NBA and Players Finalize CBA With Both Sides Rolling in Cash
The NBA’s Board of Governors and the National Basketball Players Association officially ratified their collective bargaining agreement after the league and union reached a tentative agreement in the wee hours of April 1.
The seven-year deal will commence July 1 and run through the 2029-30 season with a mutual opt-out after year six, similar to the current agreement. Highlights of the new deal include an in-season tournament; a second luxury tax apron that impacts roster construction of high-payroll teams; smaller penalties for clubs just over the luxury tax threshold; and players’ rights to invest in NBA and WNBA teams, as well as sign gambling and cannabis sponsorships.
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Most important, the basic economic structure remains the same, with players and owners splitting revenue roughly 50-50. Neither party was looking to blow up a system in a league where franchise values and player salaries have skyrocketed over the past dozen years.
The financial landscape of the NBA in 2011, when the league was facing a labor negotiation, was vastly different than today. More than half the teams were losing money, and the NBA had recently bought the financially troubled New Orleans Pelicans from George Shinn. A pair of teams were sold that year—the Philadelphia 76ers to Josh Harris and David Blitzer for $287 million and Detroit Pistons to Tom Gores for $325 million. Kobe Bryant was the only player who made more than $20 million that season.
That NBA of a decade ago is no more. This season, almost every team will turn an operating profit, outside of a few outliers like the Los Angeles Clippers, who are on the hook for a roughly $140 million luxury tax bill. A pair of teams were sold at valuations more than 10 times the sale price of the two teams in 2011: the Phoenix Suns ($4 billion to Mat Ishbia) and Milwaukee Bucks ($3.2 billion to Jimmy and Dee Haslam for Marc Lasry’s 25% of the team)—neither ranks among the NBA’s 10 most valuable clubs.
Sixty-one players earned salaries of $20 million or more during the 2022-23 season, according to Spotrac. Salaries and benefits for players are expected to increase by $250 million next season with a gain in basketball-related revenue from regular revenue growth and the addition of licensing income included in BRI for the first time since the salary cap was implemented 40 years ago. Under the new CBA, BRI will be expanded further with respect to the treatment of complimentary tickets, team watch parties, barter expenses, plaza naming rights and equity transactions. Players are projected to earn between $45 billion and $50 billion over the course of the new agreement.
The top players are also awash in sponsorship deals with 36 players ranked among Sportico’s 100 highest-paid athletes in the world, based on salaries, prize money and endorsements; next up was the NFL with 25 players and global soccer with 13.
The NBA’s path to being a financial juggernaut was supercharged by a series of deals. Ahead of the 2011-12 season, the league locked out players, triggering a five-month work stoppage before an eventual 66-game season. The short-term pain was worth it for owners, as the ensuing CBA triggered a fundamental reset of the NBA’s economic system by lowering the percentage of BRI the players received from 57% to roughly 50%. The 2017 CBA extended a comparable system.
Steve Ballmer’s $2 billion purchase of the Clippers in 2014 set a new bar for franchise values. It was nearly four times the previous record of $550 million for the Bucks earlier that year and seven times what Harris and Blitzer spent for the 76ers three years earlier.
Next up was a national TV renewal with ESPN and Turner Sports worth 200% more than the previous pact on an annual basis. The NBA will likely have another TV deal done over the next 18 months, which again will be worth more than double the current one. Unlike the last TV deal where the salary cap spiked with the surge in revenue, the new CBA will smooth cap increases to avoid any one-year anomalies.
The ratified CBA adds 30 new jobs in the league with teams now allowed three two-way players, up from the current limit of two. And with the CBA out of the way, the league is a step closer to adding two new teams through expansion, which would create more jobs for players and also be a windfall for owners, who would divvy up the expansion fees.
“We want to get a new collective bargaining agreement,” NBA commissioner Adam Silver told reporters in December when the league held a game in Mexico City. “Our media deals are up soon, so we need to renew those, as well, but then we will turn to expansion.”
The NBA’s last expansion team was in Charlotte, which started play in 2004 and cost $300 million for a spot in the league. Two new teams are likely to be in place by the end of the decade, and potential investors are already laying the groundwork to secure them. The price tag could hit $4 billion apiece.
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