December 30, 2016 by J.H. Yeh
Teams add players through signing free agents, drafting young talents, and trading for players. When people think of adding a new player to the roster, their immediate thoughts are the money they have to pay for the player because the team is the employer. And often times, the money used to pay the player can be quite steep in price. This is the monetary cost. Humans naturally think about monetary value and it is no surprise that we associate any negative cost of adding one new player with money–which is the most basic form of cost.
However, for the front office, they don’t think of this way. They look beyond the monetary cost of adding a new player. Below is a list of all the costs associated with adding a new player.
- Salary cap
- Roster spot
- Potential gains forgone due to trade
- Players forgone due to limited resources
- External cost
- Time invested on developing players
- Coaching staff preparation
- Money paid to make the player available (buyout)
- Extra premium paid to convince players to join a team
- Opportunity cost
1 Salary cap: This is the most obvious cost out there because of its association with money. I am not going to talk too much about this cost. Long story short: Every player eats up a portion of the salary cap.
2 Roster spot: This is also an obvious one. The cost of adding a player means the player will take up a roster position. There are only 15 roster position in any given NBA team–and that’s it! Teams are always very strategic when it comes to filling up the roster due to its low limited number of position available. Signing a player means you have one few roster position available.
3 Players and potential gains forgone due to trade: This is a very complicated cost that teams often carefully look into. It is also one of the costs that the front office heavily weigh on. Moreover, this is a cost that is extremely difficult to put a specific measure on because the effect and the magnitude of the cost is often not readily perceivable.
When it comes to trades, a team is always expected to part ways with players and draft pick. For instance, earlier this year, Courtney Lee was involved in a three-team trade that dealt him to the Charlotte Hornets. In this trade, the Hornets acquired Lee from the Memphis Grizzlies and traded P.J. Hairston to the Grizzlies and traded Brian Roberts to the Miami Heat.The Grizzlies parted ways with Lee and received Chris Andersen from the Heat as well as.being the recipient of four second-round draft picks as part of the trade; two of the picks were from the Hornets and two were from the Heat. In an effort to avoid luxury tax, the Heat gave two second-round picks to the Grizzlies who agreed to take on an aging Andersen and his contract.
Hornets got Lee (from Grizzlies)
|Hornets parted ways with Roberts (to Heat), Hairston (to Grizzlies), and two second-round picks (to Hornets)|
|Grizzlies got Andersen (from Heat), Hairston (from Hornets), and also got two second-round picks (from Heat) and two second-round picks(from Hornets)||Grizzlies parted ways with Lee (to Hornets)|
|Heat got Roberts (from Hornets)||
Heat parted ways with two second round picks (to Grizzlies)
At the time, the winner was clearly the Hornets from a competition standpoint. However, the cost was hard to measure with the two second-round picks. The same goes to the Grizzlies and the Heat, who took the cost by giving up draft picks and, for the Hornets, Lee, just to inch closer to their long term goals. The Grizzlies gave up Lee and taking on Andersen’s contract for prolonging continuing competitiveness in the long run while the Heat achieved their long run financial goal by giving up two picks to convince the Grizzlies on absorbing Andersen’s contract. This cost goes way beyond the simple addition of adding a player to the roster. It also involved draft picks which can potentially change a franchise’s future outlook. We will spend time on this interesting and complex topic some other time.
A more recent (and more easily understood) example is the Golden State Warriors, who signed Kevin Durant via free agency. And the cost? Almost the entire bench (four key rotational players in Ezeli, Barbosa, Speights, and Rush) and two starting players (Barnes and Bogut)!! That’s six players in total! The Warriors gave up a lot by clearing the entire bench just to sign Durant!!
4 Players forgone due to limited resources. Compared to trades, this is a cost that is more readily available and easier to measure at the time of the event. In this context, the limited resources mean the roster spot and the minutes assigned to a given player. In a team, there are only 15 roster spots and 48 minutes available–and that’s it. By adding an extra player to a crowded roster means one player must be moved. For example, last season, the San Antonio Spurs waived capable veteran Rasual Butler for another another capable veteran Kevin Martin in order to maintain their roster at 15 players–the league maximum allowed. Similarly, adding a player who who shares the same position with another player may mean the one of the two players should be moved or else suffer the consequences of external cost. For instance, Harrison Barnes was not re-signed after the Warriors won Durant in the 2016 offseason because Barnes is too talented to be playing backup minutes.
