On July 10, 2014, the Toronto Raptors franchise turned a drastic corner. Finally, a marquee free agent, with every right to pursue lucrative opportunities elsewhere, returned to Toronto – and he did it without a doubt in his mind. On that day, most Raptor fans would’ve agreed that the $48 million figure that was reported to be the value of Kyle Lowry’s new contract, seemed a tad much. Lowry though, was without question playing at an all-star level, after having led his team to its first playoff appearance in 6 years and a division title. But still, the $48 million figure seemed like a lot (well-deserved, but a lot).
Looking back, those same Raptors fans are all now likely wondering…seriously? This guy’s getting $12M a year? That’s mere chump change in today’s NBA. With the money that’s flying around, heck, the $800K that Norman Powell’s due this year doesn’t just seem like a bargain…it seems like an absolute joke.
Given the approximately $3 billion in salaries that have been guaranteed to players during the first 96 hours of free agency (working out to be around $9000/second for 96 hours), it’s clear that change is upon the NBA landscape, and it’s not gradual. With television revenues skyrocketing, players starving for a winner, veterans chasing rings, and hometown discounts not being tolerated, we’ve come to see it all these past few days.
Quite honestly, the entire situation is pretty damn awkward. With the staggered, yet drastic increase in the salary cap planned over the next 2 years, the NBA free agency period has become an open auction for talent in a way never before witnessed. And unlike the past, even those who have showed promise earlier in their careers, but have been hobbled by injuries, are getting serious dough. Benchwarmers who’ve experienced even mild success in the past are being recruited, and are virtually signed/sealed/delivered just a few hours after midnight on July 1st. And for Raptors fans, while signing DeMar DeRozan seemed like the biggest task coming into this offseason, at least for the moment, the situation seems to pale in comparison to the inevitable challenge that Masai Ujiri and company will have to face just 365 days from today.
When Kyle Lowry signed that contract two July’s ago, it was signed over 4 years, with the 4th year being a player option. Lowry, who has started consecutive all-star games after signing that contract, is now going into his 13th season in the NBA and has reached the telling milestone of 30 years of age. And with that 4th year looming next summer, Lowry would have the right to opt-out of the contract, and hit the open market as an unrestricted free agent.
For Lowry, the decision will almost be guaranteed. An opt-out would allow him to cash in next summer, when the Salary Cap is expected to hit in excess of $100M (it was $70M this past year). That would serve to be approximately a 43% increase over the 2 years (DeMar cashed in with his contract at the current salary cap level of around $93M). The 2-time all-star Lowry, while happy for his fellow teammate, would presumably want to make up for some lost opportunities over the past couple of years, when one could easily make the argument that Lowry’s value to the team is clearly higher than that of JV, DeMarre Carroll, and DeMar DeRozan. Yet, due to the awkward bump in the cap over the next 2 years, he’s underpaid severely relative to those teammates.
So, the several million dollar question is then…what will Kyle Lowry really be worth next summer?
The Market Price for Kyle Lowry
There are a few ways we can estimate what it’s going to cost for the Raptors to retain Lowry. The first and obvious way would be to scale his true value, by using today’s salary cap, and projecting it out to next year linearly. Given DeMarre Carroll’s made just over $13M last year, one could make the argument Lowry’s true value was somewhere between $15-$20M (let’s just draw the line at the midpoint for argument’s sake).
$17.5M in 2015/2016 salary cap terms translates to (given the approximate 43% increase mentioned earlier) around $25M in 2016/2017 terms. Now that may not be max-level dollars for someone like Lowry, but it would occupy around 25% of your cap – that’s still a ton to be paying for a 31 year-old undersized point-guard, likely to be sloping down from his prime going forward. Granted some people said that about Lowry 2 years ago before his back-to-back all-star seasons, but this time, it’s more likely to be problematic. Given the minutes Lowry has been tasked with and the sheer reliance placed on him by the franchise, something is likely to give…or should I say, give out.
Having said that, with contracts equal to or in excess of $20M/year being handed out to the likes of Dwyane Wade, Pau Gasol, and Dirk Nowitzki, it’s clear that league salaries, seemingly on steroids, will only increase. That’s not to say Lowry isn’t going to be serviceable after next year (heck, he could still be an all-star), but to tie up significant portions of your cap long-term, is risky, short-sighted, and something Masai Ujiri doesn’t seem like the type to do.
Max-level money given to DeMar DeRozan, while questionable for other reasons, was at least done on the basis that DeRozan is a relatively young player, with the prime of his career likely still ahead of him. While you could argue the Raptors would negotiate on this basis, you’ve got to be thinking Lowry has the hometown discount of the past 4 years in his mind. With the Jose Bautista discussions from this past spring training, Toronto sports fans are more than aware that underpaying a player in his prime, will come back to haunt any GM one day. This situation is likely to be no different.
Comparable Contracts
Probably a more meaningful way to estimate Lowry’s value next year would be to look at some of his peers from the 2016 Free Agency frenzy. Here are some players that signed with their respective teams recently, in or around Kyle Lowry’s talent-level and value from a team-impact perspective. Let’s not forget, Lowry was a top-10 MVP candidate this past year and, barring any serious injury or major drop-off, is likely to retain such a value next season.
NOTE: The comparable players listed below are NOT meant to be individually comparable to Lowry. There are different players of different skill sets listed here from the free agency class of 2016 with the intention that they can together be used as a proxy to estimate the value of a player of Kyle Lowry’s calibre.
The final and easiest way to estimate Lowry’s contract value would be just assume that he’s a max-level player next summer. If he is, under the current salary cap rules, he’d be eligible to earn around $35M a year annually. Signing a player to a contract of that size may seem insane, but the way the current market is trending, if Lowry is able to sustain his level of play this year, it’s hard to argue he won’t get at least something close to that from a competing team. You don’t have to look far (i.e. Mike Conley) to be convinced of that fact.
In summary, given that the length of the contract would be tough to estimate at this stage, we can likely agree that a best-case (from Lowry’s perspective) would likely be an annual salary of around $35M, and a worst case (assuming no injuries) would be around $20-25M. Either way, it will be a steep price to pay, regardless of the imminent salary cap increase. Kyle Lowry is a gritty, undersized point-guard that relies on hustle and heart more so than physical attributes or talent. Accordingly, his value is likely to depreciate at a rapid rate after the age of 30. Or at least that’s what history would suggest – we all know that in actuality, things could play out much differently.
What it’s going to come down to
Based on all of these factors and more, it’s hard to argue the Raptors won’t be in a tough spot next summer. But for now, Raptors fans can rest easy knowing we have at least a year more of Kyle Lowry’s amazing contract in hand, knowing that he’ll once again be motivated to prove himself in order to cash in next summer. For Masai Ujiri though, all of this is likely going to come down to Lowry’s health, minute-usage, and ability to carry the Raptors deep into the playoffs once again. If he is able to sustain his all-star level of play and remain healthy, it’s hard not to imagine a situation where Lowry isn’t getting at least close to a max-level deal next summer. So chill out Raptors fans…while this summer may have been relatively quiet and expected, next summer could very well be…eventful. And as we all know – sometimes, no news is good news.
