League officials suspended the season after Utah Jazz center Rudy Gobert tested positive for coronavirus, the deadly illness that World Health Organization officials declared a global pandemic this week. The positive test results came back just minutes before the Jazz were scheduled to play the Oklahoma City Thunder, prompting the game’s immediate cancellation.
The NBA’s collective bargaining agreement includes language that explicitly states how teams can proceed from a financial perspective in the event of a pandemic or any other occurrence that makes it "economically impracticable for the NBA to perform its obligations." Such occurrences are referred to as “force majeure events” and include wars, natural disasters, terrorist attacks and epidemics.
Under the labor agreement, teams can withhold 1/92.6th of player's pay per game missed. To calculate the amount, NBA assumes teams played 5 exhibition games, 82 regular-season games and 5.6 playoff games.
That calculation could result in losses of salary ranging from hundreds of thousands of dollars to millions of dollars for high-paid stars. For example, if the season doesn’t resume, Los Angeles Lakers star LeBron James stands to lose close to $9 million in salary, according to calculations by Spotrac.
The financial hit will likely last beyond this season due to the method the NBA uses to determine its salary cap. The amount teams can spend on players is determined by basketball-related income, or revenue from ticket sales, sponsorships and other revenue streams.
Without any money flowing into the league from ticket sales, a prolonged suspension would result in a noticeable dip in basketball-related income. As a result, the NBA’s salary cap, and player salaries could sink.
The NBA already cut its salary cap projection for its 2020-21 season due to a loss in expected revenue from last fall’s dispute with Chinese sponsors over Houston Rockets general manager Daryl Morey’s tweet in support of Hong Kong protestors. League executives expected a loss of up to $200 million in revenue from that situation alone, according to ESPN.
Player losses are just one element of the NBA’s current economic landscape. Hourly workers at NBA arenas, such as concession stand attendants, were suddenly left without work as a result of the pandemic.
Dallas Mavericks owner Mark Cuban indicated Wednesday night that his franchise would work out a way to compensate its workers, but could not immediately provide further details.
While the NBA’s media partners are likely obligated to pay rights fees even during the stoppage, revenue from national television advertisements will plunge, according to LightShed media analyst Rich Greenfield.
U.S. authorities have reported more than 1,300 confirmed cases of coronavirus and at least 38 deaths to date, according to a Johns Hopkins University database.