The 25% rookie max has that curious ability to supercharge a baller’s career earnings trajectory while also curiously granting certain teams roster-building flexibility against the cap. Let’s explore.
At about this time seven years ago as the basketball world searched far and wide but ultimately in vain for JR Smith’s shirt, the talk of the NBA was the decision to allow the salary cap to skyrocket by 32% overnight. The reason was simple: a massive influx of revenue from the latest round of NBA media rights agreements. The fallout was immediate: The big spending Golden State Warriors were able to acquire my future boss and win the next two championships running away.
In 2017 — the very next year — a new collective bargaining agreement went into effect in the Association, ushering in the era of the designated veteran player exception, a contract colloquially known as the “supermax.” The rule allowed for players to sign extensions with their incumbent teams starting at a full 35% of the NBA salary cap following their seventh or eighth seasons if they met certain performance milestones. Since then, future Hall of Famers like Stephen Curry, Russell Westbrook, James Harden, Giannis Antetokounmpo, and Nikola Jokić have all inked this deal, setting new high watermarks for annual NBA earnings nearly every year.
But a less-heralded salary measure by comparison — one that long predates the 35% supermax — has had a massively greater impact on the hoops earnings landscape, and as the 2023 offseason period began, it reared its pretty little head once again to the tune of $828 million in salary commitments in fewer than 72 hours: the NBA rookie max contract, starting at 25% of the cap. It’s the first mega-extension a young baller is eligible to sign.
With four new members securing this lucrative deal this summer, there’s no better time to discuss the way the Breakout Bag has both supercharged several players’ career earnings trajectories while curiously giving several teams valuable flexibility to build up a contending core at the same time.
Not long after the 2023 free agency and extension floodgates opened at 6 p.m. ET on June 30, Indiana’s Tyrese Haliburton, the Grizzlies’ Desmond Bane, and Charlotte’s LaMelo Ball — all 2020 draftees with three years of service time in the books — signed a 25% NBA rookie max contract in their first year of eligibility, forgoing what would have been restricted free agency one year from now. Anthony Edwards of the Timberwolves joined them on July 3.
Starting in 2024-25, each stands to make $207 million over five years. For a sense of proportion, let’s establish that, as of this writing, these “Breakout Bag” contract extensions are:
- Already tied for No. 12 on the list of biggest contracts in NBA history by total value
- Approximately 35% larger than any LeBron James contract by total value and 6% larger than any Kevin Durant contract
- Larger than the career NBA earnings of all but 23 active players and all but 35 players in the history of the league
I mean, sheesh. Not bad for a group of four young lads with a combined three All-Star appearances and zero All-NBA teams among them.
But what if I told you that, despite these seemingly gigantic numbers, these contracts will practically feel team-friendly even if this foursome never once reaches MVP heights or cracks the ranks of All-NBA?
Yes, sure, I’ll pause while you research new profanities to hurl at your screen like an 18th century shinobi hurls a shuriken. But the key here is that the Breakout Bag only begins at 25% of the salary cap; it isn’t pegged there year-over-year.
Another key? Just as we saw in 2016 when the Warriors collapsed in the NBA Finals only to turn around and sign Kevin Durant, a new (and gobsmackingly gigantic) NBA media rights deal will begin following the 2024-25 season — the very first in which these four players’ extensions are in effect — delivering a revenue spike to the league that’s highly expected to be unprecedented in nature.
As this moneyed media rights bonanza takes effect, the NBPA shouldn’t be considered a lock to approve an accompanying salary cap leap as massive and immediate as we saw seven years ago. But even if they opt for “cap smoothing” over a period of years, the longer-term effect is the same.
The collective bargaining agreement allows for a contract’s annual salary number to increase by a maximum of 8% year over year. With this in mind, an NBA rookie max contract extension that begins at 25% of the cap in 2024-25 could not just look team-friendly by the time it’s winding down and the player in question enters his expected prime, but could feel like a downright steal if it overlaps along the way with a notable salary cap spike since the value of the deal is only pegged to the cap in year one.
According to current estimates at Spotrac, the final year of the Haliburton-Bane-Ball-Edwards Breakout Bag comes with a salary number of about $46.86 million. Out of context, that feels like a gigantic figure; only Steph Curry made more in 2022-23. In the context of expected annual salary cap growth, however, $46.86 million is barely 22.5% of the estimated 2028-29 cap.
If an explosion of TV money shoots revenue outlooks even higher, a 25% extension could easily be down to 20% by its end. With each of these four players in question already showcasing All-Star-quality production, particularly on the offensive end of the floor, accounting for just 20% of team spending allotment is a steal.
And besides, even in a worst-case scenario, an expiring contract of that size is a readily tradable asset that likely wouldn’t require a team to give up notable draft assets for the sake of a salary dump.
Under current rules, the Breakout Bag is the largest contract for an NBA player with six seasons of experience or fewer. And while certain styles of play may not deliver the same bang for one’s buck as the hot-scoring Ant Man or Bane — streaky turnover artists or big men lacking reliable outside shooting or shot creation ability, for instance — putting a ceiling on the extent of a team’s investment in a young star can end up being a bit of brilliant business if the timing works out just right.
A Parting Word on Derrick Rose
Derrick Rose won his MVP award too early. Just 21 when the gaudy trophy was bestowed upon him in 2011, he was condemned to become the most underpaid MVP in the modern history of the league. The NBA and NBPA quickly got to work on an exception that would permit players still on rookie deals to sign extensions starting at 30% of the cap rather than 25%, a wrinkle now colloquially known as the Derrick Rose Rule.
Here’s how it affects the Breakout Bag: If either of the four players in question makes an All-NBA team, wins MVP, or wins Defensive Player of the Year in 2023-24 — the final year of their rookie deals — that $207 million rookie max contract automatically escalates into a $260 million “Rose Rule” deal.
Would that change how a team perceives the value of its investment? Sure, but don’t overthink it: it also means they have a legit superstar.
Forget that $260 million would be, as of this writing, the second-biggest contract in NBA history behind only Denver’s favorite Joker — an eruption of TV money is an eruption of TV money, and its effect on the league salary cap is going to make anyone signing an extension this offseason a bizarrely-but-explicably undervalued asset in a few short years.
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