Salary Cap

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

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

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.

NBA Salary Cap Not Expected To Drop Significantly

The COVID-19 crisis continues to impact the world both from a health and financial perspective, and the NBA is no exception. While there is fear that the pandemic, which has already cost the NBA an exorbitant amount of money, will cause the league’s salary cap to drop significantly in 2020/21, that may not be the case. Ian Begley of SNY.tv reports that the salary cap shouldn’t see a steep decline from the most recent projection of $115MM.

The National Basketball Players Association has told agents to expect a drop in Basketball Related Income for 2021. While BRI is used to calculate the salary cap, Begley adds that the salary cap is expected to be calculated fairly and won’t plummet because of a one-year outlier, assuming “things unfold as expected.”

The NBA is weeks away from making a decision on the remainder of the 2019/20 season, as commissioner Adam Silver recently announced. While the league surely wants to play out the rest of the season, it doesn’t want to delay this year to the point where it significantly impacts the 2020/21 campaign.

ESPN’s Doris Burke Recovering From Coronavirus

Appearing on the latest episode of The Woj Pod with Adrian Wojnarowski, ESPN’s Doris Burke said that she tested positive for the coronavirus.

Burke described feeling her first symptoms on March 11, the day she worked the Mavericks/Nuggets game that ended up being the final NBA contest before the season was postponed indefinitely. The ESPN analyst, who said she experienced extreme fatigue for several days after that, was tested last week and got the results earlier this week.

Speaking with Wojnarowski about her experience, Burke confirmed she is now symptom-free and is feeling like herself again, which is great to hear.

Here’s more on the coronavirus and the NBA’s hiatus:

  • David Aldridge of The Athletic is the latest NBA writer to put forth a proposal for how the league might structure a resumed season. Aldridge’s series of ideas includes a mini-tournament that would help determine which lottery teams get the highest picks.
  • Major sporting events that feature tens of thousands of fans are candidates to become “biological bombs,” according to Gabe Lacques and Jeff Zillgitt of USA Today, who explain how the NBA and others sports leagues will look to avoid that scenario when they resume.
  • Joe Vardon of The Athletic takes an in-depth look at how the coronavirus pandemic has complicated the contracts between the major sports leagues and the TV networks that broadcast their games.
  • For those interested in how the NBA’s hiatus may affect its salary cap going forward, cap guru Albert Nahmad has updated his exploration of the subject at HeatHoops.com, digging into many of the variables at play and explaining why it’s so tricky to make any projections yet.

Ripple Effect Of Hiatus On Contracts, Cap, Offseason Dates

Given the typically rigid nature of the NBA’s annual calendar, the current hiatus threatens to complicate a number of dates and deadlines that will arrive in the coming months. In his latest Insider-only article for ESPN.com, Bobby Marks takes a closer look at how those dates – linked to contracts and the salary cap – may be impacted, noting that the NBA and NBPA are expected to collectively bargain a set of transition rules once the league establishes a return timeline.

For instance, there are 29 player options and 12 team options that are currently scheduled to be exercised or declined before the end of June. Those dates will almost certainly have to be adjusted. The same goes for certain salary guarantee dates and the expiry dates on traded player exceptions, as Marks explains. Of course, the start of the 2020/21 league year will have to be pushed back too, so players with expiring contracts don’t become free agents on July 1.

Contract incentives will also be an issue worth keeping an eye on. Marks observes that during the lockout-shortened 2011/12 season, players’ incentives were prorated based on the fact that the league played 66 games instead of 82 games. The NBA could take similar measures this season. For instance, if a player needs to play 1,000 minutes to earn a bonus and his team ends up playing just 70 of 82 games, his incentive requirement would be adjusted so he only needs to play 70/82nds of 1,000 minutes (854 minutes).

