This year’s NBA salary cap is $112.4 million, a number fueled in part by a national television broadcast rights package that brings the league $2.6 billion a season.
But if the NBA can triple that income with the next broadcast deal in 2024 — as it thinks is possible — the salary cap could jump to $175 million in just a few years.
The league is looking for a broadcast rights package worth more than $70 billion over nine years, and maybe as high as $75 billion, CNBC’s Jabari Young reported previously (for comparison, the NFL just signed a $113 billion, 11-year broadcast rights deal). While it may seem counterintuitive that broadcast fee rights would spike as traditional NBA viewership numbers are declining, it speaks to the draw of major live sports and, more importantly, how streaming services want that draw to lure in fans. Increased legalized gambling plays into those numbers, as does the fact the NBA is much better at reaching Gen Z and younger fans than other major sports.
If the league gets a deal in that $75 billion range, the salary cap could spike to surprisingly high numbers, reports Morten Jensen at Forbes.
Needless to say, jumping $5.7 billion in TV-income annually will have a severe impact of the NBA’s salary cap, which is calculated off the league’s Basketball-Related Income (BRI).
According to a league source, projections indicate that a $171 million salary cap is possible, assuming no cap smoothing, by 2025. Should the NBPA instead agree to cap smoothing, it’s likely the league will still see annual increases to the extent of $15 million, according to source…
The 2025 cap spike will see $200 million contracts get normalized, and for the league’s elite, $300 million will become the new threshold.
To remind everyone of the details: All the money from that broadcast contract (as well as most of gate receipts and more) is split between the league and its players, a divide that is currently roughly 50/50 (it’s more complex than that, but that’s the basic idea). Increased television revenue will lead to a higher salary cap and, with that, higher salaries.
Some smart agents, looking ahead, may tell their clients to take contracts that put them back on the market around 2025 to take advantage of all that new money.
Expect to hear the phrase “cap smoothing” a lot in the next few years and expect to see some form of it with the next NBA CBA. With the last television contract, the players union shot down the idea of a more controlled, slower raising of the salary cap (with the players getting more of their share on the back end), and the result was the Warriors having the cap room to sign Kevin Durant. It also led to some horrible contracts. The NBA league office never liked the massive cap spike, and plenty of players were not happy with it as well — players in the year of the spike made out, but players who were free agents a couple of years later saw that money eaten up by the previous contracts. Don’t be surprised if the union agrees to some form of cap smoothing (though not what the league likely wants).
Jensen’s point is a valid one: While fans may consider the massive contract extensions of Luka Doncic ($207 million), Joel Embiid, James Harden, and others this offseason excessive — not to mention $92 million for Aaron Gordon in Denver — those back ends of deals may not look so bad in a few years when the cap starts rising fast.
It may not be realistic that the league triples its current broadcast rights package — that’s what these projections are based on, and that may just be the league’s dream scenario — but it’s going to see a doubling or more. The NBA remains an incredibly valuable property, both in the United States and growing internationally (the NBA has a $1.5 billion streaming deal with Tencent in China already). And with that, the salaries for top players are only going to get more astronomical.