NBA CBA Negotiations: Looking to the Past with an Eye Toward the Future

Mar 27

The National Basketball Association (NBA) and the National Basketball Players Association (NBPA) are currently negotiating a new Collective Bargaining Agreement (CBA) in order to avoid a potential lockout. The sides have pushed the opt-out date back to March 31st and want to avoid pushing further into the NBA playoffs in mid-April. [1] Either side could opt out of the current CBA which runs until the 2024-25 season and trigger negotiations. Both sides, led by Commissioner Adam Silver and Executive Director Tamika Tremaglio respectively want to avoid a lockout-as was the case in 2011 and 1999 – which resulted in the loss of games after deals could not be reached between the parties before the seasons started. [2]

Both sides are looking for a balanced partnership as the league is truly flourishing, with team valuations skyrocketing as evidenced by the recent $3.5 billion sales of the Bucks and Suns – 75% higher than Steve Ballmer paid for the Clippers a decade ago – and the potential $75 billion TV deal on the horizon in 2025, dwarfing the current 9-year, $24 billion deal with Turner. [3] As the league booms, Tremaglio wants the NBPA and the players driving the growth to have an additional stake in the financial pie. The players have taken greater influence over the league in the age of player empowerment, exampled by Lebron James, who boasts over 50 million followers online compared to the Lakers 10 million. Aside from online presence, many new fans align with player rather than team allegiance in an age where stars such as James are frequently on the move.

Owners realize they don’t have the power they once had but are still looking to continue to grow fan engagement, grow the financial pie, and increase competition. Looking to the past, the financial issues and balance between revenue sharing has always been a key point of contention in negotiations and it is surely going to be one in the upcoming CBA. Since the 1987 CBA, as the league burst onto the national landscape with stars such as Michael Jordan and Larry Bird, the main issue has been the share of Basketball Related Income (BRI) between the players and owners. [4] This has culminated in two work-stopping lockouts, each 12 years apart, in 1999 and 2011 as the sides couldn’t come together on core issues. If history repeats itself the league and players’ association could be heading towards another in 2023.

In 1987 the BRI split was 53% to the players and in 1999 the owners won a victory by reducing player salaries that had ballooned in the 1990s and gave 55% of revenue to players in exchange. After the smooth 2006 CBA negotiations, resulting in a 57% player share, the owners cracked down in 2011, leading to a work stoppage. [5] The recession had ravaged the league which lost $300 Million per season and 22 of 30 teams were losing money. The owners leveraged this and lowered the player share down to 51% from 57% which was a massive win for David Stern in his last CBA negotiation as Commissioner. After the work stoppage, both sides agreed to a win-win CBA in 2016-17, as Commissioner Adam Silver took charge of the league, with sharing between 49-51% for the players. [6] The new $24 billion Turner and ESPN TV deal kicked in and the salary cap and team valuations simultaneously exploded. At the time, only 13 teams were valuated above $1 billion compared to the current average of $3 billion. Over the same period, player salaries grew 45 to 50 percent and the salary cap has exploded as average salaries are now nearing $10 Million with max contracts beyond $40 Million. As a result, teams are now paying massive luxury tax bills, in some cases upwards of nine-figures as the league seeks to punish teams for overspending and maintain competitive balance between large and small market teams. [7]

Looking to the present negotiations, there are the same core issues in slightly different iterations than before. As player empowerment continues to drive the expansion of the economic pie, the NBPA will surely look to the past revenue sharing and feel a 50-50 BRI split is no longer fair. The second critical issue that is being ironed out are the luxury tax tiers and rate adjustments, as the league is looking to make it more viable for smaller teams to spend over the cap while still punishing large-market teams for egregious spending in an effort to keep the league competitive. The current levels are $1.50 for every dollar to $5 million and $1.75 from $5 to 10 million. These levels are completely up for negotiation as the league is looking to maintain the punitive upper levels while the smaller market teams seek to be able to spend more without a massive tax bill. The players maintain their interests in expanding player salaries and would favor a lessened lower band tax which would allow more teams to spend big on player salaries, but an effective hard cap could stall star player salary growth. [8]

