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.”