NBA Salary Cap: China Strikes Twice this Season

It has not been a good season for the NBA and China. Daryl Morey’s tweet back in October prompted a harsh response from the Chinese and cost the league approximately $150-200 million in revenue according to the latest reports. NBA executives expect this to result in a $3 million dollar loss for next season’s salary cap, with new projections clocking in at $113 million.

Now, six months later, the virus which reportedly was born in Wuhan, China has shut the entire league down. Game revenue, TV deals, Sponsorship…the amount of lost revenue for the league will be significant.

Now for those who don’t know, the Salary Cap is a direct percentage of all Basketball Related Income, also known as BRI. When the BRI spikes, so does the Salary Cap. This is why in 2016 we saw an extremely large jump in the Salary Cap when the league negotiated a record-setting 9-year $24 billion TV deal with ESPN and Turner. The large spike in BRI caused a large spike in the Salary Cap, which allowed the Warriors to sign Kevin Durant while keeping their existing team. Next season, it looks like we shall feel the opposite effects.

Building a championship team is a long-term process. The increase in player movement has slightly altered timelines, but very very few teams win in their first year. GMs lobby for stars, they build around these stars, they extend the contracts for these stars, all with the idea of a constantly increasing Salary Cap. A team who is playoff competitive this season, maybe one major piece away from going for the Larry O’Brien, might’ve been banking on making a big offseason move this summer. After taking into account the adjusted BRI, who knows how much extra cap space teams will have to work with. This equally effects the players too. Guys like Hassan Whiteside are entering Free Agency this summer…will the market for him be as hot with less spending money for everyone?

The financial implications of the league closure, especially if the season is cancelled instead of suspended, extend way beyond one down year for the league. A significant drop in the salary cap could alter teams’ approaches in the coming seasons.