5 External cost: Let’s piggyback off of the external cost mentioned in the previous paragraph. In here, the external cost means too many players with similar set of skills and positions stuck in the same team. Hence, having a team with more than three players with similar skill set can contribute to external cost, which leads to inefficiency and wasted resources. Inefficiency means the team is not balanced and therefore, failing to perform effectively and collectively at the maximum level. And by wasted resources, that means the player’s talent is not being utilized and the foregone minutes that are never played by the player. For another words, having a crowded roster can mean there will be players who are too talented to be playing garbage minutes or not playing at all. A prime example of this is the 2012-13 Milwaukee Bucks. That team featured an extremely crowded frontcourt in Larry Sanders, Samuel Dalember, Drew Gooden, John Henson, Ersan Ilyasova, Joel Pryzbilla, and Ekpe Udoh (and later Gustavo Ayon via mid-season trade). With so many big bodies taking up almost half the team, the result was too many wasted talent and healthy bodies sitting on the bench. In that season, established players who can compete at NBA level such as Gooden, Pryzbilla, and Dalembert took turns shuffling in and out of the inactive list. Gooden and Pryzbilla, who were healthy throughout the season, only played a combined 28 games in the entire season. The crowded roster also led to inefficiency as young talent like Henson struggled with development due to inconsistent minutes.
6 Time spent on investing. This is a cost that fans normally don’t see. This mostly applies to rookies since young players tend to be inefficient and not immediately ready for NBA competition. The cost of signing a young player straight out of college or oversea leagues is the time for the coaching staff to develop that player. Depending on the player’s maturity level and skill set, it can take anywhere between one to three years (or even more) to develop the youngster into an NBA ready product. The cost of investing on a young player includes multiple assignments to the D-League, regular monitor and status updates of a player’s progress, health and physical reports, and hiring a shooting coach or development coach, etc. Interestingly, such investment can sometimes go beyond basketball such as hiring a translator or a personal assistant to help player’s (usually foreign) transition to the league by learning the language and better assimilating to American culture. Yao Ming’s transition and the Rockets’ investment on him was publicly documented during his rookie season.
7 Coaching staff preparation: This is closely related to the time spent on developing rookies as the two often come hand to hand. In here, we are strictly talking about utilizing the resources and energy for the coaching staff and the operations personnel to get the players ready to compete. Adding one player can change the dynamic of the team chemistry or offensive assignments and it is up to the coaches to figure out the right combination of lineup and proper game assignments for the team to compete effectively as a cohesive unit. A good example is the 2010-11 Miami Heat when Pat Riley signed LeBron James and Chris Bosh via free agency. The cost of suddenly having a super team is the time the coaches and the team spent on figuring out the right lineup. The team got off to a slow start and was 9-8 before finishing the season with 58 wins, and the preparation did not fully pay off until the second and third year when the team won it all.
8 Money paid to make the player available. This is a simpler cost that is readily available and easily measured. Often times, a player may be under contract with another ball club and the team has to pay for the buy out in order to make him available. This cost is often a major encumbrance that can prevent players from joining the NBA or other basketball leagues. An example is when the Toronto Raptors paid a portion of the reported 2.4 million to buy out Jonas Valanciunas’ three-year contract with Rytas in Lithuania.
9 Extra premium paid to convince a player to join a team. This is illustrated in an article a couple weeks ago. Smaller market teams or teams enmeshed in undesirable situations often pay a player some extra money beyond his perceived value to convince the player to come to the franchise and hopefully make the team more attractive to future free agents. This explains why mediocre teams sometimes overpays a player.
10 Opportunity cost. Finally, the cost that is the most difficult to calculate: Opportunity cost. This is the loss of the benefit associated with an alternative decision when it is chosen. It is the gain you never enjoyed and from a choice you never made. Literally there are hundreds, if not thousands of opportunity costs that can be potentially derived from any of the previous nine costs. The opportunity cost of spending money on Player A instead of the Player B and waiving Player C so Player A can have the final roster spot and join the team is not being able to enjoy Player B or Player C’s on court contribution. This also applies to allocating resources. A team can choose to investing all the energy and time on a player drafted first-round while leaving the other newcomers and the opportunity cost is a potential second-round steal or a polished undrafted free agent. This list can go on and on because there is always an opportunity cost for every decision a team makes, for each player added onto a team.
(all graphs are created by me, and all sources of information are courtesy of NBA.com and BasketballReference.com as of December 30, 2016)