How the NBA's New Two-Way Contracts Will Affect the Draft and Beyond

From a tightly-grouped top tier of prospects to a team selection order that's teeming with trade possibilities, the 2017 NBA Draft could be one of the most unpredictable in recent memory. And adding to the uncertainty are two-way contracts, a new wrinkle in the league's Collective Bargaining Agreement that may complicate matters even more, particularly in the second round.

What, exactly, are two-way contracts? When the new CBA goes into effect this summer, teams will be able to sign and carry a pair of players with less than four years of league experience who will spend most of their time in the D-League but also can flex up to the NBA for up to 45 days, and be paid accordingly for that time.

In essence, two-way contracts will give teams 16th and 17th roster spots for project players. No one really knows how will that affect the draft, this year and going forward, or overall player development.

In theory, the contracts could produce win-win outcomes. First, promising young players who aren't quite ready for prime time end up receiving more money to stay in America instead of playing overseas, and also get to work more closely with NBA teams that are more invested in seeing them succeed. Second, those same teams get cheaper, longer-term rights to athletes who have a chance of becoming both contributors and major bargains.

In practice, however, things might be fuzzier. How so? Let's take a closer look:

How do two-way contracts work?

Players under two-way contracts are paid on a tiered salary system. Each two-way player can sign a deal for one or two years, will make a $75,000 D-League salary next season, and also make additional money based on the time they spend in the NBA.

For each day that a two-way player is on the NBA team's roster—up to a maximum of 45—he will accrue one day of service and make the daily amount owed to him based upon the rookie minimum salary, currently set to be $815,615 for the 2017-18 season. Given that there will be approximately 180 days in the season in 2017-18, a two-way player could make up to around $203,903 in NBA money on top of their D-League salary.

So a two-way player could make up to $279,000. Is that good?

It's pretty good, at least compared to previous seasons. Last year, players that were drafted and stashed in the D-League typically made less than $30,000, while those who went undrafted and were stashed made, at most, about $100,000.

Are there any reasons that players— whether they're second-round picks, undrafted rookies, or currently in the D-League or overseas—wouldn't want to sign a two-way contract?

Yes. VICE Sports spoke to a number of NBA player agents, most of whom said they won't advise their clients to sign two-year two-way contracts—something they expect teams to push for. The reason? While a two-way contract can encourage a team to invest development time and resources into a player, it also limits that player's ability to land a regular NBA contract.

If a player goes undrafted or accepts a required tender offer as a second-round pick but then gets released in training camp, he becomes available to the entire league. But if he's under a two-way contract, only that team can call him up to the league.

Here's why that could be a problem: suppose you're a defensive wing on a two-way deal, playing in the D-League because your parent NBA team has a logjam of more established wing stoppers. If another franchise suffers a series of injuries to its wing players and needs someone like you, you're out of luck, even though it's a golden opportunity.

Moreover, players who refuse two-way deals and take their chances as undrafted free agents can still make money. Strong undrafted prospects often are able to earn a $50,000 training camp salary, be cut, and then earn an additional $26,000 as an affiliate D-Leaguer.

That $76,000 is less than what two-way players will make, of course, potentially by a factor of four. But for some players, the freedom to sign with any team in the league will be worth leaving cash on the table. For players on the margins of making a NBA roster, talent differences are miniscule. Fit is crucial. Having the flexibility to find right circumstance could mean less money in the short term, but more money and a better career over time.

What about NBA teams? Since two-way contracts offer the opportunity to acquire additional assets at low cost, they sound like a no-lose proposition. Is there any potential downside?

Possibly. Let's let a player agent explain.

"To me, teams are really stupid with (two-way contracts)," an agent told VICE Sports. "They thought, 'Wow, we invested $50,000 in this kid to come to training camp and come to our D-League team, and then he got really good and now we're out $50,000 because another team signed him."

Two-way contracts solve that issue. Right?

"That's one way of thinking of it," the agent said. "Here's another. Those deals were like health insurance. You pay into it, and you may never use it, but when you need it, you get the benefit. So these affiliate players in the past, you pay them, you get a good player on your D-League team, someone on another NBA team gets injured, they call him up, and you lose the player. But it went the same for you. When you needed a player, you could go get one from any D-League team and the world was open to you outside of draft picks. You could get the best player you needed."

