Houston Rockets: Why Victor Oladipo should have signed the extension

The Houston Rockets, per ESPN’s Adrian Wojnarowski, reportedly offered Victor Oladipo a two-year, $45.2 million max contract extension. Per league rules, the additional two-years are the maximum that the Rockets could offer Oladipo in season.

The Rockets have clearly seen enough from Oladipo to be interested in extending his stay but the feelings were not mutual and Oladipo quickly rebuffed their advances. In the offseason, Oladipo will be eligible to sign a four-year commitment from suitors and could still circle back to the Rockets and hammer out a long-term deal.

The simple math makes Oladipo’s decision appear to be wise. Why sign for two-years at approximately $22.6 million a season when you could land that number but over a four-year period? Well, the math actually says that Oladipo could be leaving some money on the table.

Houston Rockets: How Victor Oladipo is leaving money on the table

Maximum contracts are tied to the salary cap and the league salary cap is tied to revenue, thus league revenue dictates the size of maximum contracts. The Rockets ‘ offer to Oladipo comes in at an average of $22.6 million, which is only 20.7-percent of the current $109.1 million salary cap.

As Wojnarowski lays out, the contracts that Oladipo could land in the offseason could offer him a much larger per season salary and for many more years.

After the season concludes, but before the start of free agency, Houston would be able to offer him as much as a four-year, $113 million extension [25.9% of cap]; once free agency begins, Houston can offer up to four years for $151 million [34.6% of cap] or five years for $195 million [35.7% of cap].

So how is it possible that Oladipo is leaving money on the table? Well, NBA revenue and the salary cap have taken a beating from the fallout from Daryl Morey’s Hong Kong pro-democracy tweet and then the ensuing global pandemic preventing fans from being in stadiums and all the revenue they generate.

To protect players and teams in the short-term the NBA decided to smooth those losses over the next few salary caps. Again per ESPN’s Adrian Wojnarowski, the projected salary caps over the next three seasons are for $112 million in 2021-2022, $115.7 million in 2022-2023, and $119.2 million in 2023-2024.

If Oladipo were to sign the Rockets’ extension offer for $45.2 million he’d become a free agent following the 2022-23 season at the age of 31-years-old. Assuming Oladipo enters that offseason in the same position as this upcoming one, where he could land a four or five-year maximum contract at the same percentage of the salary cap, then he would be in line for a $160.1 million deal over four-years or $206.5 million over five-years.

The simple math says that if Oladipo were to have signed the Rockets’ offer now then he would be in a position to earn $205.3 million over six-years or $251.7 million over seven years. However, by taking the Rockets’ current offer off the table he’ll be becoming a free-agent in the worst market for free-agents in modern NBA history.

Next: How much Oladipo will earn now