After agreeing to a sign-and-trade with the Chicago Bulls and San Antonio Spurs, the Sacramento Kings have agreed to a three-year, 74-million dollar deal with the newly-acquired DeMar DeRozan. The third year is only partially guaranteed.
DeMar DeRozan’s Kings deal lands at three-years, $73.7 million — with third year partially guaranteed at $10 million, according to league memo. https://t.co/pjMrMxvisy
— Adrian Wojnarowski (@wojespn) July 9, 2024
Adding DeRozan undoubtedly makes the Kings a better team on the court. But when it comes to the NBA – a league where teams are limited by a salary cap – you can't just focus on on-court fit when you evaluate signings. You also need to assess the amount of money the team is paying for that player's production.
In past posts, we've looked at different methods (that are similar to what front offices use) for projecting how much a player's contract should be. This time, we'll do the same thing. The only difference is that we already know the amount the player has been paid rather than having to predict it.
Method #1: A Revised Version of Seth Partnow’s Formula
In his book, “The Midrange Theory,” NBA analyst for The Athletic and former Director of Basketball Research for the Milwaukee Bucks, Seth Partnow, discusses a formula that teams use to estimate a player’s monetary value.
In its essence, the formula involves multiplying how many points a player is “worth” by the amount a win “costs” in a given season. Unfortunately, Real-Adjusted Plus-Minus (RAPM) — a major component in the formula — is no longer available. So, I've revised Partnow’s formula a bit.
The website Dunks & Threes has a statistic called Estimated Wins (EW). Last season, DeRozan had 9.0 EWs. Next year, with the salary cap being estimated to be around 141 million dollars (per Spotrac), a single win will “cost” roughly 3.4 million dollars. Based on those two numbers, DeRozan should make about 30.6 million dollars next season (roughly 21.7% of the salary cap).
That means that, based on this estimation method, DeRozan is getting paid 7.2 million dollars less than his value (according to last season's production).