While the NBA takes a big financial hit, rumor is the salary cap won’t see a huge drop
No NBA games are being played, no fans paying for tickets or buying arena beers, no revenue is coming in. The NBA playoffs will not start on time. If games are ramped up at any point in the next couple of months, it will not be in front of fans, just television only.
Which is to say, the NBA is taking a big financial hit right now. How much is impossible to say, but a billion is not out of the question.
The NBA is set up for the players and owners to split revenue, basically 50-50 (it’s more complicated than that, but it stays close to that range). If Basketball Related Income (BRI) drops around the league, then the salary cap drops and players get less money.
The league’s income is going to suffer, but the salary cap may not that much the NBA players union told agents in a call today, according to Ian Begley of SNY.TV.
NBPA has told agents to anticipate a large reduction in BRI for 2021 in wake of coronavirus crisis but said salary cap for 20-21 should be calculated fairly. So if things unfold this way, salary cap is unlikely to drop significantly from the current projection of $115 million.— Ian Begley (@IanBegley) April 7, 2020
What this implies is salary cap smoothing — the league would keep the cap artificially high in the short term, but when revenue spikes back up in the following years that rise will be artificially slowed a little to even things out. The idea is to smooth out the cap number rather than have wild fluctuations.
This is likely part of the negotiations going on between the league and players union over the force majeure clause of the CBA, which allows owners to reduce salaries if games are canceled. If the players give up salary now they don’t want to see future income fall too because the cap cratered for a season or two.
Most likely, the owners and players can work out a cap-smoothing compromise that works for both sides (something they could not do when the new NBA TV deal kicked in and the cap spiked back in 2016). The league’s cap projections were already reduced some by the loss of revenue from China following the Daryl Morey Tweet controversy, the missed games obviously will reduce it further.
How much further appears to be under negotiation.