We’ve spent a lot of time on this fine website debating who the Knicks should take with the 8th pick in the NBA draft. And that’s understandable. But New York also owns two second round picks (#44 and #58). Therefore, it’s similarly worth considering what the best course of action would be with respect to the second round as well. So let’s do that!
What I want to do here, rather than describe my preferred outcome by listing a bunch of players I think the Knicks should draft, is examine the range of approaches the team can take. Normally, there are a few straightforward options for each pick: 1) draft a player and sign him right away; 2) draft an international prospect and hold onto his rights, but wait a few years to officially sign him; 3) trade the pick; and 4) sell the pick for cash. And those remain the options this year. But the new NBA Collective Bargaining Agreement, which was signed in January and goes into effect on July 1, muddies the waters in an intriguing way. Let’s take a look!
(Note: I realize the draft takes place before July 1, but any contracts that are signed by second rounders in this draft will apply to the 2017-18 season, so teams will have to act like the new CBA is already in effect during the draft.)
What’s the Issue?
The new CBA includes a provision for what are called two-way contracts, which are contracts that are applicable to both the NBA and the D-League. The story I linked does an excellent job of explaining how this works, but I’ll break it down myself as well. Teams can sign any player with less than 3 years of NBA experience to one of these deals. Players on two-way contracts don’t count towards the normal roster limit of 15; instead, teams can sign two players to these deals and therefore carry up to 17 players on the roster. The salary of a two-way player depends on how much time said player spends on the NBA roster: a player who remains in the D-League for the entire season will make $75,000 next season, while a player who remains in the NBA for the entire season will make $275,000. That max salary may not seem like much, especially considering it’s only about half the projected minimum salary for a rookie deal next year. But as Rob Dauster noted in the article I linked above, D-League players normally make a maximum salary of only $26,000, so the $75,000 guaranteed for two-way players is a huge incentive.
Given the information above, two-way contracts look like an great idea, and I don’t doubt that’s the case. Dauster correctly explains that one of the main benefits of this provision is that it creates the possibility for 60 extra guaranteed NBA salaries and, therefore, 60 more NBPA members. And I assume that’s the main reason for why the NBA players’ union agreed to this. But I also see what I imagine is an unintended negative side-effect of two-way contracts: teams will see an incentive to use second round picks on draft-and-stash prospects rather than college players or NBA-ready international prospects.
While this may not seem immediately obvious, I do believe it to be the case. Players picked in the second round often spend a good chunk of their rookie season in the D-League. Normally, when a team does this, they effectively throw away a roster spot. So why would the team not want to take advantage of a new rule that allows them to not only avoid giving up one of the standard 15 roster spots, but also pay that player less than half of what they’d have to in the past? Of course, the obvious retort here is that a team can simply sign a second rounder to a two-way deal, but that does not seem to be a possibility. Teams cannot sign second round picks to anything less than the rookie minimum salary, and there’s no indication that that’s changed in the new CBA (nor would it have been logical for the players to agree to remove the salary floor for second round picks in exchange for the introduction of two-way contracts). As a result, for a team to sign a second rounder to a two-way deal, they would first have to relinquish their draft rights to that player, making him a free agent. And if a team plans to do that, why would they draft the player in the first place? They wouldn’t. Therein lies the rub.
So, as I said, the ultimate consequence here seems to be that teams will be more likely to draft a player in the second round whom they plan to stash in Europe. That, or they’ll decide to sell the pick and avoid drafting someone altogether. To be clear, I’m not referring to the first 10 or so picks of the second round here; there will always be a few players that teams view as borderline first rounders and worth picking in the second round regardless of roster/salary requirements. But if, for the latter part of the second round, teams act the way I expect them to, we have a market inefficiency in that there will be 10 or 15 players who are skilled enough to be worth second round picks but will instead be signed to two-way contracts.
Okay, cool. What should the Knicks do about it?
Each of the two second round picks that the Knicks hold requires different approaches to the four options for how to use the pick, including how to take advantage of the presumed market inefficiency created by the introduction of two-way contracts. I’ll take them separately. But before I move on, here’s a quick reminder of what those four options are (since I just spent almost 700 words explaining the issue): 1) draft a player and sign him right away; 2) draft an international prospect and hold onto his rights, but wait a few years to officially sign him; 3) trade the pick; and 4) sell the pick for cash.
Given this pick’s position in the draft, the Knicks may actually be best served going the draft-and-stash route, even though that would contribute to the market inefficiency. The issue here is that, because this pick is probably either right around or just past the point at which all the players who could be seen as borderline first rounders have been taken, it may be more valuable for the team to draft an international prospect and hope that some of the more immediately useful prospects they like fall either to pick #58 or out of the draft entirely. Just because New York would be helping create a market inefficiency by doing this doesn’t mean it’s not the right play. However, if a player who could be seen as a borderline first rounder does fall to #44, the Knicks should absolutely draft him.
There’s also the option of trading this pick to move up to the first round, with the Jazz as a seemingly good fit. Taking into account Utah’s position on the win curve, it’s unlikely that they see pick #30 as a huge difference-maker, and not worth the $1 million+ per year that they’d have to pay that player. So the Knicks could offer Kyle O’Quinn and the 44th pick to Utah in exchange for the 30th pick, giving the Jazz an established commodity who has only two years remaining on a very inexpensive deal and is more useful in the short term, as well as a mid-second round pick that they can use to draft and stash an international prospect who’ll be useful in the long term. Meanwhile, the Knicks would get an obvious long-term benefit from acquiring the 30th pick. Packaging this pick with Courtney Lee in an attempt to move up closer to pick #20 is also worth exploring, with the Thunder (pick #21) and Raptors (pick #23) sensible targets.
This pick is perfectly positioned to allow the Knicks to take advantage of the market inefficiency I described above. Assuming most teams between picks 41 and 57 draft international prospects, the Knicks will have the opportunity to take a solid prospect at a spot where picks are often wasted on international prospects that will most likely never play in the NBA. While the team would be paying a premium for a player they could theoretically sign to a two-way contract, choosing to draft the player instead would ensure that the Knicks are able to gain the player’s rights. And since New York should not be aiming to contend for the playoffs this year, it makes sense to pay such a premium in exchange for acquiring what could be a useful piece on future playoff teams. It would also make sense to try to package this pick with a player (such as O’Quinn) to jump ahead of teams like the Nets and Suns into the early 50s, as those teams would similarly be in a position to want to draft players who they could sign to NBA contracts immediately. Additionally, the Knicks should aggressively pursue purchasing any picks teams choose to sell in the 51-60 range with the intent of drafting players who could conceivably have been taken earlier in the draft.
So there you go. 1600 words on the different approaches the Knicks can take in the second round of the draft this year, all because of a provision in the new CBA that was likely not meant to affect the draft in any meaningful way. But if my analysis is correct, two-way contracts will forever change the way teams view the value of second round picks, and the Knicks would be smart to take advantage. Of course, whether they will remains to be seen.