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Cancelation of season could cost NBA $1 billion or more, hit salary cap hard

NBA salary cap

WASHINGTON D.C., March 19, 2020 -- Photo taken on March 19, 2020 shows U.S. dollar banknotes in Washington D.C., the United States. The Trump administration’s plan to send Americans relief money as part of a massive stimulus package in response to COVID-19 could be 1,000 U.S. dollars per person, and 500 dollars per child, Treasury Secretary Steven Mnuchin said Thursday. (Photo by Liu Jie/Xinhua via Getty) (Xinhua/Liu Jie via Getty Images)

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The NBA is a business, and like a lot of businesses around the nation right now, it is getting hammered. Revenue flowing in has stopped because the league is suspended due to the coronavirus, but it is still playing out expenses to employees right now.

How big a hit? Cancel the season and the loss could be $1 billion or more.

There was 21 percent of the NBA season left when games were suspended. When they added up the cost of lost gate receipts, television revenue, money returned to sponsors, and everything else, got to $1 billion quickly.

All told, the total financial impact of suspending the NBA regular season alone could approach a billion dollars, and that only involves one-fifth of the schedule being lost. If the playoffs must be shortened or otherwise altered to fit a new, later timeline, the costs would climb even higher.

That’s the lower end of the numbers Ben Golliver of the Washington Post got from a team executive.

Gauging the precise economic hit of the NBA’s suspended season is impossible, but one high-ranking team executive said that the total damage could reach $40 million per team, or more than $1.2 billion, if the playoffs are lost.

The NBA salary cap is a function of team and league revenue. The cap is at $109 million a team this season and originally was projected to jump up to $116 million for next season; however the financial hit from the league’s lost revenue from China in the wake of the Daryl Morey’s Tweet was expected to drop that projection a couple of million. Still a number up from last season.

Now, the NBA could see that salary cap number drop $8 million or more if the season and playoffs are called off, suggests John Hollinger of The Athletic (he’s a former front-office executive with the Grizzlies).

Because [Basketball Related Income] is roughly split with the players and then is cut 30 ways to produce a cap number, playing the rest of the season in front of empty crowds could theoretically drop next year’s cap by $8M. That’s the regular season, mind you – doing the same for the playoffs, where the average gate is higher, would siphon away millions more.

A dropped salary cap also could potentially lead to a massive cap spike for the 2021-22 season as revenues returned closer to normal (something the teams and players may want to smooth out rather than have hit the market all at once, as happened after the latest television deal, a spike that made Kevin Durant to the Warriors possible).

All of this is theoretical. Nobody knows what the financial impacts of all of this will be on the NBA in the end, because nobody knows how well our current national measures to contain the virus will work, when play can resume, and if that will be in empty arenas or in front of crowds. Officials with teams are running out different scenarios and preparing for what they can, which is all anyone can do right now.

All we know is that the league is going to take another financial hit in what has already been the strangest NBA season in memory.