In 2014, the NBA signed a nine-year, $ 24 billion broadcast deal with ESPN and Turner, which began ahead of the 2016/2017 season and is currently underway.
The increase in revenue saw an immediate expansion of the NBA’s salary cap, which increased by $ 24 million from 2015 to 2016.
This is in large part due to the refusal of the players’ union, the NBPA, to incorporate cap smoothing that would have resulted in smaller annual increases in the league’s salary cap.
That brings us to the present, where the NBA is planning to sign a new broadcast deal, taking effect in 2025. Only this time around, the amount is expected to be significantly higher than what they clawed back in 2014.
According to a report by CNBC’s Jabari Young in March, the NBA plans to nearly triple the number of the current deal, targeting more than $ 75 billion that will offset the league with $ 8.3 billion a year.
For reference, the NFL recently signed a new TV deal worth $ 113 billion over 11 years.
Implications of the salary cap
Needless to say, a jump of $ 5.7 billion in television revenue per year will have a severe impact on the NBA salary cap, which is calculated from the league’s basketball-related income (BRI).
Assuming that the players union will again prefer a major peak, a year-over-year increase of over $ 50 million is not out of reach.
According to a league source, projections indicate that a salary cap of $ 171 million is possible, assuming there is no smoothing of the cap, by 2025.
If the NBPA agrees to cap the smoothing instead, it is likely that the league will still see annual increases of $ 15 million, according to the source.
Smoothing the cap could become an important topic in the next CBA round of negotiations, which is expected to start next summer.
Free agency and contract extensions
With four years left to go to the 2025 offseason, it’s no surprise that agents in the coming years are advising their clients to include opt-outs by this summer to maximize revenue.
A richer salary cap means richer max contracts, so for the league’s elite it would make sense to position themselves for new contracts by that year.
For teams looking to extend their rookie contracts for the players in the coming years, there might also be less reluctance to offer them a rich deal.
Players who might not be considered maximum players, but aren’t necessarily too far away, could receive the standard 25% rookie maximum anyway, just because it blocks them out longer.
Teams would then swallow a few years of overpayment to that player, to greatly benefit from a peak cap that lowers the cap percentage of the player’s compensation.
This type of agreement offers both the player and the team significant advantages. The player will be compensated to the maximum for a few years, which it wouldn’t otherwise, and the team will benefit by retaining their services and receiving solid value at the end of the contract.
In particular, look for the 2019 and 2020 project classes to receive rich contract extension offers in 2022 and 2023 when they become eligible.
The qualifying offer could become a weapon
With agents and players under contract with the rookies knowing that 2025 could become the year of the peak, some young stars might be willing to take drastic measures to avoid finding themselves locked into a maximum of rookies just before the peak of the ceiling. .
Players who are expected to gain as many newbies as possible by 2024 could simply sign the Qualifying Offer (QO) and bet on themselves for a year, so that they can access the unrestricted free agency market by 2025.
QO is rarely used, but that could change if players like Anthony Edwards or LaMelo Ball, who project themselves as clear maximum-wage players, learn that they could benefit from the peak cap.
Edwards, who has an OQ worth $ 17.5million, could simply grab it back, play his fifth year for Wolves and enter the free market by 2025 where he will be eligible for 25% of the salary cap newly raised from the league – a vast increase in what he would otherwise have earned if he accepted a rookie extension based on 2024 numbers.
For the newly arrived players who were selected in the first round of the 2021 draft, teams need not worry.
If Cade Cunningham were to become the generational talent everyone expects him to become, he could sign an extension in 2024, but that won’t take effect until 2025. His contract will then automatically adjust his pay level. the salary cap of 2025, unlike that of 2024.
Get used to $ 300 million contracts
It wasn’t that long ago that we saw the first $ 200 million contract in NBA history. Stephen Curry signed one worth $ 201 million in 2017 and may be close to signing another soon.
The peak of the cap in 2025 will see the normalization of contracts of $ 200 million, and for the league’s elite, $ 300 million will become the new threshold.
Based on a cap that by 2025 stands at $ 171 million, a maximum deal of 35% would start at $ 59.85 million and carry annual increases of 8%. Over a five-year period, that becomes $ 347.1 million, with the last year alone accounting for $ 79 million, or $ 9 million more than the total salary cap in 2015.
For NBA teams and NBA agents, it’s time to plan for their financial future.