Editor’s Note: The MULS Sports Law Society (SLS) Blog is pleased to welcome 1L Killian Commers as one of our NBA writers. Killian received his undergraduate degree in Financial Services and Marketing Strategic Communications from Creighton University’s Heider College of Business. 

It truly was a great summer to be a mid-level NBA basketball player. As the salary cap rose twenty five percent to $94.14 million, teams had money to spend and players were eager to either re-sign with their current team or join elsewhere. However, many of the deals signed since free agency began in early July may have additional unintended consequences in the long term, not to mention the raising of eyebrows by fans and the media. First, let’s take a look at where all this money is somewhat questionably being spent and where it all is coming from.

In July, Evan Turner and the Portland Trail Blazers reached a four-year, $70-million deal. That’s an average of $17.5 million per year to the former second overall pick, who frankly struggles from the field. Since 2010, Turner has shot 43.2 percent from the floor and 30.5 percent from three-point range. This coming year he will be the third highest paid player on the Trail Blazers. Another sought after free agent this summer was Harrison Barnes. Mark Cuban will be shelling out $95 million over the next four years to a guy whose ability remains to be seen without the aid of Golden State Warriors’ duo Steph Curry and Klay Thompson.

Regardless of his somewhat lackluster playoff performance, Barnes could have the potential to excel alongside Dirk Nowitzki, but only time will tell if this gamble pays off throughout the duration of his deal. Finally, Joakim Noah, the former Chicago Bulls center, inked a four-year, $72-million deal with the New York Knicks. The 31 year old has certainly seen his fair share of injuries the past two years and still faces doubts concerning his recurring knee troubles. However, Phil Jackson and the Knicks certainly showed their belief in his ability to improve a struggling defense; the question is, does it justify the price?

What exactly is the source of all this money?

For the 2014-15 season, the NBA salary cap was set at just over $63 million, an amount that increased a total of about $10 million in somewhat steady increments over the prior ten years. The cap moved to around $70 million for 2015-16, and for this coming season, will jump 25% to $94.14 million. The money obviously has to be spent somewhere, and throughout this summer it certainly was, but why? Back in 2014, the NBA struck a $24 billion media-rights deal with Turner Sports and ESPN. This deal would have huge ramifications on not only the salary cap, but by extension, player contracts as well.

Turner and ESPN didn’t just come up with $24 billion out of thin air. The largest chunk of your cable bill each month goes towards carriage fees (Draper). Currently cable providers pay ESPN $7.04 per month to carry the worldwide leader in sports, which is up from $5.75 in 2014. Between 2014 and today, TNT’s carriage fee rose from $1.28 to $1.76.

With these networks spending an additional $915 million and $715 million respectively under the new agreement, one can bet these fees will be passed directly onto the consumer. Be sure to thank the NBA for that couple dollar bump in your monthly bill.

What exactly does this deal mean for the future of the NBA?

The last time the league’s share of revenue saw such a large increase was in 2011, when the players essentially bailed the league out of its $300 million deficit. This year the revenue explodes again by an additional $1.6 billion due to the new television contract. Half of these dollars will go to the league, and the other half to the player’s salary cap.

The current collective bargaining agreement is set to expire after 2021, but both sides have the ability to opt out after this coming season. Is the salary cap increase going to be enough? Jerryd Bayless, who signed with the Philadelphia 76ers, will be the highest paid player this year ($9.4 million) on a roster with a host of potential stars. Ian Mahinmi, a new Washington Wizards signee, will earn $16 million this year, while John Wall is set to make only $15.8 million.

One can see the apparent problem fairly easily. For those guys who didn’t have the opportunity to take advantage of this summer’s payday, they certainly will desire to do so in the near future. It can be difficult to predict where the salary cap moves in coming years, but an additional 25% increase is more than improbable. In the not too distant future the owners may decide their piece of the pie simply isn’t large enough, and in looking at somewhat recent history it is apparent no course of action is ever left out of question.

One dreaded word then swirls in the back of everyone’s mind that could spell disaster for America’s third most-watched professional sport … “Lockout.”

Connect with Killian on LinkedIn

Sources        

  1. Michael Candongo, NBA Salary Cap 2017: Disparity Alert! The Problem With Net Worths, The Warriors, Clippers & Other Rosters!, FX News Call (Sept. 7, 2016).
  2. Charles Curtis, The 9 Craziest Contracts of 2016 NBA Free Agency so Far, USA Today: For The Win (July 2, 2016), http://ftw.usatoday.com/2016/07/nba-free-agency-contracts-craziest-evan-turner-mozgov-list.
  3. Kevin Draper, What The NBA’s Insane New TV Deal Means For The League And For You, Deadspin (Oct. 6, 2014), http://deadspin.com/what-the-nbas-insane-new-tv-deal-means-for-the-league-a-1642926274.
  4. Michael Salfino, Knicks Fans Have Reason to Feel Bullish About Joakim Noah, WSJ.com (Sept. 27, 2016), http://www.wsj.com/articles/knicks-fans-have-reason-to-feel-bullish-about-joakim-noah-1475022781.
  5. Tom Ziller, The NBA Is Richer than Ever. That Only Makes a Lockout More    Likely, SBNation.com (Sept. 19, 2016), http://www.sbnation.com/2016/9/19/12812702/nba-lockout-2017-adam-silver-owners-tv-revenue-money-rich.

 

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