Dario Saric’s cost of going to the NBA

Last night, David Pick reported that the Sixers were in talks to bring Dario Saric over to Philadelphia now.

This isn’t all that surprising, as Saric is playing extremely well. Being able to work with Saric directly, and develop them how they see fit, would have a tremendous amount of value to the Sixers.

The hurdle, as it has always been, isn’t the Sixers desire to bring Saric over: It’s finances.

Saric’s current contract

Saric still has two seasons remaining on his contract. I’m told this contract pays him 2m euros per season, although this is second hand information that I couldn’t get verified by either Saric’s representatives or the Sixers. Still, I’m going to use this as a baseline for my calculations, but keep in mind, it’s just to use as a baseline. If it’s less than that amount, that would obviously help the Sixers case.

Saric has a buyout aftert this upcoming season. This means that Anadolu Efes will have to be paid to give up the contractual rights to Dario Saric. I’ve been told that Saric’s buyout with Efes after the 2015-16 season would be “about 800k euros”, which would be about $900k, so we’ll use $900k for that.

That means that the Sixers (and Dario Saric’s representation) will have to negotiate a buyout with Efes if they want to get him over here now. Since a buyout doesn’t currently exist for this offseason, Efes could, at any time, simply refuse.

A couple of things which makes it difficult to see Efes taking a “low” buyout offer:

• Efes is under no financial hardships. Last year we saw Furkan Aldemir come over because his team, Galatasaray, wasn’t in the greatest financial shape, and they wanted to get out of his contract. Efes is not in remotely the same situation, and Saric is signed to a relatively cheap contract for the production he’s giving them.
• Efes is having a lot of team success in Saric’s first season there, as they’re up 1-0 in the Turkish League finals, with Saric playing tremendously for them.

The short version: Efes is not a team looking to get rid of Saric’s contract. The Sixers, and Saric, will basically need to make them an offer that’s too good to pass up. Because of various limitations, this will be difficult.

Sixers contributions towards the buyout

No problem, the Sixers are owned by billionaires, right? Just drop a big bag of cash at their team offices and move on with life.

If it were this simple, I’m sure the Sixers owners would be willing to do so. Unfortunately, the NBA doesn’t want billionaire, big market owners to have an advantage over small market franchises, and has thus limited what teams can contribute towards a buyout for an international player. The maximum the Sixers can spend towards a buyout this season is $625k.

Let’s say Efes would want a $2.1 million buyout as compensation for allowing Saric to leave. This is probably on the low end of what they would want, but it’s on the high end of what could actually be feasible from the Sixers and Saric’s perspective. So let’s just use this as an example to show the kind of financial sacrifice Saric would have to make in order to come over here this season. The sacrifice, in the end, could be even greater.

In order to make up this difference the Sixers can essentially use a portion of Saric’s guaranteed salary towards a buyout. Very important note: This is basically like giving Saric an advance on his salary, which he can then use towards the buyout. While it’s coming on day 1, and would come directly from the Sixers, it’s essentially coming from Saric’s own pocket, as it greatly limits his earning potential over the next 2 seasons.

Basically, the NBA sets a scale for 1st round draft picks, setting how much each player should get paid based on where he was drafted. The NBA then allows players and teams to negotiate up or down up to 20% from there, but in practice almost all players get 120% of the “slot”.

This wiggle room is what the Sixers can then use as an additional part of a buyout. The Sixers basically write a contract for 120% of the slot, but only pay Saric 80% of the slotted amount, and then use the money in between towards a buyout.

For the 12th pick in the 2014 draft, the slotted salary is $1.8 million. 120% of that is $2.16 million, and 80% is 1.44. The difference between those two, roughly $720k, can be used towards a buyout.

The Sixers can then do the same for year 2 of Saric’s contract, which is the only remaining guaranteed year. With Saric’s 2nd year slotted at $1.884 million, this would give the Sixers another roughly $750k to play with. This means the Sixers can “contribute” up to about $2.1 million towards a buyout before Saric would have to find other means (his own personal savings, a loan, etc) to use towards a buyout.

Reminder: Roughly $1.475 million of that $2.1 million comes out of Saric’s earning potential over the next two seasons.

Saric’s financial sacrifice

One additional note before we get there: Saric’s 2m euros/year contract is post-tax. Basically, in order to have the same buying power in the United States as he does in Turkey, you have to account for both the exchange rate between euros and US dollars, AND the loss of income tax.

