The New Economics for Second Round Picks

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The handsome personage of Chandler Parsons hovered around the Ledo talks and many other second-round negotiations. The Rockets drafted Parsons with the 38th pick in 2011 and signed him to a four-year that guaranteed Houston could keep him with a salary under $1 million in each of those four seasons. It wasn’t the first four-year deal for a second-round pick, but as Parsons emerged into a well-rounded NBA starter, it quickly became the most famous-slash-infamous of such deals. Cap experts and union officials estimate that about a half-dozen second-round picks have received four-year deals in the last half-decade, and Houston helped pioneer the process before Parsons in deals for Chase Budinger, Joey Dorsey, and Jermaine Taylor. (The Spurs also did this with DeJuan Blair, as did the Kings with Hassan Whiteside.)

Those contracts give teams control over cheap second-rounders for an unusually long time. (Teams can control first-round picks for four seasons, but those players carry larger salaries that increase at set annual rates.) Most of the players upon whom Houston used the Parsons Plan did not really work out, but Parsons has, rather spectacularly, and the league has taken notice in pursuit of copycat deals, officials say. “With players we think have a big upside, we will only do three- or four-year deals,” Mark Cuban, the Mavs owner, tells Grantland. “If their agents don’t like it, we let them go overseas.”

Very few second-round picks amount to anything in the NBA, and it’s tempting for front offices, short-staffed and busy with a thousand other things in early July, to make second-rounders their last priority. And teams that are over the salary cap have fewer options in dealing with second-rounders. Such teams can sign an unlimited number of players, including second-rounders, to the league’s minimum salary, but only to one- or two-year deals. If they want to extend into three- or four-year contracts, they must dip into the midlevel exception — a key building block they might want to keep open for a veteran free agent.

...And some teams choose the two-year route even when they don’t use their midlevel exception at all, a sign they either don’t love their second-rounders or had other potential plans for the midlevel; the Pelicans, for instance, have done this with Darius Miller and Jeff Withey over the last two summers despite not using their full midlevel in either one.

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Also interesting from the article, expect Houston to decline Parsons option next year so he becomes a Restricted Free Agent.