The NBA draft lottery is an annual event that determines the order of selection for the teams that did not make the playoffs in the previous season. The lottery system gives each non-playoff team a chance to move up in the draft order and select higher in the first round. Being selected early in the first round, especially in the top 3 picks (commonly referred to as the ‘lottery picks’), means a player can command a much higher salary as part of their initial NBA contract.
What is an NBA lottery pick?
The NBA draft order is determined by the previous season’s standings, with the team with the worst record getting the best odds to receive the #1 overall pick. The top 4 picks are determined by a weighted lottery system among the 14 teams that did not make the playoffs. These lottery picks are the most coveted, as they represent the right to select one of the top prospects coming out of college or internationally. The remaining playoff teams select in reverse order of their regular season record.
So in summary, a lottery pick refers to one of the first 4 selections of the NBA draft awarded to the teams with the worst records from the previous season.
What is the salary structure for NBA rookies?
All NBA rookies selected in the first round of the draft sign 4-year contracts based on a structured rookie salary scale. The scale is set ahead of each draft by the league’s collective bargaining agreement. The salary terms for first round picks are predefined – teams have no flexibility in negotiating salaries for rookie contracts. The salary increases each season, but the amount is also dependent on where the player was selected in the first round.
For example, in the 2022 draft, the first overall pick (Orlando Magic selecting Paolo Banchero) signed a 4-year deal worth $44.2 million. The second pick, Chet Holmgren selected by the Oklahoma City Thunder, signed for $43.2 million. Meanwhile, the final pick of the first round received $4.4 million over 4 years.
Second round picks do not follow the same predefined scale. Their contracts are negotiated between the drafting team and player, but are limited to a maximum of 2 years at the minimum NBA salary. This provides much less financial security for second round draftees compared to first round picks.
NBA Rookie Salary Scale for First Round Picks in 2022 Draft:
| Draft Pick | Year 1 | Year 2 | Year 3 | Year 4 | Total |
|---|---|---|---|---|---|
| #1 | $10,245,480 | $10,729,320 | $11,284,617 | $11,903,373 | $44,162,790 |
| #2 | $9,870,100 | $10,328,420 | $10,785,739 | $11,391,073 | $42,375,332 |
| #3 | $9,494,600 | $9,927,880 | $10,361,920 | $10,853,023 | $40,637,423 |
| … | … | … | … | … | … |
| #30 | $2,417,320 | $2,528,440 | $2,639,520 | $2,750,680 | $10,335,960 |
As illustrated by the table, the player drafted first overall earns significantly more on their rookie contract compared to the final pick in the first round. These initial 4 years of a player’s career are crucial for their development and earnings potential down the line when negotiating extensions or free agent contracts.
Do lottery pick salaries increase on their second contracts?
Yes, players selected in the lottery can see significant salary increases once they finish their rookie deals and sign their second contracts in free agency. Teams have greater flexibility negotiating terms for a player’s second deal – salaries are no longer constrained by the rookie wage scale.
The NBA’s collective bargaining agreement does have some provisions that often benefit lottery picks on their second contracts:
- 5 Year Max Contracts – Also known as the “Designated Rookie Player Extension”, only players coming off their rookie contract with the team that drafted them are eligible to sign 5 year extensions. The 5th year is also at the maximum salary.
- Higher Max Salaries – Under the “5th Year, 30% Max Criteria”, players meeting certain performance criteria may be eligible for higher maximum salaries – up to 30% of the salary cap.
The table below shows some examples of lottery picks who saw significant salary increases on their second contracts:
| Player | Draft Pick | Rookie Contract Total | Second Contract Total |
|---|---|---|---|
| Anthony Davis | #1 (2012) | $23 million | $127 million |
| Damian Lillard | #6 (2012) | $15 million | $120 million |
| Bradley Beal | #3 (2012) | $18 million | $129 million |
As you can see, lottery picks like Davis, Lillard, and Beal saw their total contracts increase by over 5x after finishing their rookie deals. This speaks to their on-court development and value to their respective franchises.
What factors most impact a lottery pick’s salary?
There are a few key factors that tend to have the largest influence on a lottery pick’s earnings potential in the NBA:
- Draft Position – As outlined already, draft slot determines the predefined rookie scale salary. But it also signals perceived upside/potential entering the league. Teams will pay more for the top prospects.
- Team Success – Contributing to winning and playoff success raises a player’s profile and value. Teams reward and retain players who positively impact winning.
- Individual Performance – Putting up impressive stats and accolades like All-Star selections or All-NBA teams boosts a player’s market value around the league.
- Market Size – Large market teams can often afford to pay more to keep their stars. Players in cities like Los Angeles and New York have more endorsement opportunities too.
- Potential – Players are also paid for future potential and projection, even if they haven’t produced at a star level yet early in their careers.
The very top lottery picks who become perennial All-Stars like LeBron James or Derrick Rose can eventually earn 35-40% of their team’s salary cap on maximum veteran deals. But most lottery selections will earn in the range of $15 – 25 million per year on their second contract if they perform well on their rookie deals.
Do second round picks earn as much as lottery picks?
