrary to every move they've made for the past half dozen years. Houston has bigger fish to fry, but may be a realistic destination down the road. Ditto with the Mavericks.

Suddenly you're left with the Denver Nuggets as a reported destination. Financially, they could offer the full MLE to Miller; all you have to do is ignore the fact that they have five other wings under contract.

The latest fly in the ointment is the possibility of reuniting with Lebron in Cleveland. If that happens, you just tip your cap to the basketball gods. Lebron has a gravitational pull all his own, and it cannot be fought.

Put all of this together and Miller is in a holding pattern. He could get a better offer than Memphis is willing to give, but my bet is he returns for something like half of the MLE for 3 years (just over $10mm total). Any more is risky. More on this in a bit.

Re-Visiting the Courtney Lee Trade

With every inflated contract that is handed out, the Courtney Lee trade looks better and better. At the time I was dubious that picking up the remaining three years of Lee's full Mid-Level Exception deal was worth the opportunity cost of allowing Jerryd Bayless's contract to expire.

But now we see what the MLE gets you in the summer of 2014. MLE deals are quietly terrible contracts to give out. Rarely do you get a bargain for the Mid-Level Exception; more often, it is a contract that quickly morphs into an albatross. Jason Terry, James Posey (bad, unproductive New Orleans Hornets James Posey, not Grizzlies Posey or even Celtics James Posey), most recently Jarret Jack - these are the types of veterans the MLE traditionally purchases.

This year, the MLE  has been used to acquire Josh McRoberts (a nice player who, at best, will live up to, but probably not outperform, the contract) and Spencer Hawes (ditto); Jodie Meeks, Patrick Patterson and Darren Collison all signed comparable contracts to the Mid-Level Exception.

In effect, the Grizzlies used their Mid-Level Exception last year. They placed a bet that there would be no Mid-Level bargains to be had in the Summer of 2014 (they were right), and instead bought Courtney Lee 6 months early. Lee offered an instant upgrade last year, and Boston even sent over a 2016 2nd round pick which eventually became trade fodder to acquire Jarnell Stokes. Stokes will be signed on a super-favorable 2nd round contract for at least three years, and is a pretty good bet to outperform that contract going forward.

Think of the overall transaction like this: the Grizzlies upgraded Jerryd Bayless to Courtney Lee for last year's stretch run, signed Lee to a two year Mid Level Exception this summer, and acquired Jarnell Stokes. As a result, they more or less gave up the ability to sign Jodie Meeks, Josh McRoberts, or any of the other shooters in this year's class to a longer contract.

And with all of that said, I still think he is likely to be traded. More on this (again) in a moment.

The Market the Same, Just Got More Fierce

Paraphrasing the great Slim Charles, the market got more fierce this summer. Bargains are few and far between. The best contract given (besides, you know, everything the Spurs did) may have been Thabo Sefolosha. It's hard to see many other players (maaaaybe Shaun Livingston) who a team could realistically expect to outperform the contracts they've been given.

But this is what happens when the fundamental forces of supply and demand are skewed. The supply of quality players isn't large enough to satiate the cap space (demand) teams have at their disposal. This is how a thirty year old big man who has never made an All-star team and is, at best, an average defender claims a rarely-seen-anymore five year deal. When this big man, Marcin Gortat, is the same age as Zach Randolph is now, they will be owed an identical $36mm for 3 years. The major difference is that Gortat is owed $12mm flat for 3 years, whereas Randolph's contract contains less risk ($16mm this year, just $10mm for years two and three).

As icing on the cake, the Wizards have likely capped themselves out for the next two years, at which point they will have to pay Bradley Beal's max extension. So basically the Wizards can't add a significant Free Agent for the life of Gortat's contract, unless they are somehow magically given more salary cap dollars to spend in the future.

And this is exactly what is happening.

The Rising Cap, and What It Means

This week, the NBA announced that the Salary Cap will rise by about $4.3mm to just over $63mm. That may not seem like much - just an 7% increase over the previous year. But if the cap rises by the same amount next year, that is 14% inflation in two years.

To put that in perspective in two years, the salary cap will increase by about what Mike Conley makes next year.

But that isn't even the crazy part; it's about what happens next. In two years the league will re-negotiate their new TV deal, and by all accounts, it will be worth an insane amount of money. And because the NBA salary cap is tied to Basketball Related Income, the Salary cap will rise by increasingly large amounts.

