Zion Williamson situation means we need to talk about rookie contract problem

In the early days of the NBA, the concept of a “rookie contract” was alien. Several legal challenges and collective bargaining sessions, we are immersed in the era of the rookie-level contract. In many ways, the change suits NBA players. But as we see with Zion Williamson’s increasingly dysfunctional situation in New Orleans, the current system is not without flaws.

But to understand today’s problems, it is essential to understand how we got here. We’ve advanced far beyond the previous setup, even with the warts that mark the modern beginner’s ladder.

It beats pure chaos.

Rookie contracts before rookie ladder

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Long before Zion Williamson and the NBA rookie contract ladder, the only competitive teams that had draft picks were industrial teams like the Phillips 66ers. | Denver Post via Getty Images

Signing rookies was straightforward for the first 20 or so years of the NBA‘s existence. Teams recruited between 10 and 20 players each year and offered one-year contracts to those they wanted. But most towers received an invitation to training camp, a place to sleep and meals. The deal came later if they made the cut.

In the 1950s and into the 1960s, some name-only amateur clubs operated in various industrial leagues. Most notable was the Phillips 66ers. Managed by Philips Petroleum and based in Bartlesville, Oklahoma, the 66ers recruited talented college players from the NBA.

They got jobs in the company, even though their main duties were kicking ass on the basketball court. But the rise of rival professional leagues like the American Basketball League in 1961 and the American Basketball Association in 1967 eventually drove industrial teams into the history books.

The 66ers played their last season in 1967-68, according to a 1985 article by Frank Scott of Oklahoma. The new ABA has pushed player salaries beyond their means.

First-round draft picks commanded more money and longer contracts due to competition between the ABA and NBA. When the salary cap era came to the NBA in 1984, the business got complicated. Before Zion Williamson, there was only anarchy.

The salary cap era brought class warfare to the NBA

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Sports agents have a different understanding of supply and demand than most of us. They represent supply, making demands on behalf of their customers. Lottery picks represented by savvy agents have learned to pull through.

Rookie contracts have become more lucrative while the salary cap has not kept pace. The National Basketball Players Association has noticed an alarming trend. Role-playing veterans have been squeezed out of jobs for undrafted rookies or less experienced players who cost less.

Rookie offers went from the sublime to the ridiculous in 1993. Chris Webber, the first overall pick that year, signed a 15-year, $74.4 million deal with the Golden State Warriors, per The Associated Press.

But the deal gave Webber an early termination option which he exercised after his rookie year. A restricted free agent, Webber eventually re-signed with Golden State. The Warriors then traded him to the Washington Bullets.

Unsurprisingly, the NBA insisted on a rookie ladder in the next collective agreement. They got it, with several tweaks since.

The first rookie ladder provided guaranteed three-year deals for first-round picks. First-rounders are currently signing four-year contracts with salaries determined by their draft slot. The first two years are guaranteed and the third and fourth seasons are team options.

Then they are eligible for restricted free agency and the teams have full Bird rights. This is where the system begins to break down, as seen with Zion Williamson and others before him.

New Orleans Pelicans basically control Zion Williamson for 9 years

Zion Williamson is just the latest example to highlight the problems with the NBA's rookie contract system.

Zion Williamson is just the latest example to highlight the problems with the NBA’s rookie contract system. | Jonathan Bachman/Getty Images

The Pelicans selected Zion Williamson with the first pick in 2019. He signed a four-year, $44.3 million contract. He became fully guaranteed when New Orleans exercised its fourth-year option last October.

To maximize his money, Zion can sign a five-year extension for up to $181 million. But he must sign before the start of the 2022-23 season, or he will head to free agency. The Pelicans may extend a qualifying offer to retain the right to match any offer.

If Williamson wants to test unrestricted agency as soon as possible, his only choice is to sign the qualifying offer from New Orleans and play a fifth season with the club. But even then, he can’t make maximum money unless he re-signs with the Pelicans.

In this scenario, New Orleans still has Bird rights. This gives the organization the ability to offer an extra year and more money over the term of the contract.

Greg Monroe was the last notable player to sign the qualifying offer and opt for unrestricted free agency a year later. He signed the QO, a one-year contract, with the Detroit Pistons in September 2014 before getting three years and $51.4 million from the Milwaukee Bucks the following summer.

Finding the right balance for rookie contracts hasn’t been easy

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Salary cap tools such as Bird rights help teams retain free agents. Restricted agency exists for a similar reason. Teams select a player and develop him for four years. If they are stars, their teams don’t want to lose them after investing in that progression.

For example, Zion Williamson still has star potential even though injuries have hampered his development.

The designated rookie extension (the supermax) came out of the 2017 ABC talks. If a player meets specific criteria like All-NBA status on his first contract, his team can offer him up to 25 % of salary cap for up to five years.

Such was the case with Ben Simmons when he joined the Philadelphia 76ers in 2019. When he made the All-NBA Third Team in 2019-20, supermax provisions kicked in and the value of the new contract soared to $190 million.

A year into the pact, he asked for a trade. The fear among NBA executives is that Simmons’ situation will set a precedent for future rookie extensions. The player the 76ers acquired for him, James Harden, was traded twice in 13 months while on a veteran supermax extension.

Is the current system defective? Absoutely. But the alternative is to expose franchises in less desirable markets to just becoming incubators for big-name franchises, even more than they already are.

The NBA and NBPA haven’t found the perfect solution. Until they do, Zion Williamson and every other young player in the league are working under a well-meaning but flawed system. In a league that hasn’t had true parity since the late 1970s, that’s an ongoing problem.

Contract information courtesy of spotrac.

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