Salary Cap

Latest Details On NBA’s Finances, Plans For 2020/21

October 28th, 2020 at 3:17pm CST by Luke Adams

The NBA’s revenues dropped 10% to $8.3 billion during the 2019/20 season due to the coronavirus pandemic and the controversy with China, according to a report from ESPN’s Adrian Wojnarowski and Zach Lowe.

Those losses included $800MM in gate receipts and $400MM in sponsorships and merchandise, sources tell ESPN. The losses related to last year’s spat with China over Daryl Morey‘s tweet in support of Hong Kong protestors were estimated at $200MM.

The NBA did manage to recoup approximately $1.5 billion in revenue by restarting and completing the season during the summer, according to Woj and Lowe, who note that the bubble’s expenses totaled $190MM.

As Albert Nahmad and Eric Pincus point out in a Twitter thread, it sounds as if ESPN’s report is referring to gross income, since basketball related income (BRI) – which is used to determine the salary cap – was never projected to exceed $9 billion.

While the 2019/20 revenue losses are significant, the losses for ’20/21 will likely be more substantial, since the pandemic figures to affect the entire season rather than just the tail end of it. The NBA has told teams to prepare for a potential 40% loss of total revenue if fans can’t return to arenas, according to Wojnarowski and Lowe.

ESPN’s latest report on the state of the NBA includes a few more noteworthy details, so let’s round them up…

The expectation remains that the NBA and NBPA will look to artificially inflate the 2020/21 salary cap to keep it around its current level of $109MM, sources tell ESPN. Following the usual formula and linking it directly to league revenue would result in a drop to about $90MM, according to Wojnarowski and Lowe.
Amid rumors that some NBA players are pushing for a January 18 start to the 2020/21 season, Wojnarowski and Lowe refer to that possibility as an alternative that is “less palatable” to the league than its December 22 proposal. A mid-to-late January start would push the completion of the season into September, forcing the NBA to compete with the Tokyo Olympics and the start of football season, ESPN’s duo observes.
As the NBA plans its 2020/21 season, it is open to the idea of setting up regional “pods” and reducing inter-conference games in order to cut back on teams’ travel, per Woj and Lowe. While the league is hoping to have its teams play games at their home arenas, it’s also open to a modified bubble environment similar to what the MLB did during its postseason, sources tell ESPN.
The NBA is considering releasing its schedule for next season one half at a time in order to maintain flexibility in the event of postponed games and coronavirus outbreaks, according to ESPN. While the All-Star Game may not take place, the league still may look to schedule a mid-season break, which could also be used as a window to make up some postponed games.

Notes On NBA’s Plan For 2020/21 Season

October 26th, 2020 at 4:05pm CST by Luke Adams

In recent weeks, it seemed as if the NBA was becoming more and more open to a later start date for the 2020/21 season. Commissioner Adam Silver and NBPA executive director Michele Roberts publicly suggested that the season was unlikely to begin until January, while some reports suggested that a February or March opening night was more realistic.

However, that changed on Friday, when word broke that the league is now looking to begin its ’20/21 campaign before Christmas. According to Marc Berman of The New York Post and Brian Windhorst of ESPN, the NBA’s finance committee played a major role in that abrupt pivot.

“The owners’ finance committee – there’s a group of owners who make up the finance committee – had a meeting and in that meeting they looked at everything and decided ‘You know what? We need to play sooner rather than later,'” Windhorst said on his Hoop Collective podcast, per RealGM.

“It’s interesting Silver talked behind the scenes about waiting until a March time-frame if it meant getting a vaccine,” one NBA insider told Berman. “That’s until the finance committee showed him the numbers.”

Tipping off the 2020/21 season before Christmas would allow the NBA to air games on December 25, which is one of the most important days of the year for the league’s TV partners. It would also allow the league to hold its playoffs in the spring, with the Finals taking place at the very start of summer, instead of in the late-summer and fall like this year. Shams Charania of The Athletic reported over the weekend that the NBA believes its new plan could mean salvaging $500MM in potential revenue.

