The NBA informed teams Thursday of a slight cut to its projected salary cap and luxury tax threshold next season as league officials contend with the financial fallout from a dispute with Chinese sponsors.
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The projected salary cap for the 2020-21 NBA season dropped to $115 million, down from a previous estimate of $116 million, ESPN reported, citing league sources. Some team front-office executives are reportedly preparing for a drop to as low as $113 million by the time the salary cap is finalized.
NBA teams that exceed the luxury tax threshold are required to pay an additional penalty. The projected threshold for the 2020-21 season fell to $139 million, down from a previous projection of $141 million.
League officials determine the salary cap each season based on calculations tied to “basketball-related income,” or revenue from sources such as media rights deals, ticket sales and corporate sponsorships. As a result, any major gain or loss of revenue can have an immediate impact on salary cap projections.
The NBA experienced such a loss in revenue last October when Houston Rockets general manager Daryl Morey tweeted support for pro-democracy protesters in Hong Kong. The tweet drew an immediate backlash among the NBA’s Chinese fans and sponsors, damaging the league’s most lucrative international market.
State-run Chinese television pulled NBA games off the air and local sponsors cut ties with the league. NBA games have yet to return to Chinese televisions.
The dispute has cost the NBA anywhere from $150 million to $200 million in revenue, league sources told ESPN.