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BTL - Rookie Contracts

With the recent news of Name, Image, and Likeness Rules for NCAA athletes, the discussion of future NBA stars profiting in the early stages of their careers is as prominent as ever. The options for young basketball players are continuing to expand. Now athletes can decide to play in college, where they are now able to earn money. They can choose to enter the G-League or play overseas to earn a salary right out of high school. But what do those earnings look like as these same players enter the league through the draft?

With the NBA Draft just around the corner on July 29, let's take a look at what next season's NBA rookies will be earning. Starting salaries for NBA rookies is determined by draft placement. All rookie contracts are guaranteed for two seasons with a 3rd and 4th-year team option, meaning the organization has the choice to sign the player on for each of these additional seasons.

The first-year salaries, based on the draft order, for rookies, drafted this season look like this:

  • $8,375,100

  • $7,493,500

  • $6,729,300

Many NBA Analysts consider Cade Cunningham the consensus pick for 1st overall. This pay scale means that Cade Cunningham could be making over $8 million next season. This figure is higher than many established veterans earn each season, but that is the price you must pay for young stars in the league.

These rookie contracts are also back-loaded, meaning that the salary increases each season. In the 3rd season, if the team were to exercise their 3rd-year option, and they would be crazy not to, Cunningham would be earning $9,212,700 in his 3rd season.

This past April, I wrote an article outlining the Larry Bird Exception. Bird Rights are offered to teams who have a player under contract for multiple seasons. They allow teams to provide that player with higher salaries than their competition in Free Agency. One major factor in rookie contracts is that they attach the player's Bird Rights to the team who drafts them. Considering this, any team that signs a player onto the 3rd year option of their rookie deal would then have Full Bird Rights on that player. This allows that team to offer a much higher salary to that player and encourages player retention.

The final note on rookie contracts is Restricted Free Agency (RFA). Any former 1st Round Pick who completes the fourth year of their rookie deal becomes an RFA. Again, being an RFA puts more power in the hands of your team. An RFA can take offers from any team during free agency, but whatever offers they receive, the team that drafted them will have the opportunity to match the offer. Once the request is matched, the player must resign with his former team.

Rookie deals set up top draft picks nicely for a successful career, both financially and on the court. Over the course of their first four years, high first-round picks have the opportunity to earn around $30 million. However, teams also love them. They allow teams to have Bird Rights on young stars and allow offers to be matched when those stars become free agents, thus promoting team continuity and allowing franchisees to grow around a superstar.

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