“The priority is getting back to the October-to-June format for 2021/22,” a source told Berman. “They found out the hard way not enough people watch TV in the summer. The virus and real-life struggles obscure the reality that sports on TV in the summer don’t generate enough viewers.”

Here are a few more items related to the NBA’s tentative plans for the 2020/21 season:

People around the league don’t expect push-back from the players’ union to derail the NBA’s proposed schedule, Windhorst stated on his Hoop Collective podcast. “They’re probably going to have to agree to this,” Windhorst said (per RealGM). “In talking to people on the league side this past week, they didn’t act like getting the players to agree was going to be that big of a stumbling block. I’m sure some people are going to be upset, but I’m not sure what they can do about it.”
Assuming the plan gets the go-ahead, the free agent period and offseason will be accelerated in a major way, which isn’t great news for teams expecting to have major roster turnover this fall, as Berman writes. “This is going to favor teams with stable rosters,” one source told The New York Post.
While it sounds as if the NBA is moving toward a December return, there are still a number of potential obstacles to take into account, according to Chris Mannix of SI.com.
Teams are hoping to get clarity soon about where the salary cap will land for 2020/21, as well as an updated projection for ’21/22. Appearing on today’s episode of The Lowe Post podcast with Zach Lowe, ESPN’s Bobby Marks said that for the time being, most teams are using a $115MM cap estimate for ’21/22.

Teams Lobbying For Higher Tax Line In 2020/21

October 26th, 2020 at 10:14am CST by Luke Adams

Even if the NBA’s salary cap doesn’t end up increasing at all for the 2020/21 season, teams are lobbying for a bump in the luxury tax line, according to ESPN’s Bobby Marks (Twitter link).

In 2019/20, the cap was set at approximately $109.1MM, with the luxury tax line at $132.6MM. Generally, the tax threshold is directly tied to where the cap lands, so if the ’20/21 cap remains at $109.1MM, the tax line would remain unchanged too. Teams that cross the tax line must pay a penalty for each extra dollar they spend.

However, given the unusual financial circumstances dictated by the coronavirus pandemic, clubs are hoping the NBA will consider artificially setting next season’s tax level at around $139MM, with a $145MM tax apron, says Marks. Those are approximately the figures the NBA had projected before the pandemic, when the league was forecasting a $115MM cap for 2020/21.

It’s not hard to see why teams – or at least the teams without cap room – would be pushing for a higher tax line. The pandemic has already had a major financial impact on many clubs, and having to pay bigger tax bills than initially expected would only exacerbate those financial woes. Increasing the apron – which serves as a hard cap in certain situations – would also give teams more roster flexibility.

While it’s not clear how the NBPA feels about the issue, there’s incentive for them to favor artificial changes to the tax line as well. Increasing the tax level certainly doesn’t guarantee that teams will put those savings toward player salaries, but it would likely make at least some clubs more willing to be active in free agency and open to taking on money in trades, which would benefit players.

As cap expert Albert Nahmad points out (via Twitter), there are a number of other ways the NBA and NBPA could temporarily tweak the luxury tax rules for the 2020/21 season to lessen the risk of a widespread spending freeze. Besides artificially increasing the tax threshold, the two sides could explore reducing taxpayer penalties or waiving the more punitive repeater tax penalties altogether.

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NBA, NBPA Extend CBA Termination Deadline For Third Time

October 16th, 2020 at 10:05am CST by JD Shaw

The NBA and the National Basketball Players Association have once again agreed to extend the deadline that would allow one side to terminate the Collective Bargaining Agreement due to COVID-19, according to Adrian Wojnarowski of ESPN.com.

The decision marks the third of its kind since May, with the new deadline now being October 30. Both sides are in active discussions on what the Collective Bargaining Agreement should include for next season, according to Wojnarowski, who says the possibility of the CBA being terminated remains unlikely.

“Extending is an easy call,” NBPA executive director Michele Roberts told ESPN in August when the sides agreed to extend the deadline for a second time (Twitter link). “If everyone continues to be well-intentioned on how we deal with the economic effects of this virus, we’ll just make the appropriate adjustments and there won’t be a need to terminate the CBA at all.”