This may seem like bad news for a small market team like Memphis, but it isn't. Remember, the cap is directly related to the amount of money the league makes the cap only rises because teams can afford it.

This is bad news for teams who are not accounting for these rises in their planning, and given how they handled the Courtney Lee trade, my guess is they have this firmly in their sights.

I already covered here how Memphis can wind up with near max level cap room next year. The Cliffnotes version is this: Memphis can't use the full Mid-Level Exception this year if they want to clear max room next year. Signing Mike Miller to anything over $3.5mm this year likely precludes this future. Trading Courtney Lee, Quincy Pondexter, or Tony Allen is enough.

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Why do I keep harping on sitting out this year's Free Agency and cutting salary in advance of next year?

The Free Agents class of 2015-2016 is shaping up to be a potentially historically undervalued class. They will be the last players signed before the massive new TV deal and the resulting spikes in salaries. The sneaky part of this is that all max salaries and Salary Exceptions are tied to the overall salary cap. A "Max Salary" - exactly like the deal Gordon Hayward is about to sign - is 25% of the salary cap, with raises built off of that initial 25% number. Therefore, any player signed to a "max deal" the year before the new TV deal goes into effect will be a bargain the year after, because the max deal could go up as much as $5mm the next year. Even if the cap rises at a flat rate (and the NBA has EVERY INCENTIVE to make BRI appear lower so as to keep salaries from skyrocketing), a max deal will start right around $18mm once the new TV contract comes into place.

Want more good news? Marc Gasol is due for an extension the year before all this craziness starts, meaning even if he demands every dollar the Grizzlies can possibly pay him, he will still be a bargain after the TV deal kicks in. The Grizzlies could theoretically sign Gasol, add a max player (or two of the Arron Afflalo tier) in 2015-2016, and potential still be under the cap in 2016-2017.

This team is not taking a step back any time soon.

Add it all together and next year's free agent class may be a historically undervalued anomaly. The rampant spending of this year (2014-2015) will soak up much of the cap space for next year, even with the expected $5mm raise. And once the new TV deal kicks in (right before the 2016-2017 season), the salary cap could be rising by upwards of 10% a year with no end in sight.

In the meantime, pray that the best teams cap themselves out this year. Pay close attention to every three and four year deal handed out. Teams locking themselves into overspending in this fierce Free Agent period are making next year's class that much less competitive, and costing themselves a chance to sign a player next year who will play the bulk of their contracts for a dramatically decreasing percentage of the salary cap. Pay close attention to which teams hand out only one year contracts, especially if they are big market teams with stars already in house.

It's too early to tell, but my guess is that of the "marquee" destinations, only Boston is guaranteed to have significant cap room next season (and depending what happens with Carmelo, possibly the Knicks for Lakers, but possibly neither). Only a few other good teams - Atlanta, Phoenix, and Portland (who will be fighting tooth and nail to re-sign their entire team) are likely to have cap space. There are a ton of teams who will be one move away, but they will be in a position where they give up assets to shed money.

This is the fascinating subtext to deals like the Chandler Parsons offer sheet. Yesterday, Dallas penned Chandler Parsons to a three year max contract, complete with a trade kicker and a player option in year three. If Houston matches the offer, they knock themselves out of the secondary market this year, AND cripple themselves for next year's class (which has a bevy of big men that would fit well alongside either Dwight Howard or Dirk Nowitzki). Meanwhile, Dallas will still have max room to pursue free agents going forward. The trade kicker makes trading Parsons damn near impossible. Did I mention Chris Bosh only has 72 hours to make a decision now if Lebron walks!

If I was HOU, assuming Bosh stays in Miami, I would let Parsons walk and offer Luol Deng a one year $20mm contract. Deng is a better fit than Parsons anyway, and you don't tie up your cap.

Don't get me wrong. Teams signing free agents this summer will still enjoy the benefits of the rising salary cap. But we're talking about the difference between maximizing your balance sheet, and merely making an overpriced contract palatable. In a roundabout way, this is why Lebron should sign a two year max deal. In two years, Cleveland will still have Kyrie and Wiggins, and they will be that much closer to being ready to compete. And Lebron's max, augmented by the new TV deal, may be approaching $30mm, a figure which only Michael Jordan has been paid to play basketball.

Memphis is in a position to sign its cornerstone player and a max level free agent next year. And BOTH players will be viewed as bargains for nearly the entirety of their contracts.

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