Connect with us

Hi, what are you looking for?

Collective Bargaining Agreement

Effects of the Escalating Pay Limit on NBA Organizations & Athletes

Image Source: A.RICARDO / Shutterstock

The NBA encountered substantial impacts on its income during 2020 and 2021 due to the COVID-19 outbreak, but made a robust recovery in the most recent season, leading to the most significant increase in the pay limit in a single year since 2016.

According to The Athletic’s John Hollinger, the pay limit is anticipated to escalate rapidly in the upcoming years, particularly after the NBA finalizes a lucrative new TV contract that commences in 2025. This progressive rise in the pay limit will profoundly affect how organizations handle negotiations on contracts and extensions with their athletes and how the athletes evaluate their contractual choices.

Initially, the NBA’s Collective Bargaining Agreement restricts veteran athletes earning more than the league’s average payment from obtaining a raise exceeding 20% in the initial year of an extension. Consequently, players like Dejounte Murray and Jaylen Brown, who have significantly surpassed the value of contracts ranging from $16-26MM annually, are highly improbable to sign extensions before they reach free agency, potentially leading to challenging predicaments for organizations.

For example, the Spurs’ trade of the All-Star guard Murray during this offseason was reportedly influenced by the incapacity to extend his contract now and hesitations about entering free agency in 2024. As a result, Brown is now also the subject of trade rumors.

Currently, the extension regulations mainly pose issues for organizations that engage players below the maximum salary and witness these players warranting maximum extensions. However, this problem may become more prevalent if the pay limit maintains its rapid ascent.

Hollinger suggests that with a potential “50-60% boost in the cap over a five-year period,” even athletes signing maximum-salary deals may need to delay extensions until their subsequent free agency to optimize their earnings.

Considering the predicted pay limit escalations in the upcoming years, Hollinger proposes that teams may become more inclined to secure lengthy contracts that may seem unfavorable in present value but will depreciate significantly in proportion to the overall cap by their expiration. He identifies Jordan Poole, RJ Barrett, and Tyler Herro as instances of players eligible for extensions that could warrant maximum-salary commitments based on prevailing and anticipated cap figures.

As Hollinger highlights, securing a player to a more profitable elongated deal presently would also facilitate potential extensions in the future, whereas contracts like Keldon Johnson‘s recent four-year, $80MM agreement with the Spurs may render him nearly unextendable if the cap continues to rise by 10% annually or a similar rate.

Alternatively, some athletes may opt for short-term agreements to attain unrestricted free agency in 2025 or shortly thereafter, triggered by the arrival of fresh TV deal income.

There are speculations that the NBA and NBPA might opt to “even out” a substantial pay limit increase over multiple seasons this time around, instead of allowing a massive surge in a single year, similar to the situation in 2016. Nevertheless, it is anticipated that a wave of new revenue will enter in the ensuing years, whereby the athletes are entitled to approximately half of it.

It is still a bit premature to definitively assess how the NBA’s pay limit perspective is influencing the decisions of teams and athletes, but it will be a topic warranting keen observation in the future.

Image Source: A.RICARDO / Shutterstock

Advertisement
Advertisement
Advertisement

You May Also Like

Culture

Longtime ESPN broadcaster Holly Rowe is coming home to Salt Lake City to join the broadcasting team for the Utah Jazz. Friday, the team...

Culture

The Los Angeles Lakers have unveiled a new jersey patch sponsor for the 2021-22 NBA season: Korean-based food company bibigo. “This partnership is a...

Culture

The Los Angeles Clippers have no clue when or if Kawhi Leonard will play this upcoming season. Leonard is recovering from a partial ACL...

Culture

The Los Angeles Lakers have agreed to trade veteran big-man Marc Gasol to the Memphis Grizzlies – and no, the year is not 2008....