NBA anticipates owing $500-million shortfall to players after 2016-17 season
Positioning for public support ahead of a potential labor stoppage two years down the line has already begun.
NBA commissioner Adam Silver met with the league's Board of Governors in Las Vegas on Tuesday, and subsequently addressed assembled media about the multitude of hot-button issues put up for debate in the meeting.
One of his most pertinent talking points shone a light on the potential impending labor strife, with both the owners and the players union able to opt out of the league's current collective bargaining agreement in 2017. The players union is currently expected to do just that, though Silver continues to express optimism that the two sides can collectively bargain any issues within the context of the current deal.
The hazy variable both driving and clouding the debate is the league's financial picture, and what it could look like in a far more fortuitous revenue environment.
On top of revealing that multiple NBA teams continue to lose money despite the record-smashing revenue the league pulled in last season, Silver dove into projections for what revenue allotment might look like when the lucrative TV rights deal kicks in after the 2015-16 season.
In accordance with the CBA, players are guaranteed roughly 50 percent of all basketball-related income. But because of the market-depressing impact of the league's salary cap - expected to increase substantially over the next two years - and maximum contract structure, as well as all the pre-existing contracts that will have been signed in the current cap environment, the players' share projects to come in well below that guaranteed haul when the cap spikes in conjunction with the TV money in 2016-17.
Essentially, total player salaries are not expected to be able to keep up with the increase in revenue. There will be too much money chasing too few players, and while that could lead to some eye-popping individual salaries, it's unlikely teams pay out the players' full share through total salaries in 2016-17.
That, in turn, will necessitate a substantial shortfall payment from the league.
From Ken Berger of CBS Sports:
Silver revealed that the NBA is projecting that it will have to write a nearly $500-million shortfall check to the players after the 2016-17 season. There was a shortfall in the players' guaranteed 50 percent of revenue for this past season, and there could be another one after '15-'16, as well.
"That's not, of course, the ideal outcome from our standpoint," Silver said. "It's not something we predicted when we went into this collective bargaining agreement."
The league did indeed pay out a shortfall this season - a comparatively modest $57.2 million - when revenues came in higher than projected. It's not as simple as a check being handed to the players, but that shortfall is rolled into the following season's salary cap, which in this case could continue a multiyear trend of the cap expanding.
"It's happened because the revenue we generated was much higher than we had ever modeled," Silver said. "But we're also learning that when you have all that money coming into the system, team behavior isn't necessarily predictable either."
One doesn't have to squint too hard to see where this is all heading.
"As one league source told me hypothetically," writes Berger, "there are going to be a lot of owners who will look at those numbers and say, 'If they're only worth 46 percent, why the hell are we paying them 50?'"
Two years is a long time to work these issues out, and the league sounds ready to be transparent with its books. But it isn't likely to sit well with new union head Michele Roberts that ownership is already taking a disadvantaged public stance.