Though exact numbers aren’t known, the pandemic has caused significant financial losses for the league this year and beyond. The two sides are discussing a new salary cap for the upcoming campaign based on future financial projections and implications.

It’s unclear when the 2020/21 season could begin, as the league is currently investigating ways to safely bring fans back into arenas for the first time since the pandemic began. NBA commissioner Adam Silver has previously estimated that 40% of the league’s revenue comes from game-night counts.

While the NBA season will occur in some form, a decision also must be reached about the NBA G League. Discussions have been ongoing about how and when the G League could proceed, with several agents telling Hoops Rumors they’ve prioritized placing clients overseas in recent weeks due to the widespread uncertainty.

The NBA’s current CBA contains a mutual opt-out after the 2022/23 season and extends into the 2023/24 season. The league and union had previously projected a 2020/21 salary cap of $115MM and luxury-tax threshold of $139MM. Some teams fear those numbers could fall by as much as $25-30MM, according to Wojnarowski, though the two sides are expected to reach a compromise to avoid a significant drop.

For fans and officials across the league alike, the importance of the NBA and NBPA configuring a new salary cap mechanism and continuing productive negotiations in the coming weeks is clear.

Michele Roberts Talks Free Agency, 2020/21 Season, Cap, More

October 6th, 2020 at 11:37am CST by Luke Adams

Having rescheduled this year’s draft for November 18, the NBA has yet to officially set a start date for 2020’s free agent period. Speaking to Shams Charania of The Athletic, NBPA executive director Michele Roberts suggested that she thinks free agency will probably start no later than December 1 and that the salary cap and tax figures won’t drop too drastically from what was originally projected.

“We can’t go much beyond (December 1) for (free agency),” Roberts said. “We had a projected BRI (basketball-related income), which I think teams appropriately planned for. I don’t think we can deviate much from where we projected the cap to be.

“It may not reflect what people think is the likely BRI, but since I’m of the view this game is not dead and it will rebound, we can do some things with the cap to allow for a free market and not completely destroy what the teams were expecting the cap to be as they were planning ahead. Frankly, I think that’s going to be one of the easier negotiations, figuring out a cap.”

As Charania writes, Roberts met with NBA commissioner Adam Silver on Sunday, and the two sides left that meeting confident that they’ll be able to negotiate agreements on the many cap- and CBA-related issues that must be resolved before the new league year and the 2020/21 season begin.

“It’s amazing what needs to be accomplished in the next six weeks, but it has to be done. I feel sooner rather than later,” Roberts said, adding that she doesn’t believe there’s any real chance of a lockout. “… We’re going to resolve this.”

Charania’s Q&A with Roberts is jam-packed with interesting info and quotes, and is worth checking out in full if you’re an Athletic subscriber. Here are a few more of the most notable takeaways from the conversation:

Roberts still views January as the “absolute earliest” possible start date for the 2020/21 season. “The latter part of January, February makes sense,” she told Charania. “If it’s later than that, if we have a terrible winter because the virus decides to reassert herself, that’s fine.”
Although Roberts and the NBPA share the NBA’s hope that teams can play a full 82-game season in their respective home arenas in 2020/21, she told Charania that the two sides must be “flexible” and “nimble” as it makes plans for next season. “I’m not of the view that we should wait until we think the arenas can open, because this virus, she’s not cooperative at all,” Roberts said.
Silver has expressed some reluctance to change the NBA’s permanent calendar as a result of the COVID-related delays, but Roberts sounds more open to that possibility. “Even before COVID happened, there was a conversation about starting our season later. Why compete with football in the fall? Why don’t we start our season around Christmas?” Roberts said to Charania. “It may very well be that our regular schedule is going to change, not so much because of COVID, but because of the ability to experiment. I wouldn’t bet on returning to the old normal.”
Faced with the possibility of the NBA’s basketball-related income for next season dipping from $8 billion to something like $6 billion, Roberts acknowledged that maintaining the 51/49 split between players and owners will be tricky. “It comes down to if it’s a $6 billion pie and our owners are entitled to 49%, and they’re already committed to $5 billion in player salaries and fixed costs for example, where’s the rest of their money?” she said. “There’s ways to take that $6 billion and get to their 49%. One of the ways to do it is to slash player salaries. I got to deal with a constituency that, you slash their salaries, this may be for many of my guys on the last two or three years of their careers. Is there a way to deal with that?”
Here’s more from Roberts to Charania on the issue of the BRI split: “We’ll never say to the owners: ‘Y’all just going to have to eat the loss.’ Who’s going to do that? They’re not stupid. They’re not just going to say, ‘OK, yeah you’re right, we’re just going to have to lose a couple billion dollars on our own.’ That’s not going to happen. Instead what you say is, ‘Can we figure out a way to manage that so there is no loss, but there isn’t an immediate pay day. Can you withstand some delay in getting your money?’ I have some real life examples of people I know in my life that say that they live paycheck-to-paycheck. And there are other people that can say that they can deal with deferred compensation. You figure it out.”

