The Herb Jones Extension Is A Win For Everyone

A win for the Pelicans, a win for Herb Jones, a win for the new CBA

The Pelicans and Herb Jones have agreed to a three year, $68 million contract extension as reported by ESPN's Shams Charania. The final year of the deal includes a player option. As all of the Pelicans' moves this summer, the Jones extension comes as an unexpected surprise. This contract is a tremendous piece of business for Dumars and Jones and highlights one of the strengths of the new CBA. Let's take a look at the options Jones and the Pelicans had in front of them, and why this is such a strong deal.

Why Extend Now?

Two years ago, when the Pelicans rejected the team option on Jones, they were able to sign him to a four year, $54 million contract. This was the max amount they were allowed to sign Jones for that summer, as the Pelicans only held Early Bird Rights. Early Bird Rights allows teams to give players 105% of the average player salary from the previous year. This mechanism allowed the Pelicans to lock in Jones at what would roughly amount to a 9% cap hit for the duration of the deal. The deal was such a steal that the league's full non-taxpayer mid level exception has outpaced Jones's average annual salary. The Pelicans were able to enjoy first team all defense level production from Jones at an extremely modest price.

Fast forward to the present, Jones became eligible for another extension at the two year anniversary of his signing. Here are all the factors Jones and his agency needed to consider before deciding on a direction.

• Option 1: Re-sign up to maximum 140% of final year salary, with three new years (~$68M), totaling 5 total years on deal remaining.

• Option 2: Wait one year, re-sign for four new years at up to 140% of final year salary (~$94M). This would mean one more year at the newer, higher amount than the first option.

• Option 3: Wait two years, hit free agency with bird rights and become eligible for a deal up to five years, ~$271M. This amount could theoretically increase if Jones wins DPOY.
  

Let's work backwards to see how Jones and his agency arrived at option 1 as their preferred route.

Option 3 is by far the riskiest proposition for Jones, but is also potentially the most lucrative. Because the first two options are limited to only a 140% raise on the final year of Jones' deal, if he wanted a greater raise, he would have to wait until free agency. This would allow his bird rights to kick in, and the Pelicans would be able to sign him to any amount up to his max, including a maximum 8% raises for five years. Jones would also be able to sign with any team with cap space for up to the same maximum amount the first year (25% of cap due to 6 years of service), but be limited to only 5% raises and one less year.

In the previous CBA, this would have been the most likely route for Jones and his camp to go. The previous CBA only allowed for a 120% raise on a veteran extension. This means Jones would start his next contract at roughly $17.9M. The new CBA has increased the raise on veteran extensions to 140%, bringing Herb's first year salary on his new deal to roughly $20.9M. Remember, the 8% raises also compound on the first year base salary. An 8% raise on a $17.9M contract is very obviously going to be lower than an 8% raise on $20.9M.

This nearly $3M difference in starting salary is enough for players in Jones' salary band to forgo the risk that comes with waiting and playing the free agency game. We are seeing players get squeezed in free agency both in dollars and years. Very few four year contracts are being handed out, and there is inherent uncertainty in waiting two full years before entering the market. If you're Jones, you have to consider the possibility for reinjury (Jones is coming off a shoulder surgery), or there simply not being any cap space two years from now. With dollar figures so high, more and more players are opting to secure money in advance to mitigate these risk factors.

This leaves us with Options 1 and 2. Both of these options utilize the new 140% extension rule. The key difference is the amount of years at the newer, higher amount. On the surface, it makes sense for Jones to wait a year and secure four new years at the higher amount. It would be a reasonable assumption on his part that his value will not decline significantly a year from now. Yet we just saw Brandon Ingram take a similar gamble just recently.

Ingram was offered the three year max extension two years ago. He and his agency opted to wait one more year for the four new years, and the possibility of All-NBA. The underlying assumption was that the same deal would be there a year later. Ingram would proceed to have an extremely difficult season and that same deal evaporated.

This leads us to Option 1: guaranteed money for Herb Jones with immediacy. Though Option 1 is limited to only three new years because a deal cannot exceed five total, Jones and his agency smartly negotiated a player option. By forgoing an extra year that would have come from waiting, Jones was able to “buy" the option. This allows Jones to do two things— enter free agency in 2029 OR extend again three years from now at an amount that would exceed Option 2 due to the 140% raise. This is a sneaky smart way for Jones to maximize his earning potential while also mitigating the risks of waiting.

Why The Pelicans Did It

The sticker shock of a three year, $68 million contract can be surprising when it relates to a role player. However, I urge people to start thinking of contracts as a percentage of the salary cap. Jones's new dollar amount projects to be just over 12% of the salary cap in 2027-28. This is an extremely reasonable amount to pay for a player who is one of the five best perimeter defenders in the NBA.

Generally the team-side risks on a long term contract are opportunity cost and production loss. With regards to opportunity costs, there is no reasonable pathway for New Orleans to acquire a player of Jones’ caliber for this price. And when it comes to the production risk— a 12% cap hit is minimal enough to navigate in event of injury or other production issues. This is an extremely fair deal for a homegrown player who carries tremendous respect in the locker room and organization.

Lastly, there is a great chance this contract is actually a steal for the Pelicans. Herb Jones is a RAPM god. When it comes to impacting winning, Jones consistently shows up as a top 10-15 level player in multi year adjusted plus minus models. Jeremias Engelmann's xRAPM grades Jones as a +4.5 level player. This puts Jones in the 98th percentile, and 10th overall. 3-year RAPM ranks Jones as a +4.0 level player, which is also 98th percentile and is 8th overall. Needless to say, 12% of the salary cap is an insignificant amount to commit to a player potentially registering super star level impact on winning.

The CBA Is Working

Jones becomes the latest among the growing list of players to forgo free agency and secure a long term extension. The 140% rule has created a middle ground for teams and players to walk away happy with contracts being signed. In the previous CBA, good players in the middle class of the NBA were forced to wait until free agency to see significant pay raises. This created what I like to call a Bird Rights Trap. Because Bird Rights allowed teams to sign their own players to 5 year deals up to their max amount, this led to significant overpays. Teams would be afraid to lose their own player to the market for nothing, and agents would leverage the threat to secure enormous deals for their clients.

Now of course, this also carried huge risks for the client. A player who decided to wait until free agency could find a frigid market. Additionally, one injury at an inopportune time during a contract year could wildly change the dollars available to the player. The 140% rule is a fantastic middle ground for players and teams. Players are able to secure their money sooner, and teams are happy they won't risk losing their guys or be forced into an overpay that exceeds 140%.

Free agency may be dying, but the middle class is thriving because of this new change. $68M is life changing money for anyone. The new TV deal and rising cap has increased salaries to an amount where non-max level players are no longer worried about squeezing every single dollar they can. Kudos to the new CBA and congratulations to Herb Jones and the Pelicans.