Even before COVID-19 and the postponement of the NBA season, insiders in the NBA organization were already projecting losses of $400M in revenue. This initial decrease was because of Daryl Morey, since he got China furious at the NBA, and most of the Chinese sponsorships disappeared.
Because of the suspension, the NBA is facing a much larger depreciation. The NBA generates about $8B each year, and many experts project that the NBA will lose about $1.2B if the season is canceled.
The NBA makes the most money from sponsorships, merch, ticket sales, and TV contracts. Since almost all of those profit avenues are gone for the next few months, so it’s hard to tell exactly how much money they will lose.
Nobody knows when the season will return, hence nobody knows how many games will be played. Even if games are played, if no fans are allowed that’s still a huge hit (about $500M loss). 25% of the NBA’s annual revenue is from ticket sales and other processes involved with fans at games.
Let’s just say that between the China fiasco and the suspension the NBA loses $1.2B. Considering how drastic these two events are, $1.2B is pretty generous.
Under the current NBA CBA, the players receive 50% of league revenue. During normal circumstances, the salary cap would be $116M, if the NBA makes $8B again. If the NBA only makes $6.8B this year, the salary cap could drop to $100M.
It means that the teams are potentially looking at a $16M difference in cap space if the season is canceled, which seems more and more likely with every passing day.
That means almost every player with a player option will opt-in since the amount of money they signed for is set and doesn’t change based on cap space. There are 28 players with a player option and almost all of the money will be tied up with already-existing contracts.
Example: Anthony Davis signs a two-year max contract with the Lakers this offseason with the cap at $116M. That would’ve paid him 30% of the cap space/year, or $34.8M/year (max contracts are delegated percentage-wise).
With $100M cap, Davis would only make $30M/year, a significant decrease, however still more than he would make if he opted in. Other players, like Gordon Hayward, might pick up their player option because there will be limited money on the table this year.
Unrestricted free agents like Paul Millsap, and other aging role players, could see their earnings decrease by as much as 40%. Hassan Whiteside, who was making $24M, might have to settle for something closer to $117M.
The NBA is looking at a massive reduction in revenue, which trickles down to the players. Each team could be looking at a $16M decrease in cap space, which would limit the amount of money free agents would receive and how many players would want to become free agents. It would also limit how much money the teams could spend since no team wants to be paying the luxury tax.