NBA, NBPA Agree To Extend CBA Termination Deadline Again

August 25th, 2020 at 1:39pm CST by Luke Adams

The NBA and the National Basketball Players Association have once again reached an agreement to push back the 60-day window giving each side the right to terminate the league’s current Collective Bargaining Agreement, reports ESPN’s Adrian Wojnarowski (via Twitter). According to Wojnarowski, October 15 is the new deadline for modifications to the CBA for 2020/21.

The NBA and NBPA first agreed to push back the Collective Bargaining Agreement termination deadline in May. The agreement gives the two sides more time to make the necessary adjustments to the CBA for the 2020/21 season to account for the impact of the coronavirus pandemic.

As Wojnarowski explains (via Twitter), an October 15 deadline will allow the NBA to complete the current season and should give the two sides a chance to make more informed decisions for the future based on the 2019/20 end-of-season revenues.

The pandemic has resulted in NBA revenue losses for this season and will affect its projected revenues going forward. However, there’s still optimism that the league and the players’ union can reach agreements on temporary changes to the Collective Bargaining Agreement and figure out next season’s salary cap without requiring the “nuclear option” of terminating the CBA, tweets Woj.

“Extending is an easy call,” NBPA executive director Michele Roberts told ESPN (Twitter link). “If everyone continues to be well-intentioned on how we deal with the economic effects of this virus, we’ll just make the appropriate adjustments and there won’t be a need to terminate the CBA at all.”

While the 2020/21 season presents a number of logistical and financial challenges on its own, teams will also hope to get some clarity this fall on what the salary cap might look like in 2021/22, ESPN’s Bobby Marks notes (via Twitter). The Jazz, for example, will have the opportunity to extend Rudy Gobert this offseason, but a new deal for him would go into effect in ’21/22 and his first-year salary would likely be based on a percentage of the cap.

NBPA Preparing For Possible Delay Of Free Agency Start Date

August 20th, 2020 at 2:35pm CST by Luke Adams

The National Basketball Players Association is preparing players for the possibility that the start of the 2020 free agency period will be postponed by several weeks, according to ESPN’s Adrian Wojnarowski.

As Wojnarowski explains, the coronavirus pandemic has resulted in major uncertainty about the league’s projected revenues for the 2020/21 season. Delaying the October 18 free agency start date would give both the NBA and NBPA more time to formulate the parameters of the 2020/21 salary cap and luxury tax lines.

The NBA previously projected a $115MM salary cap and a $139MM tax threshold for the ’20/21 season. However, that projection was released in January and hasn’t been updated in recent months to account for the pandemic, which has had a huge financial impact on the league.

According to Wojnarowski, with the October 16 draft fast approaching, front offices around the NBA are concerned about the lack of updated cap and tax projections in place, since those estimates allow teams to make roster decisions with a clearer sense of the financial ramifications.

Before finalizing its projections, the league will likely want to wait as long as possible to determine whether fans can safely be allowed to return to arenas next season. As Woj notes, the NBA may also deviate from its usual formula to determine next year’s salary cap, artificially smoothing it to avoid a significant drop based on lost revenues. The NBA and NBPA continue to collectively bargain those issues.

