Delving Deeper Into J.R. Smith's New Contract

I have promised more commentary on the singing of J.R. Smith and judging by the response I have received, well, you guys do not really care, but a promise is a promise.

 

The three year contract reportedly has a guaranteed value of $16.5 million, but there are also incentives built into the deal.  What those incentives are is a question we do not have the answer to, but I would guess there are about two million dollars of incentives built in that probably include games played and/or minutes played, points per game, maybe three point percentage and even some form of good behavior incentive as well (although I am not sure if that kind of clause is permissible under the Collective Bargaining Agreement).

 

It has been speculated that the first year salary on the contract is between four and five million dollars.  Considering the Nuggets have Smith’s Bird Rights he was eligible for annual raises of 10.5%.  If the guaranteed portion of the contract is indeed $16.5 million the lowest the first year salary could be is $4.97 million.  Most likely the contact starts at $5 million with $500,000 raises for the second and third years.

 

I have stated before that a three year deal in the $15 to $18 million range was the best deal for both parties and it appears the Nuggets and J.R. agreed.  J.R. may be somewhat of an unproven commodity, but he has proven that given the chance can be an explosive scorer.  He certainly deserved more than the three million dollar qualifying offer, but his track record, on and off the court, negated any possibility of a big five or six year contract in the $50 or $60 million dollar range.

 

Both sides could have signed this deal on the first day of free agent signings, but they both had good reasons to wait.

 

From the Nuggets perspective, they were able to scare off any potential suitors by proclaiming that they would match any offer J.R. received (and despite the Camby trade and media musings that Smith could be pried away, one report I read ridiculously speculated the Nuggets would be unlikely to match a contract starting as low as four million a season, other teams obviously realized the Nuggets did indeed intent do retain J.R. no matter the cost).  The fact that so few teams had any money to spend on free agents effectively removed any chance of them having to match a huge five year deal.  Being up against the luxury tax helped them keep the value of the contract down too.  They were not going to overpay as they may have been tempted to if they had more room under the tax level and the Camby trade showed that they were serious about keeping costs down.

 

Smith owed it to himself to take his time and find out if any team was going to figure out a way to sign him to a big offer sheet.  There was no reason to rush into a contract agreement with the Nuggets.  No matter how unlikely the chances were of getting that big offer sheet had to be patient and make sure that no offer sheet was coming.

 

I am sure the Nuggets would have loved to have had a team sign Smith to the full MLE because that would have meant they would have had him at well below market value for the last three and maybe four years of that contract.  I believe some team would have signed smith to the MLE, but Smith knew that would limit his earning potential over the last couple of years of a MLE contract and was understandably not interested.

 

Ultimately, both sides got what they wanted.  The Nuggets get a player who given the minutes could legitimately be a top ten and maybe even top five scorer in the NBA at a mere pittance for that kind of production.  If Smith continues to develop, they can reward him for the player he becomes at that time.  Smith is now going to earn pretty good money, but if he wants to really get paid, he will have to earn it over the next three seasons.  On the other hand if he does not continue to develop or if he reverts to being an imbecile, on and/or off the court, he is only on the books for three seasons at a relatively small wage.

 

Smith gets some “financial security” at a very young age based on what he has done so far as well as what he is expected to do.  As mentioned above, he also preserves his chances of landing a huge deal in three years if he continues to work hard and develop.

 

I have been impressed with J.R. throughout this process.  He never complained to the media that he was not being respected and he never demanded to be paid Corey Maggette money or anything like that.  He humbly reported to duty with the select team who practiced against the Redeem Team and shagged rebounds for the other players due to the fact he was not able to play because he was not under contract.  To me the maturity J.R. began to show towards the end of the season on the floor has been displayed off the court this summer.

 

The Nuggets could claim that J.R.’s market value was below the MLE seeing as how no one signed him to such a contract, but J.R. could have demanded more money and argued that he could have signed a MLE deal if the Nuggets had not scared everyone off.  However, he took what I believe to be below what his value would have been on a truly open market and to his credit certainly seems happy to have done so.

 

The bottom line is I think the Nuggets are thrilled with this deal and they handled everything in the right way.  They allowed J.R. to play the market and did not make any silly take it or leave it offers that would have painted both sides into corners.  I believe the contract Smith signed is going to end up being great for them.

 

This contact and how it was handled takes another step in proving to me that Stan Kronke is willing to spend money when it makes sense to spend it.  I think Kronke would have opened up the check book to keep J.R. no matter what the tax ramifications ended up being.  Even with J.R. slated to make “only” $5 million this season the Nuggets are almost certain to pay the luxury tax.  They have twelve players currently signed to contracts and Sonny Weems will probably be signed before camp so that they meet the league minimum of thirteen warm bodies.  The only question now is will they take a chance on a player like Elton Brown or even a Shaun Livingston?  I believe that if Kronke is convinced it is a risk worth taking they will add a young player even though it may push them even further over the tax line.

 

No matter what their opening night team salary ends up being I still expect them to drop salary this season by trading Allen Iverson by the trade deadline, but planning on doing something with AI’s contract and actually doing it are two completely different things.

 

No matter what happens over the next six months Denver is set up to have a very nice team over the next two or three seasons.  It is certainly possible that they miss the playoffs this season, but now that J.R. is in the fold, they are in a solid position to continue to be very competitive while the roster is made younger and more well rounded.

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