The NBPA is also seeking an increase to contract extensions limits which are capped at 120 percent under the current CBA, meaning a player’s new extension can’t be beyond that number. An increase to 140-50 percent would give more incentive to players to sign longer contracts and not have them become below market very quickly as is the case now with a constantly ballooning salary cap. Although it would cost more for the owners, it would give some stability in an era where many stars sign short contracts and hold their franchises hostage year-to-year seeking to maximize their pay. The sides are also interested in a smoothing of the cap when revenue expands with a new TV deal rather than having a cap spike such as that in 2016. [9] The cap spike had many unintentional consequences that were detrimental to the league. One major issue was the salary floor of 80 percent meant that when the cap boomed teams were forced to spend egregious amounts on role players which limited their flexibility in future years. The cap spike also allowed the Golden State Warriors to have the money that they would not have had in any other year to sign Kevin Durant, upsetting many teams around the league. A smoothing mechanism would normalize contracts and allow for better team planning for front offices going forward.

The future of the league is undeniably bright but there are some issues on the horizon that the new CBA must be able to address going forward. One of the major threats to the league is the impending bankruptcy of Bally Sports, which provides regional coverage for over half the league. [10] Another issue at play going forward is dealing with possible expansion of the league starting in 2025. There are talks ongoing of adding two teams, with Seattle and Las Vegas as the front runners. [11] This would expand the pie but also create two more mouths to feed. Revenue would have to continue to expand to make it an attractive option for the current owners. However, expansion could be beneficial to both parties as it is more money for both sides as well as more jobs for players. To create additional revenue, there are also talks of a possible in-season tournament that could add billions in revenue with additional games on national TV.

One contentious issue that was skirted by Commissioner Silver is “load management” which has plagued the league in recent years. [12] As players seek to maintain health with an eye toward the playoffs, the league has seen many star players sit out games without being injured which is an undeniably bad look for the league. Fans pay hundreds of dollars for tickets just to find out before tip-off that the star player they came to watch is sitting out. The owners may seek to push for a solution but are likely to meet heavy resistance by the players who are looking to maximize their potential earnings and avoid overuse injuries. This issue could be made more complex with the possible addition of more big-ticket games added by the in-season tournament.

With a goal of completing a deal before the March 31 deadline, the NBA and NBPA must address all these pressing issues in order to forge a path forward for the league. Although it is claimed all that is to be done is to “dot the I’s and cross the T’s” a simple look to history between the two parties shows that negotiations can devolve into a stalemate resulting in a lockout. [13] In what could be Adam Silver’s swansong as commissioner, as he has been shortlisted for Disney CEO, the parties have an opportunity to create a CBA that is a win-win for both sides and takes the league into a bright future with an ever-growing financial pie that can satisfy everyone. [14] A truly balanced partnership has never really been seen before, but it seems both sides are rowing in the same direction as the NBA seeks to become the first truly global U.S. pro sports league with a massive and growing domestic and international audience fueled by foreign-born star players vying for MVPs. By looking to the past with an eye towards the future, the NBA and NBPA can avoid a lockout and set the league up for unprecedented growth and success in the future with the upcoming CBA.

[1] CBA Opt-Out Extension Adds More Uncertainty to the 2023 NBA Trade Deadline, Forbes, Bryan Toperek

[2] Tamika Tremaglio looking for a true partnership between NBA players and owners in the next collective bargaining agreement, Boston Globe, Gary Washburn

[3] NBA eyeing $75 Billion for next media deal, Sports Media Watch, Paulsen

[4] Labor Pains Nothing New to the NBA, APBR, Robert Bradley

[5] NBA Collective Bargaining Agreement, Inside Hoops

[6] Breaking Down changes in the new CBA, ESPN, Larry Coon

[7] Biggest Takeaways: The NBA’s New CBA Deal, Sports Illustrated, Michael McCann

[8] NBA, NBPA progressing in talks on reaching new CBA, The Athletic, Shams Charania

[9] Id.

[10] Diamond Sports Group, LLC’s Potential Bankruptcy and Its Effects, JD Supra, Lauren Bernstein

[11] NBA Insider Notebook: Future of 1-and-Done Draft Rule, Expansion, Target Score, Bleacher Report, Eric Pincus

[12] Id.