The NBA’s tentative offseason schedule would allow free agents to begin negotiating with teams at 5:00 pm central time on October 18, just two days after the draft. The new league year is officially scheduled to begin on October 19.

However, that calendar was created when it looked as if next season would begin as early as December 1. If the start of the ’20/21 regular season is pushed back, there may not be as much urgency to open free agency that soon. According to Wojnarowski, the NBPA has been privately suggesting to players that the season could start sometime in late December or in the new year.

Although Wojnarowski’s report suggests that free agency seems more likely than not to be delayed, it’s not clear whether this year’s draft date will be affected. According to Woj, many teams have interest in connecting the draft and free agency and postponing them together.

Financial, Logistical Uncertainty Looms Over 2020/21 NBA Season

July 10th, 2020 at 5:05pm CST by Luke Adams

Now that the NBA has finalized its plan for the summer restart and teams have reported to Orlando, we have a pretty clear idea of what the rest of the 2019/20 season will look like, assuming it can be completed. However, uncertainty looms over the ’20/21 campaign, which doesn’t yet have an official start date.

According to Alex Silverman of Morning Consult, the NBA’s Global Innovation Group recently sent out an internal planning document outlining four possible scenarios for the 2020/21 season. Three of the proposed scenarios would feature a December start date and a July end date, but the fourth would see the season start in March 2021 and run through October, Silverman writes.

As Silverman explains, that fourth scenario is one that could be considered if there’s a pathway in early 2021 to a coronavirus vaccine or therapeutic treatment for COVID-19 that would allow teams to host fans in their home arenas for a full season. Under that proposal, the league would consider breaking for the Tokyo Olympics in the summer and would execute a “rolling schedule” rather than releasing the full-season schedule at once, Silverman writes.

It seems more likely that the NBA will opt for one of the December-to-July scenarios (the league has tentatively proposed a December 1 start date), but that will mean making contingency plans and preparing for a wide variety of complications related to the state of the coronavirus pandemic across North America.

According to Silverman, the NBA may still have to consider rolling schedule releases if the season starts in December, as well as “increasing game density, building in buffers for canceled or rescheduled games, and potentially using alternate sites like neutral markets or practice and G League facilities.” Regionally restricting matchups to reduce travel is also a possibility, Silverman adds.

Determining how to safely play in a world with the coronavirus will be a crucial question for the NBA to answer as it weighs its options for next season, but there are other important factors to consider, per Brian Windhorst and Tim Bontemps of ESPN. Notably, the NBA’s owners and players will have to agree to a deal on how to financially operate, and 30 teams facing different restrictions and market conditions will have to figure out the best way to share revenues.

As Windhorst and Bontemps explain, the NBA salvaged its lucrative television deals in 2019/20 and had played about 75% of its regular season before the coronavirus pandemic forced a stoppage, so the financial losses were significant but not debilitating.

During the 2020/21 season, however, teams might not be able to fill their arenas with fans at all from opening night through the playoffs, which would significantly cut into the league’s earnings — commissioner Adam Silver has estimated that about 40% of the NBA’s revenues come from ticket sales and other arena-related revenues.

“The truth is, things are changing so fast that, when it comes to next season, the best we can do is put a stake in the ground and make a guess,” an Eastern Conference team president told ESPN. “The reality is nobody is probably going to operate in the black next season. The only question is how much each of us are going to lose.”

According to Windhorst and Bontemps, the league’s financial situation will become even cloudier if – due to local health restrictions and regulations – some teams can’t get fans into their arenas while others can. In a typical season, massive revenues for teams like the Lakers and Warriors help support smaller-market clubs. But if those smaller-market teams can host fans while big-market teams can’t, “traditional revenue sharing becomes distorted,” Windhorst and Bontemps write.

Sources tell ESPN that NBA deputy commissioner Mark Tatum recently told team presidents that the league’s plan for now is to allow local governments to regulate crowds at games. That means franchises around the NBA could be at the mercy of the policy views of local governors and mayors.

