Thursday, July 10, 2008

An examination of the Pau Gasol trade

Yesterday, the 2007-2008 luxury tax numbers were released, as were next year's salary cap and luxury tax limits. I think the occasion provides a good opportunity to look at the effects of the Pau Gasol trade for the two teams involved. Generally, media outlets judge a trade the moment it happens, and decide that whichever team got the better player "won" the trade, hence Memphis has been ridiculed for "giving away" Pau Gasol. However, different teams have different time horizons and goals, so I want to look back and see whether the teams actually got what they were looking for out of the trade, and what the true costs were (obviously, the Lakers are very happy with the trade since it catapulted them to the top of the Western Conference, but let's look at the full picture).

A brief explanation of the relevant rules:
  • The salary cap is a maximum amount of salary that a team can spend on all its players in a particular year. While it does restrict teams from doing anything they might want, there are many exceptions and loopholes that allow teams to spend more than the salary cap allows.
  • The luxury tax is a sort of tax paid by the highest spending teams. Every year, a luxury tax line is set, and for every dollar over the luxury tax line that a team spends on its players, the team is required to pay one dollar to the league in "tax." For instance, if the luxury tax limit is $70 million, and your team spends $85 million, they pay an extra $15 million to the NBA in tax -- in effect, even though the players don't get paid more this raises the team's payroll-related expenses to $100 million. The teams that do not go over the luxury tax line split up the total paid luxury tax evenly. So the team that goes over the luxury tax not only spends the extra tax money, but also misses out on its share of the luxury tax money that's in the pot.
So, the trade itself:

Lakers send out Kwame Brown, Javaris Crittenton, rights to Marc Gasol, a filler contract in the shape of Aaron McKie, and their first round picks in 2008 and 2010 in return for Pau Gasol and the Grizzlies' 2010 second round draft pick.

What were the goals? For the Lakers, they had just started to show a lot of promise when Andrew Bynum went down with an injury, and the Western Conference was competitive enough that even if he only missed a month, it would have really hurt their playoff chances. So they needed someone who could play center in their system and fit in with the team they already had. Memphis, meanwhile, had reached its ceiling with the team it was fielding. They had some success, and had won 50 games a couple of years before, but had never won a playoff game. They were looking to start over.

Ok. So we know the deal worked on the court for the Lakers. How about the Grizz? And what was the cost? Here's the cost to the Lakers:

  1. A promising young player in Javaris Crittenton.
  2. The chance to sign Marc Gasol, who went on to become the MVP of the Spanish League last year. We have yet to see how good he might be in the NBA, but if he becomes a solid rotation player or better, then that should count for something.
  3. Money: Kwame Brown ($9 million) and Javaris Crittenton ($1.3 million) together were paid less last year than Pau Gasol (about $13.7 million). Since the trade happened at about mid-season, the Lakers paid an extra $1.7 million in salary. However, the trade put the Lakers over the luxury tax line, so at the end of the season they were assessed an extra $5.1 million in tax, and forfeited their right to any share of the luxury tax pool, which when split among the non tax-paying teams came out to about $4.2 million this year. That isn't totally accurate, the tax pool would have been less if the Lakers hadn't paid $5.1 million into it, and the number of teams splitting up the tax revenue would have been 22 instead of 21, so without the trade the Lakers would have actually received about $3.8 million (instead of paying $5.1). In all then, for the first year the trade cost the Lakers $10.6 million. Further, Kwame Brown's contract was expiring while Gasol's goes through 2011, so the Lakers are on the hook for another $49.4 million over the next three years (plus any luxury tax payments that might result) as opposed to the about $5.2 million they would have paid to Crittenton -- so a difference of over $44 million.
What did the Grizzlies get out of the deal? So far, they have Javaris Crittenton - a second year guard who has shown quite a bit of talent and ability and could develop into an all-star caliber player, Marc Gasol - a skilled center who is an NBA unknown but MVP of the Spanish League, Darrell Arthur - a college star and national champion who was supposed to be drafted much higher in the first round, plus a first round pick (probably in the 20's) in 2010, and FLEXIBILITY. If they happen to sign a free agent this year, next year, or in 2010, that signing can partially be attributed to the Pau trade. So they traded known mediocrity for unknown potential -- this trade can only really be assessed once we find out what kind of players Crittenton, Marc Gasol, and Darrell Arthur are, as well as the free agent moves the Grizzlies make over the next couple of years.

There is every chance that Crittenton never becomes more than a rotation player, that Gasol isn't able to translate his skills to the NBA, that Darrell Arthur doesn't pan out, and that Memphis GM Chris Wallace throws a max contract at Zach Randolph in the next couple of years. Still, the risks were a necessity for Memphis -- the alternative was to continue winning about 45-50 games a year without any room to improve. Just as it is in the draft, potential is a driving force in the way teams are built and rebuilt in the NBA.

I'll periodically come back to this trade to analyze it over the next year as we are able to see more clearly what Memphis in fact did get for Gasol. The point is that trades, like draft picks, can't be assessed the day they are made, you have to look at the involved teams' time horizons and goals and let things develop.

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