The exchange rate is relatively easy, as 2 million euros is (currently) roughly equivalent to $2.25 million.

However, to get $2.25 million after taxes, you’d have to earn roughly $3.8 million. (Note: I’m using a 40% tax bracket, which is overly simplified).

So, when looking at Efes contract, you essentially have to look at it like he’s currently making $3.8 million.

Here is a quick look at his earning potential over the next 4 seasons if he comes over to the Sixers now, compared to what it would be if he stays with Efes for this upcoming season. Again, this is assuming a $2.1 million buyout:

This actually doesn’t look too bad, and the fact that the Sixers would have to take money out of Saric’s guaranteed pay to help make up the difference in the ~$900k buyout even if he remains in Turkey for 1 more season actually helps keep that difference close.

You could also argue, with much validity, that getting to Saric’s 2nd NBA contract one year earlier could help make up that lost $1.5 million.

There’s another scenario for Saric, though: Staying in Turkey for the remaining 2 seasons of his contract with Efes.

This has 3 major benefits for Saric:

• Keeps him in his favorable Efes contract, rather than the restricted NBA rookie scale.
• Doesn’t have to contribute anything towards a buyout.
• If he stays over 3 seasons after being drafted, he’s no longer bound by the rookie scale.

That last bullet point is huge, especially with the rising salary cap from the national TV deal.

Nikola Mirotic just went that route, signing a 3 year, $16.6 million deal, that was outside of the rookie scale, when he finally came over. At $5.3 million during his rookie season, Mirotic earned roughly 8.4% of the Bulls salary cap space during his rookie season.

Problem: in 2017 (the season Saric would come over if he stayed over in Turkey for his entire contract) the salary cap is projected to be $108 million, a drastic increase over the $63 million cap during Mirotic’s rookie season.

In essence, a similar (RE: 8.4% of cap) deal for Saric would start at roughly $9 million. That being said, since Saric cannot negotiate with any NBA other than the Sixers, his earning potential is dictated more by what he could earn in Europe rather than what another NBA team would pay him. This is admittedly hard to predict, considering how young Saric is and the lack of comprehensive salary information publicly available for the European leagues. As such, this may be a high estimate, and $6m per year in the NBA may get it done.

Now, let’s take a look at that above table, but including the possibility of Saric staying over for the remainder of his Efes contract, and using the “worst case scenario” of being able to command a $9m/year NBA salary..

Now that’s a spicey meatball. We’re now talking about a projected difference in earning potential over the next 4 seasons of -$17 million. Even if the $9m/year post-tv-deal salary estimation is high, and the more conservative $6m/year estimation is closer to the truth, we’re still talking about $10m+ Saric would be leaving on the table.

You might look at it as “Well, yeah, but if he comes over now, he’d be in line to negotiate his 2nd NBA contract in the summer of 2019!” This is true, but if he stays over with Efes for the remaining 2 seasons, thus not being bound by the rookie scale, he’s also not bound to sign a 4 year contract. He could stay in Turkey for 2 seasons, then sign a 2 year NBA contract, thus having his cake and eating it too: He gets to keep his increased earning potential over the next 4 seasons and still hit free agency at the same time.

Conclusion:

Assuming Efes would entertain a $2.1 million buyout (which is absolutely not certain), with the ability to get to his 2nd NBA contract quicker, you can make a financial case for Saric to come over now, even if he’d have to limit his earning potential over the next 4 years.

However, the best financial move for Saric, by a considerable margin, is to remain in Turkey for the entire duration of his Efes contract and come over to the Sixers for the 2017-18 season.

There’s a chance that Efes would not be reasonable with their buyout demands, and all of this is moot. That’s a big hurdle to climb right from the get-go. Even when you get past that hurdle, however, you’re hoping that Saric’s desire to play in the NBA right now is so great that he’s willing to overlook a pretty drastic decrease in earning potential.

In short: If Saric comes over, that’s great. I’m not counting on it, though.

Update: 11:30 am: 

Corrected incorrect report that Saric’s buyout was $1.2 million after the 2016 season. Also, I updated the explanation on Saric’s projected NBA salary.

Update: 12:15 pm:

Have been told by a European source that Saric’s buyout after next season would be for roughly 800k Euros. I updated the calculations to reflect this.