It was not a surprise before last season when the Orlando Magic signed Jonathan Isaac to a contract extension.
The Magic were stuck in something of a bind with a team they still expected to make the playoffs and a young player with clear elite defensive talent. Even with Isaac was likely out the entire 2021 season recovering from a torn ACL, it made sense to invest in the young forward.
The Magic signed Isaac before the shortened 2021 season to a four-year, $70-million contract. That equates to $17.5 million per season.
That was a major investment for the team and a show of faith in the young forward. They were not going to get any more information on Isaac with him out the entire 2021 season, so they invested in what they knew and took care of him.
The Orlando Magic’s contract with Jonathan Isaac was heavily incentive-laden. The details of those incentives are starting to come out as the team plans for 2023.
That was a point up for debate. Perhaps the Magic could have retained him for less if he hit restricted free agency. That might have been bad of business — Orlando took care of their person as much as their player.
But it quickly came out that Isaac’s contract was heavily incentive-laden. With Isaac having played only 136 games in five seasons, it was widely assumed he had to reach certain games played marks to get the full value of his contract.
That cover seemed to satisfy everyone. If Isaac plays, then the team will get its defensive stopper. If Isaac does not play, then the team does not have to pay out the whole contract.
The question was always how much protection the Magic were able to get for themselves.
After missing the entire season as he recovers from his torn ACL — and the Magic make sure they ramp him back into playing properly after missing more than two whole years of regular playing — it appears several provisions in Isaac’s contract triggered that changed the value of his contract when it comes to the cap and the guaranteed money he will get moving forward.
That started coming to light in more detail. Isaac’s guaranteed salary was already reduced because he failed to play 25 games this season. Now the rest of the details are coming out:
It is not clear if his guaranteed amounts could be retriggered because he hits some games played mark moving forward.
UPDATE: Keith Smith does a really good job explaining the implications on The NBA Front Office Show here:
According to Smith, the non-guaranteed nature of Isaac’s contract was triggered since he did not meet the games played threshold this season and these are now his guaranteed amounts. He will retain a $17.4-million cap hold (so the Magic do not get any salary cap relief) and these are merely the amounts the Magic owe Isaac if they decide to cut him.
The full salary is no longer guaranteed moving forward. As always, every contract becomes fully guaranteed after Jan. 10 of each season.
Back to the original post:
Some of this is certainly just salary cap machinations too.
If Isaac meets whatever incentives remain in his deal — again, it is likely games played marks — then he will receive his full salary or something similar to it. These numbers are likely to adjust if he returns and plays a full season next year.
There are not many contracts that are this heavily incentive-laden. Mostly incentives kind of pass through a contract with little effect. They are usually too small in many ways to cause a big impact with a team or its books — save for famous instances where players are trying to make sure they get incentives like when Moe Harkless refused to take any 3-pointers late in the season to preserve a 3-point percentage incentive in his contract.
Incentives do not usually clear out this much cap room either. And in all likelihood, we will be talking about changes to his contract once Isaac returns and starts playing regularly again.
The way incentive contracts work is that only “likely incentives” count against the cap. Incentives are categorized as “likely” or “unlikely” depending on whether they were achieved the previous season.
So if Isaac had an incentive in his contract to play 25 games and he failed to reach it this year, then that incentive becomes unlikely for the remainder of his contract. If Isaac plays 25 games next year, then his incentive becomes likely again and whatever amount he would make under his contract for reaching this incentive would become likely and his salary would be restored.
Of course, once an incentive is triggered, then it counts against the cap anyway. So the Magic will still have some math and calculus to do, especially as they move forward. And Orlando is likely betting on Isaac being able to hit whatever games-played mark moving forward.
This sounds like this is more of a cap machination. And the longer Isaac is out and unable to play, the more the Magic are protected and gain cap flexibility because of his absence. The guaranteed amounts just decrease the longer Isaac is out.
It is not like playing 25 games is a difficult hurdle to overcome. And the Magic obviously guaranteed more money upfront while Isaac was recovering and knew he would miss games. This contract structure protects them if Isaac continues to have problems in his recovery.
That is likely why this contract structure was something Isaac and his representatives would agree to.
That appears to be what is going on with this news about Isaac’s contract.
It was already fairly public knowledge that there were a lot of these incentives placed into Isaac’s contract. A games-played incentive made a lot of sense considering how much time he has missed.
A lot of this discussion and the contract machinations may ultimately become moot too.
If Isaac plays 75 games next year or even 50 games, then a lot of his contract may retrigger — it has become understood he had a 25-game incentive in the 2022 season, but that number may change or escalate over time or it might be the same. His whole salary amount may yet be restored — $17.4 million every year for the next three years.
What seemed to be new recently was the vast amount of his salary that was non-guaranteed and apparently incentive-laden.
If all goes well, it will not matter. Isaac will return and his contract will be restored.
For now, Isaac is still recovering from what is being described as a minor hamstring injury. He was on a podcast recently where he said he believes he is on track to return for training camp.
That is probably the most welcome news of all.