The NBA’s revenue was significantly impacted in 2020 and 2021 by the COVID-19 pandemic, but rebounded in a big way this past season, resulting in the league’s biggest single-year salary cap bump since 2016.
As John Hollinger of The Athletic writes, the salary cap projects to continue increasing rapidly in the coming years, particularly after the NBA completes a lucrative new television deal that will take effect in 2025. That rising cap will have a real impact on how teams approach contract and extension talks with their players, and how those players weigh their contract decisions.
For starters, the NBA’s Collective Bargaining Agreement prohibits veteran players who are earning more than the league average salary from receiving a raise of more than 20% in the first year of an extension. As a result, players like Dejounte Murray and Jaylen Brown, who have significantly outperformed contracts in the range of $16-26MM per year, are extremely unlikely to sign extensions before they reach free agency, which could result in difficult decisions for teams.
For instance, an inability to extend Murray now and an uneasiness about going all the way to free agency in 2024 with him was believed to be one reason why the Spurs traded the All-Star guard this offseason. Now Brown finds himself in trade rumors as well.
For now, those extension rules are only really creating problems for teams who sign players for less than the maximum and then watch those players prove worthy of max extensions. However, the issue could become more widespread if the cap continues to rocket upward.
According to Hollinger, a “50-60 percent increase in the cap over a period of half a decade” isn’t out of the question, in which case even players who sign maximum-salary contracts may have to put off extensions until their next free agency in order to maximize their earnings.
Given the anticipated cap jumps coming in the next few years, Hollinger suggests that teams may be more willing to lock in long-term deals that look like bad present values, since they’ll be worth a much smaller percentage of the cap by the time they expire. He points to Jordan Poole, RJ Barrett, and Tyler Herro as examples of extension-eligible players who could be worth maximum-salary investments based on current and future cap numbers.
As Hollinger observes, locking in a player to a more lucrative longer-term deal now would also make it more viable to extend that player down the road, whereas a contract like Keldon Johnson‘s new four-year, $80MM pact with the Spurs could make him virtually unextendable if the cap continues to increase by 10% per year (or anything close to it).
Conversely, certain players might become more inclined to seek shorter-term contracts in order to reach unrestricted free agency in 2025 or shortly thereafter, after the NBA’s new TV deal money comes in.
There has been speculation that the NBA and NBPA may agree to “smooth” out a significant salary cap increase across several seasons this time around, rather than allowing a massive one-year spike like in 2016. But either way, the expectation is that there will be an influx of new revenue in the coming years, and the players are entitled to about half of it.
It’s still a little too early to say with any certainty how the NBA’s salary cap outlook is affecting teams’ and players’ decisions, but it’ll be an issue to keep a close eye on going forward.
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