Marks’ article is jam-packed with interesting info and is worth checking out in full if you have an Insider subscription. Here are a few more highlights:

  • Although the NBA’s basketball related income for 2019/20 is projected to take a huge hit as a result of this hiatus and the controversy with China in the fall, it’s too early to say what that will mean for the 2020/21 salary cap, according to Marks. In situations like this, the NBA and NBPA generally negotiate in good faith a cap adjustment that satisfies both sides, so we’re unlikely to see a big drop-off next year.
  • Still, with the cap for the next year or two no longer expected to increase by nearly as much as the NBA initially projected, the ripple effect could be significant. Maximum-salary contract extensions scheduled to go into effect next season or in 2021/22 for players like Jamal Murray, Ben Simmons, Pascal Siakam, and Damian Lillard won’t be as lucrative as previously estimated, and teams will no longer have as much cap or tax flexibility as expected. As Marks points out, that could influence players with option decisions — they may be more inclined to opt in for ’20/21, with less leaguewide spending power available in the offseason.
  • Resuming the regular season – rather than just jumping straight to the playoffs – may not be a top priority for many fans, but there are reasons why the NBA won’t want to skip that step, Marks writes. Teams that wanted to make roster moves prior to the postseason wouldn’t get a chance to do so if the NBA moves straight from its current moratorium to the playoffs. For example, in that scenario, the Thunder wouldn’t get the opportunity to convert two-way player Luguentz Dort to their 15-man roster. As such, the NBA may want to play a few regular season games or at least give teams a few days to make necessary roster moves.

Team Owners Await Financial Projections From NBA

NBA team owners are waiting for the league to provide them with new financial projections on lost revenues as a result of the coronavirus-related hiatus, sources tell ESPN’s Adrian Wojnarowski. As Wojnarowski explains, NBA chief financial officer J.B. Lockhart has taken the lead on making those estimates and sharing the information with owners.

[RELATED: NBA Hiatus May Extend Into June]

Tom Haberstroh of NBC Sports and Bobby Marks of ESPN are among those who recently estimated that losing the remainder of the regular season and some or all of the postseason could cost the NBA upwards of $500MM+ in basketball related income. While the league has yet to publicize its own projections, it’s safe to say teams around the NBA are bracing for major losses.

According to Wojnarowski, the NBA will likely share a handful of projections with teams based on at least three different scenarios. Those scenarios are as follows:

  1. Shutting down the season entirely.
  2. Resuming the season with no fans in arenas.
  3. Resuming and playing postseason games with fans in attendance.

That lost revenue isn’t the most pressing concern for fans, but we’ll likely see its impact going forward on the salary cap. As recently as last June, the NBA was calling for a $117MM cap for the 2020/21 season, up from approximately $109MM in 2019/20. Given the projected earnings the league will lose as a result of this hiatus and its controversy with China earlier in the season, that estimate is no longer realistic.

Hiatus Notes: Revenue, G League, Warriors, Kings

The league could lose nearly $500MM in ticket revenue if the remainder of the season is not played out, Tom Haberstroh of NBC Sports Philadelphia estimates. Using an unnamed high-ranking league official as a source, Haberstroh relays that the NBA makes an average of $1.2MM in gate revenue per regular season game and $2MM for each playoff game. There were 259 regular-season games remaining, a loss of approximately $300MM in ticket revenue. With 83 postseason games played on average, the league would lose $166MM in postseason revenue.

The loss of basketball-related income could actually total near the $500MM for the regular season alone, according to ESPN’s Bobby Marks. That would directly affect the salary cap and luxury tax for next season. However, a resumption of the season with fans in attendance could mitigate and eliminate those potential financial losses, Marks adds.

We have more regarding the suspension of NBA games:

  • G League players will be paid as contracted and receive benefits, league expert Adam Johnson tweets. The remainder of the NBAGL season has already been suspended, with Johnson suggesting it may be canceled entirely. The G League’s regular season had been scheduled to end on March 28, with the postseason to follow.
  • Warriors staffers will work from home for at least the next two weeks, Nick Friedell of ESPN tweets. Their players will be allowed to work out individually inside the team’s facility but it’s not a requirement.
  • The Kings have suspended all team activities through Monday, according to a team press release. The players will remain in the Sacramento area but will not participate in group workouts or practices. No Kings players have experienced symptoms of COVID-19.

