After the 2015-16 season, the eight-year, $7.4 billion agreements for television and digital revenue will expire. If you think that’s a a ton of money for all sides involved, then consider the news of Monday morning.
That was when the NBA announced a nine-year, $24 billion agreement on broadcast and digital rights for an already thriving business. Besides the basic things of increased nationally televised regular-season games (100 for ESPN/ABC, 64 for Turner) and increased rights for ESPN to provide digital content, there is likely to be a major component that will be impacted positively or negatively depending on your point of view.
The new deals mean that the league’s television revenue increases from $930 million to $2.67 billion. Projections have this season’s combined players salary being a combined $2.33 billion so an increase in television money figures to impact the salary cap favorably for the players.
The current cap is at $63 million, a 7.5 percent increase from last year. The current luxury tax also has increased by 7.1 percent to $76.829 million.
That will continue to rise and by the time this new deal takes effect in 2016 when Kevin Durant and LeBron James highlight the free agent class. If the cap increases by another 7.5 percent next year, that will raise it to $67.7 million for the 2015-16 season.
Under the current cap, 23 teams are above it. If the cap increased to $67.7 million next season 16 teams would be over it.
Both sides may opt to phase in estimates for the new TV deal for the 2015-16 season and if that happened, the cap would likely be around $75 million, a figure that no team presently has any commitments adding up to that figure although the Brooklyn Nets are closest at nearly $74 million.
With increased television revenue to play with after that, eventually the cap could rise to $90 or even 100 million. The revenue would also increase the basketball-related-income, which is the formula for dividing the revenue for players salaries. Last year’s BRI was $4.5 billion and this year is expected to $4.7 billion.
That will likely increase the max contracts for those with 10 years of service time. By 2016, James will have 13 years of service time while Durant will have nine.
The new deal will likely result in some kind of reconfigured collective bargaining agreement. The current one expires in 2021 but players and owners can opt out in 2017 and in those negotiations could see drastic increases or elimination of the maximum salary according to ESPN’s Brian Windhorst, especially with Chris Paul serving as president of the union.
By then, the players will be gearing for their share of the pie. Will the significant increase in the money be enough to avoid another lockout?
It’s too early to tell but an additional stream of revenue could make negotiations significantly less hostile than those ugly days of 2011. That was when the league claimed 21 of 30 teams were losing a combined $300 million per season and the season did not start until Christmas.
The outcome of those negotiations solved that since it lowered player’s salary by $300 million. The new TV deal should help ease some of those profit losses even more since the league’s share of TV revenue after deducting player’s salaries will go from $465 million to $1.3 billion.
It’s another step in showing how far the NBA has come a long way in the last 35 years. The league has gone from showing NBA finals games on tape delay on CBS to becoming a massive international success on the broadcast and digital front.
