Biggest Takeaways: The NBA’s New CBA Deal
In an anticipated, but nonetheless critical development in professional basketball, the NBA and NBPA on Wednesday tentatively agreed on a new seven-year collective bargaining agreement.
Although both sides still need to ratify the agreement, agreement is widely expected. In light of the need for ratification, the two sides have mutually agreed to postpone the Dec. 15, 2016 deadline for either side to opt out of the current CBA until Jan. 13, 2017. If either side were to opt out, the current CBA would be set to expire on June 30, 2017 and a lockout would almost certainly begin on July 1, 2017. Instead, once ratified, the new seven-year CBA will begin in the 2017-18 season and run through the 2023-24 season, with either side able to invoke an opt out clause in 2022.
With a tentative deal in place, here’s a look at the biggest takeaways from the new CBA deal:
Adam Silver and Michele Roberts learned from the mistakes of their predecessors
The new CBA is the first negotiated by NBA commissioner Adam Silver and NBPA executive director Michele Roberts. Both leaders deserve credit for striking a deal before a labor dispute—and accompanying antitrust litigation—arose. Consider the different result of the last labor negotiation between the NBA and NBPA. With David Stern and Billy Hunter in charge, respectively, in 2011 there were plenty of lowlights:
• After months of poor communication, the NBA locked out the players on July 1, 2011. A lockout meant that players were not paid their salaries. Players were also denied other employment benefits, such as team-funded healthcare, and access to team facilities. The lockout would last 161 days, the second-longest lockout in NBA history.
• The NBPA disclaimed interest, a maneuver under labor law where the NBPA declared that it no longer represents its players and thus did not bargain on their behalf.
• Carmelo Anthony and 13 other players filed a federal antitrust lawsuit against the NBA, arguing that the lockout violated Section I of the Sherman Antitrust Act.
• The NBA canceled 240 games, leading to abbreviated 2011-12 season where each team played 66 games instead of 82. Arena workers, security staff and restaurants and bars dependent on business from NBA games all lost substantial revenue.
• A deal on a new CBA was finally reached in December 2011 and it was a deal that could have—and should have—been reached before the lockout began.
This time around? No lockout, no disclaimer of interest, no lawsuit, no regrets—just a deal, after months of continuous and productive negotiation sessions.
No need to change a good thing
While all of the specifics of the new CBA have not been made public, sources familiar with the negotiations have shared details with The Crossover. The details reaffirm an overarching point: both sides emerge as winners. In that same vein, the new CBA is more about targeted tweaks than fundamental shifts. Both sides recognize that economic prosperity in the NBA already exists for owners and players, and it would be unwise to radically alter the current state of affairs. The league’s nine-year, $24 billion TV deal with ESPN and Turner Sports, along with lucrative sponsorship deals, already provide for a healthy economic landscape. Neither side wanted to jeopardize that with a labor dispute.
Likewise, although NBA owners and players may disagree about whether certain teams in smaller markets are losing money due to smaller regional TV deals, both sides surely concur that most NBA franchises are doing quite well and would net enormous sums of money should they be sold—some reports suggest that as many as 13 NBA teams are now worth more than $1 billion.
Further, of all the major U.S. pro sports leagues, the NBA is best positioned to become the first truly global league. It has a massive and growing international fan base and an ability to generate more and revenue every year. As explained below, the new CBA should accelerate those positive trends.
Basketball Related Income: Everyone’s about to get rich(er)
The topic that was most likely to trigger a lockout in 2017 was how players and owners were going to divide and define Basketball Related Income, better known as “BRI.” This is a term that captures most types of revenue generated by NBA games, and BRI is essentially the pool of NBA money that is shared by owners and players. BRI includes sizable percentages of revenue from apparel sales, arena signage, NBA television broadcasts and many other NBA products and services that lead to incoming dollars. Depending on various factors, NBA players receive between 49% and 51% of BRI. This percentage will not change in the new CBA. Preserving that percentage is considered a success for Silver and the owners, who insisted upon not conceding on BRI.
Players, however, are expected to receive much more BRI in the new CBA through two factors 1) an expanded definition of the categories of revenue that are classified as BRI and 2) an increasing influx of revenue into the game, primarily through broadcast deals that are climbing quickly in value. So while the distribution of BRI will remain constant, the pool of BRI will grow. In fact, one source familiar with the new CBA tells The Crossover that while NBA players in 2011 received 57% of BRI through the CBA, players will net at least $1.5 billion more in BRI in the first year of the new CBA. This, again, is because of the expanded definition of BRI and more incoming revenue. For Roberts and the players, a more expansively defined and prosperous BRI is a decisive victory.
As a result, both Roberts and Silver are winners with BRI.
Salaries will climb dramatically
According to those familiar with the new CBA, key categories of player salaries will experience healthy rises ranging from approximately 45% to 50%.
For instance, take the NBA’s minimum salary. There are actually 11 versions of the NBA’s minimum salary, as they range based on number of years of NBA experience. The lowest minimum salary for the 2016-17 season is $543,471, which is assigned for rookies, while the highest is $1,551,659, which goes to veteran players who have 10 or more years of NBA experience.
Taking the current lowest NBA minimum salary, $543,471, it is obviously a lucrative salary by any reasonable measure. In fact, it is in the top 99.5% income percentile bracket in the United States. Now consider that the lowest NBA minimum salary will rise substantially in the new CBA: there will an approximate 45% increase in minimum salaries across the board. This means that a player who would have earned $543,471 on a minimum contract under the old CBA will get a bump to about $788,033—and a bump into the top 99.9% income percentile bracket in the United States.
Similar jumps are expected in the NBA’s rookie wage scale and mid-level exceptions. In addition, the new CBA will feature a “designated veteran player exception” that will…
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