Saturday, June 14, 2014

Analyzing the 2013 NBA Free Agent Market

Determining the worth of a Free Agent since the 1970s when free agency entered the NBA. Obviously since both players and General Managers are human their will be contracts that break away from the market standard. By using basketball-reference.com's Win Share statistic and the per annum salaries of players that signed contracts during the 2013 off season we are able to estimate how many million dollars each win share is worth. Even though we were able to find the average amount of money spent on a win share we found that the correlation between win shares and salary is there but we weak with an r-score of only .729. The approximate value for a win share is $1.28 million.
Players like Chase Budinger (injury), Andrew Bynum (injury), Jon Leur, and Wesley Johnson (that bad) were thrown out of the study.
To get a betterlook of how free agency money is distributed let's break it down by position:


As you can see Point Guards are the most underpaid and Centers are overpaid. Examples of this are DJ Augustin of the Chicago Bulls who signed a deal worth $1.3 mil a year despite having 2.8 win shares during the 2012-13 season for a $/WS ratio of $.46. On the other end of the spectrum Dwight Howard inked for $22 mil a year with the Houston Rockets despite only having 7.6 win shares the season before, making him the second most overpaid player. 

Point Guards
Chris Paul was hands down the best player to ink a deal during the 2013 off season but only signed the second biggest contract at $21.40 mil a year. This is quite a bit of money but still falls short of Howard's contract, a player that had about half as many win shares as Paul. The only point guard to be in the top ten of over paid players is Chauncey Billups, who joins his Detroit teammate Josh Smith in the ranks of most over paid free agents of 2013. But what really defines the point guard position is that 3 of the bottom 10 players  in terms of difference between $/WS and the league average were point guards. This includes Nate Robinson who only makes $2 mil a year despite having 5.9 win shares in 12-13.

Shooting Guards
Shooting Guards along with power forwards were the most accurately paid players in the league with a position $/WS of $1.26 mil. Tyreke Evans of the Pelicans and OJ Mayo were both in the top ten in terms of being over paid. Evans makes $11 mil a year despite only 4.4 Win Shares in his contract year. Monta Ellis joins those to at 11 in terms of being over paid. The biggest steal among shooting guards was Nick Young who is making $1.15 mil a year despite 2.3 Win Shares in his contract year, this is most likely due to him expecting to be Kobe's backup in the upcoming years.

Small Forwards
There are three Small Forwards who find themselves to be in the top 10 in terms of overpaidness (it's a new word folks) and they are Andre Iguodala of the Warrior, Earl Clark of the New York Knicks, and Josh Smith of the Pistons (Joe Dumar had a really bad off-season.) Smith actually led the 2013 free agent class in difference between worth and salary. Metta World Peace was the biggest steal for small forwards signing for $1.6 mil a year despite 4.6 win shares the year before. Another New York small forward (although in Brooklyn), Andrei Kirilenko is also in bottom 10 for getting what they are worth.

Power Forwards
Let's just say that no power forward is underpaid (the most underpaid was Carl Landry who was only a measly $.23 mil under the average compared to $.99 mil for Andray Blatche). The average $/WS for the position was $1.25 mil. At the same time that none were underpaid none were drastically overpaid with Jason Maxiell only earning $.11 mil over the league average.

Center
While they are the most overpaid position with Dwight Howard, Chris Kaman, Josh McRoberts, and Zaza Pachulia all showing up in the top 10, their fellow big-man Andray Blatche got the shortest end of the stick during the last off-season.

Now you may have noticed that the most overpaid players tended to be some of the better players in the game; now this got me thinking. Are the third or fourth win share more valuable than the first two. Another group of people in the overpaid category are players with relatively low win shares; this makes me think that league rules regarding veteran salary minimums causes older players to be worth more. First this I'll show a quick graph that shows how different age groups' $/WS compare to the league average.

So it turns out that I was wrong that veterans would be overpaid since the salary floors would cause them to be paid more so than they deserve. These observations are actually easily explainable. The first three groups are players either entering their second or third contract so it can be expected that players might be paid as much for potential as they are for production (Especially the 20-29 year olds.) The veterans are underpaid since their performance can only be expected to decline.

Now what about the idea that win shares become more valuable as the amount a player has increases. This would fit in well with the SuperStar wage theory (where top performers in certain fields earn drastically more than those only slightly less desirable then themselves.) 
Frow what I can tell players with low win shares have exaggerated $/WS because of salary floors. The 8-14 Win Share range is a little odd since only 3 players fell in that range and two of them, Tiago Splitter and David West were in situations where they would have to take discounts to stay with their current team. If you combine them with the 7 to 7.9 range their is sort of a player demand curve to be formulated. But their is still the question of why 6-6.9 are so drastically underpaid. 

So the demand curve looks like a W and this is my theory. Players in the 6-6.9 range are role players on good teams that are willing to take pay cuts to play on contenders. Also, there win shares are probably inflated since they are surrounded by superstars. Players in the 4-5.9 range are role players who have decided to have elevated roles on poorer teams (taking money over wins.) Now if you take the superior end of this demand curve, the 7-14 range you'll see that players are worth about 1.4 mil for each win share. So for elite players like Lebron James and Kevin Durant they are probably worth up towards $30 million in a salary capless league.