And now?

"They screwed themselves," the agent said. "Now, they're more limited to only those guys on their own team. Sure, affiliate guys are going to be up for grabs everywhere. But what you have to assume now is that two-way contract players are going to make up roughly the 60 best players in the D-League. Theoretically, that's who they should be, and those guys are going to be off-limits to most teams.

"So now, a lot of call-ups aren't going to be the best player at a specific position of need. Instead, they're going to be the best affiliate player who is likely outside of the top-60 players in the D-League for two reasons. Either a) the two two-way players each team has don't fit the positional need or b) they want to keep those players on two-ways instead of converting them to standard contracts."

Long story short, two-way deals might hurt every team in the league by preventing some of the best D-League talent from flowing to where it's needed most.

How will two-way contracts affect the NBA Draft?

This remains a matter of conjecture and debate throughout the league. For a second-round pick, accepting a two-way contract may not be the best option, depending on life circumstances. Most American players would rather play in the United States than overseas, and they can now get paid reasonably to do so. But is a two-way deal the best path for them to reach the elusive goal of an NBA career? If you're an established, high-level player over in Europe, is a two-way deal the most lucrative path?

Maybe not. Meanwhile, teams may not feel that second-round picks are the best use of two-way contracts—after all, there are lots of players in the world, and draft picks aren't the only ones vying for those deals.

Here's how the agents who spoke to VICE Sports think this year's draft is going to play out with regards to two-way deals: at some point next week, teams will call agents to find out which players are amenable to taking two-way deals for next season. Agents will talk to their clients, and put all the options out on the table.

Next, teams will create two lists of players: those who are willing to take two-way deals, and those who won't, but will take the non-guaranteed, one-year required tender that every franchise must offer a second-round pick. Players in the latter group could be seen as riskier selections; a team could have to release them in training camp, losing a potential asset for nothing.

Every agent who spoke to VICE Sports said they will push for some sort of agreement—likely handshake deals—guaranteeing that their two-way players will get the maximum 45 days on a NBA roster, the better to earn the maximum possible amount of money. Most of these conversations haven't happened yet, so no one really knows if that's a demand teams will be eager or willing to meet. Most likely, it will happen on a case-by-case basis.

Bigger picture, two-way deals probably won't fix what's arguably the main problem with the draft's second round: the best players often aren't picked—rather, it's the best players amenable to particular teams' terms. Things may become slightly more meritocratic, but don't expect a perfect marketplace.

What about outside the draft?

Two-way deals likely will only cover a fraction of the players picked in the second round. Teams will be using the deals on overseas American players, previously undrafted European players, and previous second round selections that they still have rights to. For instance, the Boston Celtics could easily use a two-way contract on one of their three second-round picks this year, and use another on Abdel Nader, the No. 58 pick in the 2016 NBA Draft who has shown well in the D-League so far. That still leaves them with two draft picks that they have to figure out terms for, be it a stash in the D-League or in Europe. The Oklahoma City Thunder could use both of their two-way spots on Dakari Johnson and Daniel Hamilton, past second round picks who have been stuck in the D-League making under $30,000 a year in salary.

There are also impressive, non-affiliated D-League players with under four years of experience, as well as good American players overseas that figure to get two-way offers. The new contracts would allow teams to better scour the globe for the best system and roster fits—the talent difference between the 400th-best player and the 800th-best player in the world is essentially non-existent, so again, fit really matters!—and offer more competitive pay.

Not every American playing abroad will take a deal. As long as a player overseas is getting paid on time, $300,000 over there goes further than $300,000 here, because European teams often pay for housing, transportation, insurance, and many other things on top of that salary. On the other hand, $300,000 isn't a massive amount of money by basketball standards, and the opportunity to come home will be enticing.

Bottom line, are two-way deals good or bad?

Overall, there's a lot to theoretically like. Two-way contracts should be a good way for teams to develop assets, and a good way for some players to make more money than they could before, even if it means giving up some freedom. More options is ultimately a good thing. But we don't know exactly how they'll shape and shift the market, or how much additional complexity they'll introduce. Hopefully, they'll be a step in the right direction.