Monday, July 16, 2012

The Market for Starting PG's (aka the Jeremy Lin Offer Sheet)

Jeremy Lin's 3 year, $25.1mm offer sheet seems to be provoking opinions from every possible corner of the NBA world. Setting aside the shrewdness of the Houston Rockets' offer (the tax-punishing year 3 salary of $15mm), the question that everyone seems to be asking (and answering): is Jeremy Lin worth this much money?

Is the Jeremy Lin Deal Fair Market Value for an NBA Point Guard?

While most people are taking a crack at this question, a large component that seems to be missing is assessing the market for starting NBA point guards, in terms of annual salary. Looking at the 28 NBA teams whose starting point guards and salaries are readily available (assuming that Lin is a Houston Rocket, and Felton is the Knicks' starting point guard), the data looks like this.


Based on Jeremy Lin's soon-to-be average salary ($8.4mm), he'll be making a little more than the league average. Now, while it seems odd that a guy with so few starts could command an above-market salary, remember that many of these players are not on "market" contracts. They're on rookie deals, which restrict their true market value. Removing the players on their rookie deals...



Among this group, the truly "market" contracts for starting point guards, Lin's annual salary seems more reasonable. Aside from the true franchise point guards (Williams, Rose, Paul, Westbrook, Parker, Rondo), there's a valid argument that Lin's production over the next 3 years could exceed each of the other players on the list.

Is Jeremy Lin's Value Inflated by the D'Antoni System?

Another way to look at Lin's value: was he a product of the system? D'Antoni point guards put up video game numbers, and it inflates their value. So, what have D'Antoni point guards done over the last few years?


Look at the starting point guards for the last four D'Antoni Knick teams. Based on the numbers per 36 minutes, three things jump out: first, the other two guys clearly outperformed their career stats in the D'Antoni system; some inflation does exist. Second, a younger, woefully inexperienced Lin outperformed those guys individually and won a higher percentage of games, with similar or lesser talent surrounding him. Third, Duhon and Felton were paid an average of $6.4mm per year to be the starting point guard for a D'Antoni team. If Lin plays in a similar system for the next 3 years, he'll be getting paid an additional $2mm over that average.

What's the Bottom Line?

Jeremy Lin's offer sheet, much like his rise to fame, boasts some startling numbers that don't make a lot of sense in isolation. But, putting the numbers in perspective makes them seem less outrageous. Questions about his ability to stand up to an 82 game season, and a league more honed in on shutting him down, are real. Questions about how his game will look outside the consequence-free, up-tempo environs of the Linsanity Knicks are warranted. However, his average salary (however back-loaded it may be) isn't far off the market for a point guard. The numbers he put up with the Knicks are better than his predecessors at the position. And, no matter how much he draws at the gate, eventually his talent will show to be genuine or fleeting. It's a reasonable risk to take, and like many free agent signings, his play will soon make several GM's look like geniuses or goats.




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