The salary cap for the 2020/21 season will be another important detail to resolve. While there’s a widespread desire to artificially smooth the cap based on this year’s $109MM rather than allowing a substantial dip, that will require negotiations between owners and players. Additionally, as Windhorst and Bontemps note, since owners and players share the NBA’s revenues, there will have to be some sort of system in place to ensure a split near 50/50 is maintained, even as revenues decrease.

According to the ESPN duo, one option would be to increase the amount of players’ salaries that are held in escrow from 10% to 20%. Another option would be for the excess player salaries needed to balance the revenue split to be offset in future seasons.

“In one case, the owners want a loan from the players. And in the other case, the players want a loan from the owners,” one agent told ESPN. “It will probably end up somewhere in the middle and it will get done after some yelling and posturing.”

The NBA put in a ton of work to establish a plan to end the 2019/20 season — much more work will be required to figure out what next season will look like.

Photo courtesy of USA Today Sports Images.

And-Ones: LaMelo, BBL, Salary Cap, Penny

May 21st, 2020 at 9:18pm CST by Alex Kirschenbaum

The Illawarra Hawks of Australia’s NBL were unready for the enormous impact inking LaMelo Ball to a contract had on the 2019/20 season, according to ESPN’s Kane Pitman. “It was weird because you had ‘Melo who was like a rock star and just followed so heavily online and with the social media stuff it made it interesting,” Ball’s teammate David Andersen told Pitman.

In just 12 games, Ball won the NBL’s Rookie of the Year award sporting a slash sheet of 17 PPG/7.5 RPG/7 APG. The 18-year-old younger brother of Pelicans guard Lonzo Ball is expected to be a top-five pick in the forthcoming NBA draft.

There’s more from around the basketball world:

Germany’s Basketball Bundesliga will resume play, after pausing the league due to the coronavirus pandemic, with a three-week final tournament commencing June 6, per Dario Skerletic of Sportando.
An adjusted salary cap would affect each of the NBA’s teams in a variety of ways, as John Hollinger of The Athletic details. Though the 2020/21 cap was projected at $115MM per team in February, that number was predicted prior to the coronavirus pandemic and will almost certainly end up being lower.
Memphis Tigers coach Anfernee “Penny” Hardaway opined to ESPN’s The Jump that the G League’s recent recruitment of players straight out of high school will greatly impact college recruitment, including his program, according to ESPN News Services. “It’s going to have a huge impact, because it’s just a recruiting war right now when it comes to that,” Hardaway said. “But I think it’s going to affect us because we’re recruiting a bunch of five-stars.”

NBA, NBPA Extend CBA Termination Deadline

May 11th, 2020 at 10:41am CST by Luke Adams

The NBA and the NBPA have reached an agreement to extend the window during which the league can terminate the Collective Bargaining Agreement, reports ESPN’s Adrian Wojnarowski. The previous 60-day period, which began when the season was suspended on March 11, had been set to expire. The deadline will be pushed back to September, according to Wojnarowski.

It may sound ominous that the NBA will continue to have the ability to “terminate” the CBA, but it’s more of a necessary formality at this point. The “force majeure” provision gives the league that power, but the NBA has no interest in taking advantage of it for now, since both the league and the players’ union want to resume the 2019/20 season in the coming months.

In order for that to happen, the Collective Bargaining Agreement will need to be restructured, so delaying this deadline gives the two sides more time to gather information on the league’s projected financial losses and to work through issues like next season’s salary cap and luxury tax thresholds, as Woj explains. When the time comes, the NBA and the NBPA figure to work together to negotiate the necessary adjustments to the CBA.

“This CBA was not built for an extended pandemic,” Silver said on Friday’s conference call with players, per ESPN. “There’s not a mechanism in it that works to properly accept a cap when you’ve got so much uncertainty; when we’d be going in next season saying, “Well, our revenue could be $10 billion or it could be $6 billion. Or maybe it could be less.”

Besides figuring out salary cap details going forward, the league and the players’ union will have to negotiate a number of other issues, including how the players will be paid for whatever portion of the 2019/20 season can be played, how free agency will work, and what the NBA schedule will look like in 2020/21 and beyond.

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