A prolonged interruption to the NBA’s lucrative business relationships in China could impact what players hoops fans will see on their favorite teams as early as next season, according to salary cap experts.
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The NBA and its players union determine the salary cap each season through negotiations tied to the league’s “Basketball Related Income” – a total that includes revenue from ticket sales, media rights deals, merchandise sales and sponsorships, among other sources. The league set a cap of $109.14 million for the 2019-20 NBA season.
That total could register a noticeable drop if the NBA loses income from its Chinese sponsors, nearly all of which suspended their business ties to the league amid fallout from Houston Rockets general manager Daryl Morey’s tweet in support of pro-democracy protests in Hong Kong. Aside from limiting team budgets, any decrease would lower salaries for rookies and maximum contracts for star veterans, since both are determined by the salary cap.
“This is tricky to answer since the amount of money that comes in from China is an unknown variable,” NBA salary cap expert Jon Hamm told FOX Business. “But basically, any substantial loss of Basketball Related Income (BRI) - be it from this current situation or some other unforeseen event - could have a big impact.”
NBA Commissioner Adam Silver’s defense of Morey’s right to freedom of expression triggered a strong response from Chinese sponsors, including the league’s $1.5 exclusive streaming partner, Tencent Sports, which said it would temporarily stop airing games. Chinese footwear brand Anta said it would discontinue contract renewal talks with the league, while NBA gear was taken offline by Chinese e-commerce giant Alibaba as well as Nike’s website in the country, according to reports.
While the league’s exact annual income from NBA China is not known, the business is valued at $4 billion, according to Forbes.
“No matter what, if the cap comes in lower, it impacts future salaries. Maximum salaries are based off a percentage of the cap. That means players could not sign for quite as much as currently projected,” said Keith Smith, an NBA salary cap expert and Yahoo Sports contributor.
A drop of 10 percent of the NBA’s current basketball-related income could knock more than $11 million off the league’s current cap projection of $116 million for the 2020-21 season, according to Smith’s estimates. That could mean less money for teams to spend on superstar free agents such as the Milwaukee Bucks Giannis Antetokounmpo or the Los Angeles Lakers Anthony Davis who will be available next season.
At present, it’s unclear how long the interruption to the NBA’s relationships in China will last. State-owned television station CCTV has suspended broadcasts of the NBA games indefinitely, and Chinese government officials mandated that NBA Commissioner Adam Silver cancel his scheduled press conference ahead of the league’s preseason showcase game in Shanghai on Thursday.
It wouldn’t be the first time the NBA’s salary cap has declined – it fell slightly during the 2008 financial crisis.
“If you're the Knicks and you're planning ahead for free agency in 2021, a falling cap will impact the amount of space needed to pursue those players and could require unloading an additional player or two that they didn't expect to,” Hamm added.