Risk and Contracts: Marcin Gortat's Deal Reconsidered

This summer, when the Washington Wizards re-signed center Marcin "the Polish Hammer" Gortat to a five-year, $60-million guaranteed contract, the sports commentariat was critical.

Hammering out a good deal?
(magicbasketballonline.com)

Bleacher Report's Adam Fromal named Gortat one of the most overpaid players in the National Basketball Association, adding that Wizard fans should "be scared of how this looks down the road." SB Nation's Mark Deeks opined that "Gortat has peaked as a player and now represents questionable value."

Multi-year contracts often look bad when first announced, as fans compare the contracts' average annual pay to the average pay of deals that have been in place for years. Yet, unless the player suffers a catastrophic injury or flames out for some reason, many new multi-year deals end up looking pretty good in their out-years. In three years' time, some other center's new long-term deal will likely be criticized when it's compared to Gortat's "bargain" contract.

Beyond myopic comparisons of new multi-year deals to old ones, two recent NBA developments suggest the Wizards were just as shrewd in their bargaining as Gortat was—that, because the deal manages a number of risks for the Wizards, it may be a winner for both team and player. Such mutual benefit is what economics expects will result from voluntary contract negotiations.

The first development is yesterday's announcement that the Orlando Magic have signed young center Nicola Vucevik to a four-year, $53 million deal that begins after this season.

Gortat and Vucevik are not identical players—Vucevik is just 24 while Gortat is 30; Vucevik has slightly better offensive numbers while Gortat is a defensive demon; Vucevik's has had only two good years in the league, Gortat has a track record that suggests a consistent 13 pts., 9.5 reb., and 1.5 blks. per game; Vucevik has only played in 60 games once in his short NBA career, Gortat has done it for three straight years.

In my mind, they're of roughly equal expected value over the next few years, yet Vucevik will make 32.5% more per year under his new deal than Gortat. (Of course, Vucevik's deal was negotiated in light of Gortat's deal.) Comparing the two deals suggests the Magic will pay more money for Vucekvik's upside and the hope that he can stay healthy; while the Wizards will pay much less for a player who seems to be a good bet to play in most games and make a consistent contribution.

The more important (though a little older) development is the discovery that LeBron James' new $42-million, two-year deal with the Cleveland Cavaliers includes a player option to become a free agent after this season. James wanted that option so he can negotiate for even higher pay next year, when NBA team salary caps will rise significantly as a result of the league's giant, new broadcast deal with ESPN.

Gortat's contract apparently has no such option. In essence, he and the Wizards cut a deal where he probably got more pay this year than he might have otherwise, but he gave up the right to pursue even more money in the next four years, under the higher salary cap. He now has the security of a solid payday for the next half-decade, while the Wizards have the security (assuming no player holdout or strike) of locking up a quality center for the next five years at this year's rate. (And, in case you're wondering, established NBA centers do seem to have decent career longevity.)

The Wizards will soon face contract negotiations with budding backcourt star Bradley Beal and apparently will push hard to sign reigning league Most Valuable Player Kevin Durant after next season. Not having to worry about finding more money for Gortat will help the Wizards in those negotiations. Hence, the Wizards appear to have smartly traded some money for some very valuable security.