An interesting couple of days for the New York Knicks. By now you’re aware that Jeremy Lin is probably headed to the Houston Rockets. And, of course, I’m going to offer my take on it.
After a brief but well publicized run last season, the undrafted point guard out of Harvard is a free agent this summer. Because of a recent ruling pursued by the Players Association, Lin was granted early Bird rights, meaning that the Knicks were in a position to match any offer that he received, even though they couldn’t offer him the most money outright. So, as free agency approached, it became clear that the Knicks would let Lin seek out the best offer, and then they would be in a position to respond (with most expecting that he would end up back in New York). The Rockets became the clear primary suitor and agreed to a 4 year, $28 million deal with the neophyte, with only the first 3 years guaranteed.
Now, structure is important here, so let’s focus on it. Within those 3 guaranteed years, years 1 and 2 are for about $5 million, with the final year jumping to $10 million. In other words, a “poison pill” strategy. When dealing with a restricted free agent, where the old team is limited in its ability to go over the salary cap (and can only match) in order to keep the player, a highly punitive third year salary brings the luxury tax into play and might prevent the match from happening. In other words, because the Knicks are over the luxury tax threshold in that third year, they end up paying a dollar-for-dollar penalty to retain the player. Thus, the deal doesn’t cost the Knicks $10 million over that season, but $20 million.
Here’s where it gets interesting. After the initial terms of the deal circulated, it became clear that the Knicks would match. However, according to news reports, when contracts could officially be signed starting last Wednesday, Lin went back to the Rockets to try and get even more money in that third year with the information about what the Knicks planned to do. No sweat off the Rockets’ back, especially if it seemed unlikely that they were going to get the player. So $10 million in year 3 became more like $15 million, and the actual total cost jumped from $20 million to $30 million. And in an unexpected twist (as if there’s any other kind), the Knicks balked.
When thinking this whole scenario through, I deem that there are two possible methods to Lin’s madness. Either he wanted Houston all along, in which case, good for him, he got his team and more money. But, if he actually wanted to stay in New York (which seems to be the consensus view), then he was being penny wise and pound foolish. It’s hard to be a media darling on Madison Avenue…when you decide to leave Madison Avenue. It’s also worth noting that his story last season was as much about where he was doing it, as what he was doing. He is also dealing with an owner who is not a savvy business mind, and who if he feels scorned will bite his nose to spite his face. Moreover, I think I’ve been pretty clear about my doubts relating to his game. He is an out-of-control tweener who needs a veteran to help him learn the ropes…which the Knicks offer having brought in Jason Kidd (Houston currently lacks anything resembling a point guard to offer tutelage). But, the contract got pricier, Raymond Felton came back, and now Lin’s departure may be a fait accompli.
Still, in spite of all of those things, I think the Knicks should match. The contract actually is not that bad when put into context. At $5 million per in the first two years, it’s a pretty inexpensive option on his upside. And, even if he amounts to nothing, and the Knicks have to pay that huge salary in year 3, he is still a very tradable asset as a big expiring contract, and he does nothing to screw up the ability of management to press reset after the 2015 Finals.
So, they should keep him. Will they? Probably not.
Correction: According to ESPN, the actual cost of the Lin contract in year 3 could be as high as $43 million.
