The financial implications of Rudy Gobert’s $205 million contract extension with the Utah Jazz
The Jazz and Utah center came to a compromise when working out a new deal, one that makes sense for both sides
The Utah Jazz gave Rudy Gobert the third largest contract in league history and made him the highest paid center ever when they agreed to a five-year, $205 million contract extension Sunday.
The superlatives used to describe Gobert’s deal won’t last long though. As the salary cap goes up and the next batch of stars emerge, the price tag on Gobert will just be one in a sea of many. And the contract could have been bigger.
After being named NBA Defensive Player of the Year twice, Gobert was eligible for up to 35% of the cap (roughly $228 million over five years), the same amount that Giannis Antetokounmpo just signed on for in Milwaukee, but Gobert took a discount.
The deal made sense for both sides.
Despite being eligible for the full supermax amount and being an amazing player, it would have been hard to justify $228 million for Gobert. But a regular four-year, $195 million max, the amount the Jazz could have paid him had they waited until after Dec. 21, wouldn’t have reflected the accolades Gobert has earned or the impact he has on winning for the Jazz.
The Jazz wouldn’t have had the cap space to add someone of Gobert’s caliber if they were to have let him go in free agency, and it would have been unlikely that Gobert could have found a situation so tailored to his style of play. So the compromise was made.
Looking toward the future, the discounted price that Gobert agreed to does give the Jazz a little bit of flexibility, but it still means the Jazz will more than likely be a luxury tax-paying team once Gobert and Donovan Mitchell’s extensions kick in next season.
There’s still a chance the Jazz could do some maneuvering to get under the tax this season in order to avoid repeater tax payments next season, but after that things will get a little more difficult.
With Gobert and Mitchell’s salaries plus the seven other guaranteed contracts on the roster for 2021-22 (Joe Ingles, Royce O’Neale, Bojan Bogdanovic, Jordan Clarkson, Derrick Favors, Udoka Azubuike and Elijah Hughes) the Jazz will already be committed to paying out $132 million, which is where the luxury tax threshold sits this season and it probably won’t be far off from that in the 2021-22 season.
That’s even after Mike Conley’s salary is gone as he becomes an unrestricted free agent this coming offseason. So the Jazz will have to get creative in filling out the roster next year.
The salary cap and the luxury tax threshold for the 2021-22 season will be calculated after the current season and will be based on projected revenue. So, everything moving forward is going to depend on how soon the NBA can return to normal with fans in arenas once again.
Much like this year, in which the NBA kept the salary cap at the same place it was last season to make up for lost revenue, COVID-19 will determine what the league can do.
After the 2021-22 season the Jazz will have even more room to work as Ingles’ contract expires and the salary cap likely increases but Gobert and Mitchell will continue to count for roughly $70 million of the cap every year.
The good news is that new owner Ryan Smith does not seem fazed by being a luxury tax-paying team and gave the Jazz front office the green light on deals for Gobert and Mitchell as well as all their other moves.
Outside of the financial implications of the lucrative extensions signed by Gobert and Mitchell are the on-court expectations for the players. With big money comes big responsibility and the Jazz won’t want to be a luxury tax-paying team if their stars aren’t producing.
“People are going to expect those things from you on a nightly basis,” Conley said. “So I told them to prepare for a lot of criticism. Prepare for all of that because it comes with a big payday, but same time as the best responsibility you could ever have.”