NBA Draft: The Hidden Cost of International Prospects
Jeremy Berman explores the contractual complications that can be presented when an international player is selected in the NBA Draft.
Basketball has become a global game, evidenced by the influx of international talent that has entered the NBA. According to NBA.com, there were 108 international players on 2019-20 opening-day NBA rosters, marking the sixth straight year with over 100 international players in the NBA. Further, 11 out of 50 possible two-way spots were occupied by international players.
In last season’s NBA draft, we saw 17 players selected who were citizens of countries outside of the United States. In 2018, 13 international players were drafted, and in 2017, NBA teams selected 15 players with foreign country citizenship. This season, the draft could see as many as 20 players who are internationally-born, as well as two American-born players who played in Australia this season: LaMelo Ball and R.J. Hampton.
Are international players treated any differently than domestic players under the salary cap? At first thought, you might think not. Keep reading to learn about an important difference when an international player is selected by an NBA team.
Often, when an international player shows significant potential at a young age, they’ll sign a long term contract with a high level European team that locks them in from the age of 15 or 16 until they are upwards of 20 years old. The player is guaranteed a good bit of money, while the team gets to develop and control the player’s playing status. On the surface, you might think that once a player enters the draft, they are free from any obligation to their previous team. However, in most situations, that is not the case.
Usually, when a young international player agrees to a contract with a top-level European team, they agree to pay a fee to get out of their contract to go to the NBA. This is commonly referred to as an “NBA out clause,” or an “international player buyout.” The NBA out clause is negotiated between the player’s agent and the team. Depending on the agreement, the cost may fluctuate from year to year. The payment schedule for these buyouts is also a matter of negotiation between the player agent and his international team.
As you might imagine, an NBA team drafting a player with a buyout clause is incentivized to pay that payment for the player in order to get him stateside on their NBA roster. To prevent costs from getting too exorbitant, hence limiting the desire for teams to pay the international player buyouts, the NBA’s collective bargaining agreement limits what a team may pay directly to the player out of a European contract. In the upcoming draft, the limit is $750,000, and it increases by $25,000 each season. This amount does not affect the team’s salary cap. If an international player buyout exceeds the limited amount (officially termed the Excluded International Player Payment Amount), the player is responsible for paying the remaining difference, and that amount comes directly out of the player’s NBA salary. Further, the excess payment is applied to the team’s salary cap as a signing bonus, and is prorated over each guaranteed salary year of the contract.
Limiting the amount a team can pay also forces international teams to be reasonable with their buyout clause amounts. They must weigh the money they could receive for a young, up-and-coming player vs. his actual contributions to the team, which are usually minimal at the highest levels. Luka Doncic is the obvious exception to this rule, winning the EuroLeague MVP as an 18-year-old for Real Madrid in 2018. In essence, international teams often look at these players as investments rather than long term contributors. Similar to flipping a house, the team invests time and money into the player, hoping to develop him as an appreciating asset, and then collect a return on investment when the NBA buyout is paid. This process happens routinely every year, and international teams are happy to oblige.
As an example:
Currently slotted as the 27th pick on the Babcock Hoops’ 2020 NBA Mock Draft, Leandro Bolmaro is a 19-year old, 6’7” combo guard from Argentina, currently playing for FC Barcelona, a top team in Spain. Despite being projected to be a first round pick, Bolmaro has received sporadic minutes this season. Nonetheless, his draft value has seemingly never been higher.
Rumors have circulated recently that Bolmaro’s NBA buyout was between $2.0 million and $2.5 million, an exorbitant amount. If this were the case, with the NBA team only able to pay $750,000 of the buyout, Bolmaro would be on the hook for another $1.25 to $1.75 million to get out of the contract with FC Barcelona, depending on the actual figure. With first round contracts subject to a set rookie scale, if, for example, Bolmaro is selected with the 27th pick, he could only make a max of slightly over $2 million in year one, and almost $11 million total over four years. If his buyout was indeed $2.5 million, he’d owe an equivalent amount to his entire first year’s salary in the NBA to FC Barcelona. Clearly, this would be a ridiculously unfair scenario for the player.
However, Babcock Hoops’ Matt Babcock recently confirmed that Bolmaro’s NBA buyout is in fact only for $900,000, a much more reasonable amount, meaning Bolmaro will only have to pay $150,000 if he wants to play for an NBA team next season. Again, the timing of payment is a matter of negotiation, but the extra $150,000 will come out of Bolmaro’s salary.
If Bolmaro’s buyout was a much higher number, he may have been more likely to be selected in the second round. As mentioned earlier, first round picks are bound to the rookie scale, and it would be much tougher for the team and player to come to an agreement with such a huge buyout being owed to the European team. In the second round, there is much more flexibility to negotiate contracts.
Let’s say Bolmaro dropped to the second round of the draft, and, for example’s sake, his NBA buyout clause actually was $2.5 million. Bolmaro’s new NBA team could pay the Excluded International Player Payment Amount of $750,000, but $1.75 million would still be owed to FC Barcelona. In the second round, the drafting team could use an exception or cap room to sign Bolmaro to a larger deal than what they were planning to pay, say $1.75 million more, and distinguish that amount as being paid to FC Barcelona towards the buyout.
Hypothetical $2.5 million buyout example:
Bolmaro is picked in the second round.
Team uses cap room or an exception to sign Bolmaro to a 3 year, $9 million deal.
The NBA team pays $750,000 towards the buyout and $1.75 million remains.
The team uses available cap space or an exception and must add the prorated $1.75 million on top of the $9 million deal, resulting in the following cap hits:
Bolmaro still receives his $9 million, with about $583,333 prorated over each season and allotted to Barcelona.
Again, these figures are only for example purposes. A team targeting Bolmaro would have to balance the risk/reward of waiting to draft him in the second round, but with only a $900,000 actual buyout, this shouldn’t come into play for Bolmaro.
Each team has to do their due diligence for the draft, whether with regard to a player’s character, work ethic, or background. With international players, it is also extremely important for NBA teams to be aware of the player’s buyout amount, and to take that into consideration as a cost for the player. As more intel is gathered before the NBA Draft and we learn more about upcoming international player buyouts, we’ll find out if there will be any complications for international players wanting to join the NBA.