Very rarely. The salary differences start right away in year one, as illustrated earlier with the significant gap between the #1 and #30 picks in the first round. Second round picks do not follow the same predefined scale, so they earn much less out of the gate.
The vast majority of second rounders do not negotiate large guarantees given the uncertainty over whether they’ll even make an NBA roster as a rotation player. To put it in perspective using 2022 as an example:
- The #1 overall pick’s salary: $10.2 million
- #30 first rounder’s salary: $2.4 million
- Minimum 2nd rounder’s salary: $925,000
Very few second round picks are able to eventually land significant long-term deals. Since 2000, only a handful of second rounders have earned over $10 million per year on multi-year contracts. Names include Gilbert Arenas, Carlos Boozer, Monta Ellis and Nikola Jokic.
But essentially every single lottery pick that becomes a starter for their team eventually earns over $10 million per season on their second contract. So the odds of earning significant NBA salary money long-term is heavily stacked in favor of first rounders.
Do undrafted players ever earn as much as lottery picks?
It’s extremely rare for undrafted players to reach substantial salaries on par with lottery selections. But there are a few notable examples of players who have climbed the ladder and earned at least one significant NBA contract despite going undrafted:
- Ben Wallace – Made over $100 million in his career, including a $60 million deal with the Bulls in 2006.
- Brad Miller – Signed a $68 million contract with the Kings in 2003.
- John Starks – Inked a $20 million deal with the Knicks in 1997 after a modest start to his career.
- Jeremy Lin – Land a $25 million contract with the Rockets in 2012 at the peak of ‘Linsanity’.
But stories like the ones above are very much the exception, not the norm. The average undrafted player that even makes an NBA roster is playing on minimum salary deals for the majority of their career.
They certainly don’t have the built-in upside of a lottery pick’s rookie scale contract and the lucrative second deal that often follows for those who perform well initially.
How much are #1 overall picks paid compared to picks outside the top 5?
There is a substantial gap in both rookie salary and future earnings potential between the consensus #1 pick and players selected even just outside the top 5 in any given draft.
Using 2021 #1 pick Cade Cunningham and #7 pick Jonathan Kuminga as examples:
- Cade Cunningham’s rookie salary: $10.1 million
- Jonathan Kuminga’s rookie salary: $5.8 million
Nearly double the year one income simply by going one slot higher from #7 to #1 overall. This gap will likely continue to widen in their second contracts.
Recent #1 picks like Anthony Edwards, Zion Williamson, and Ja Morant are all projected to sign max rookie extensions in the 5 year, $150+ million range. Meanwhile, players drafted outside the top 5 – like Tyler Herro, RJ Barrett, and Kevin Porter Jr – are more likely to sign extensions in the 4 year, $90-100 million range.
While certainly still life-changing money, it illustrates the sizable financial difference between being at the absolute top compared to just slightly down the draft board.
Do overseas players earn the same rookie salaries?
Yes, overseas players selected in the NBA draft inherit the same rookie salary scale as their American counterparts. For example, Slovenian Luka Doncic earned the same salaries on his rookie deal as the rest of the 2018 draft class he was selected with.
The main difference with international prospects is that many of them decide to delay entering the NBA draft. Examples include Nikola Jokic and Giannis Antetokounmpo playing several professional seasons in Europe before declaring. As a result, they tend to be a bit older than American one-and-dones.
But in terms of the actual rookie contract values, overseas players slot right into the same preassigned dollar amounts based on draft slot once they do get selected.
How has rookie salary changed over time?
The dollar values for rookie contracts have increased substantially with the growth of the NBA’s revenue and salary cap over time. Some key trends in how rookie salaries have evolved:
- Back in the 1980s, #1 picks like James Worthy and Ralph Sampson earned between $500,000-$1 million per year.
- In the 1990s, top picks like Shaquille O’Neal and Allen Iverson made around $2-$3 million annually on their first contracts.
- The rookie scale introduced in 1999 immediately boosted salaries, with #1 pick Tim Duncan earning over $8 million per year.
- LeBron James scored a then-record $12.9 million as the top pick in 2003.
- Blake Griffin and John Wall signed their rookie deals for $5+ million per year in 2009 and 2010 respectively.
- Today’s top picks like Zion Williamson and Cade Cunningham now earn over $10 million per season.
So #1 overall salaries alone have increased by 10x over the last 25-30 years. However, stars with their massive second contracts dwarf their first deals – for example, LeBron now earns around $40 million per year.
Conclusion
Being a lottery pick certainly sets a player up for life-changing financial opportunities early in their NBA career. The guaranteed four year rookie scale contract provides lottery selections with generational wealth from day one. First round draftees then have the advantage of restricted free agency, where their original team can match contract offers, keeping the top talents in place long-term.
If the lottery pick demonstrates their abilities and achieves both team and individual success, they are well-positioned to then sign a maximum-level second contract and consistently earn $25+ million per season at their peak. Even those outside the top 5 make substantially more than late first rounders or second rounders.
While second round and undrafted players occasionally break through with big contracts, the odds are extremely long. Essentially, being a high draft pick – especially in the top 3 – almost guarantees NBA riches for the long haul.