Coronavirus Updates: Warriors, Cavs, Wizards, Next Steps

As we relayed earlier today, the Warriors‘ Thursday contest vs. Brooklyn is on track to become the first NBA game played without fans in attendance as a result of the coronavirus epidemic.

Discussing the situation today with reporters, Warriors president and COO Rick Welts acknowledged that it will be a costly adjustment for the franchise. As Nick Friedell of ESPN tweets, Welts said not playing Thursday’s game will result in a “multi-million dollar loss” for the Warriors, adding that the number would increase to the “tens of millions” if the team continues to play behind closed doors following its road trip.

Although the lost revenue for one Warriors game won’t have a massive impact on the basketball related income (BRI) for the NBA as a whole, it will become a more significant issue if more teams are forced to play games without fans, which seems likely.

Welts and GM Bob Myers confirmed today that the league’s BRI will be affected and that it could have an impact on the salary cap going forward, though it remains to be seen to what degree that impact will be felt (video link via Anthony Slater of The Athletic). Between this situation and the NBA’s controversy with China, the cap may not increase next season by nearly as much as initially expected.

Here are more news items and notes related to the coronavirus outbreak:

  • The NBA has considered the possibility of pushing back its calendar in response to the coronavirus crisis, according to Sam Amick of The Athletic. Sources tell Amick that the NBA has been asking teams to provide its arena schedule through July. Currently, the season is expected to end no later than June 21 (if the Finals go seven games).
  • The NBA and its players’ union spoke on Wednesday to discuss ways to continue the season without cancelling games, per ESPN’s Zach Lowe and Adrian Wojnarowski. It appears increasingly likely that teams around the league will be required to play in empty arenas, with the NBA bracing for losses “in the hundreds of millions of dollars,” sources tell ESPN.
  • After initially recommending against mass gatherings, Ohio Governor Mike DeWine said today that the state intends to issue an order saying that no spectators will be allowed at major sporting events, tweets Aaron Portzline of The Athletic. That will affect the Cavaliers, though they’re not scheduled to return home until March 24.
  • After the D.C. Department of Health advised against holding non-essential gatherings of 1,000+ people, the Wizards‘ ownership group issued a statement saying that they plan to move forward with allowing fans to attend home games for now. So far, teams have been reluctant to do anything drastic unless they’re faced with a full-fledged ban from local government or an edict from the league.
  • Keith Smith of Yahoo Sports (Twitter link) hears that at least half of the NBA’s teams have pulled their advance scouts off the road due to coronavirus concerns.
  • In case you missed it, the NCAA announced this afternoon that this year’s men’s and women’s tournaments will be closed to fans.

NBA Revises Cap, Tax Projections For 2020/21

3:15pm: The NBA’s new projection is a $115MM salary cap and $139MM tax line, according to Wojnarowski (Twitter links). That’s not as significant a drop from the previous projection as some front offices feared, so it shouldn’t have a noticeable impact on teams’ plans at the deadline.

3:07pm: The NBA has informed teams that new projections for 2020/21’s salary cap and luxury tax threshold are on the way, according to Adrian Wojnarowski and Bobby Marks of ESPN. Those new numbers haven’t been revealed yet, but teams are expected to receive that info shortly in order to ensure they’re as informed as possible as they consider deadline trades.

When the NBA last updated its projection in September, it called for a $116MM cap and a $141MM tax line in 2020/21. Each of those numbers would represent a substantial jump up from the figures for 2019/20, which are $109.14MM (cap) and $132.627MM (tax).

However, those estimates were issued before Rockets general manager Daryl Morey published a tweet supporting protestors in Hong Kong. That tweet instigated a controversy between the NBA and China that cost the league sponsors and television partners. The ordeal is believed to have cost the NBA approximately $150-200MM, league sources told ESPN.

Although the cap is still expected to increase beyond this year’s figure, front office executives are preparing for a more modest jump, according to Wojnarowski and Marks, who hear that some teams believe the new projection could dip as far as $113MM. Tim MacMahon of ESPN tweets that some team executives have referred to the expected drop as the “Daryl Deduction.”

A smaller cap increase than expected may not have a massive impact in free agency, since most teams are expected to be over the cap anyway. Still, every dollar counts when it comes to creating cap flexibility and avoiding the tax. Wojnarowski and Marks point to the Celtics, Nets, Warriors, Rockets, and Sixers as teams that could be taxpayers in 2020/21 and would be on the hook for a larger bill if the tax threshold is a few million dollars lower than anticipated.

Players who have signed maximum-salary contract extensions that take effect for the 2020/21 season will also take note of the league’s new cap estimates, since it will have an impact on their projected earnings.

Sixers guard Ben Simmons and Nuggets guard Jamal Murray, for instance, signed maximum-salary extensions that will start at 25% of the cap next season, assuming neither player earns an All-NBA spot in 2019/20. When they signed those deals in July, the league was projecting a $117MM cap, which would have made them worth $169.65MM over five years. A $113MM cap would reduce their projected value to $163.85MM apiece.

Several other figures – including the rookie scale, mid-level exceptions, minimum salaries, and cash available in trades – are also linked to the percentage the salary cap increases from year to year and would be affected by an adjusted 2020/21 projection.

How NBA/China Controversy Could Impact Salary Cap

As we briefly discussed in our Wednesday night roundup on the latest developments in the NBA/China standoff, salary cap experts for several NBA teams are preparing for a scenario in which lost revenue from Chinese partners affects the growth of the league’s salary cap, according to Keith Smith.

Smith explores the subject in a little more depth in a full story at Yahoo Sports, but makes it clear in a pair of follow-up tweets that those clubs are just doing due diligence now to avoid being caught off guard later. According to Smith, no one is expecting the league’s 2020/21 salary cap projection to dip by as much as the 10-15% figure he cited earlier — teams just want to be prepared for a worst-case scenario.

While the NBA’s salary cap going forward may not be drastically affected by the controversy in China, any unexpected lost revenue can have an impact on the cap. As Jeff Siegel of Early Bird Rights explains in a Twitter thread, the league’s current cap figures and projections for future seasons are based on anticipated basketball-related income (BRI).

This year’s $109.14MM cap – and next year’s $116MM projection – didn’t take into account that the league’s revenue streams in China might take a hit, so if this saga continues, projections for future seasons would have to be adjusted downward to ensure the BRI split between players and team owners adheres to the requirements laid out in the league’s Collective Bargaining Agreement.

In an in-depth look at the NBA’s financial stakes in China, Jeff Zillgitt and Mark Medina of USA Today suggest that a “conservative” estimate would put the league’s annual revenue from China at $500MM.

Cap expert Albert Nahmad (Twitter link) projects that a $100MM drop in expected revenue for the NBA this season would lower the cap projection for ’20/21 by about $1.7MM. Each additional $100MM drop in revenue up to the $500MM mark would likely reduce the projection by another $1.5MM or so, Nahmad estimates.

If the cap ultimately comes in lower than $116MM, it will have a real impact on where team salaries land in proximity to the cap threshold and to the luxury-tax line. It would also reduce projected maximum salaries, rookie scale amounts, and several other salary figures that are directly linked to the percentage the cap increases (or decreases).

“I haven’t really been in this spot before,” one team’s cap expert told Smith. “The cap has only gone up in recent years. It’s really different. I have to wonder if the league would be pressed to consider some measures to not drop the cap down so far from where we are today at $109MM. Otherwise, a bunch of us are over the tax. It’d be nice to know now, because that changes how we approach trades and everything else throughout the season.”