Impact of NBA's New Media Deal

As the NBA anticipates the commencement of its new media rights deal, discussions are intensifying regarding its potential effects on the salary cap and player salaries. Teams are preparing for a projected 10-percent increase in the salary cap starting in 2025. Traditionally, the salary cap aligns closely with basketball-related income (BRI), but the upcoming media rights deal may disrupt this correlation, leading to a possible shortfall in player earnings. The collective bargaining agreement (CBA) outlines specific conditions under which a shortfall occurs, defined as the difference between players' total contracted salaries and benefits versus their share of BRI. If contracted salaries fall short by more than 25 percent in the first year of the new media rights deal, the CBA could potentially end by June 30, 2027. Alternatively, if there are two consecutive years of shortfalls exceeding 10 percent, either party could opt out, terminating the CBA by June 30, 2028. Currently, experts suggest that while a 10-percent shortfall in the first year is plausible, consecutive years of significant shortfalls are unlikely. The new media rights deal is expected to be lucrative, but it will not encompass the entirety of the NBA's basketball revenue. For the upcoming season, the salary cap is projected to rise by only 3.36 percent, indicating that the impact of the new media deal on player salaries will be closely monitored as it unfolds. The NBA typically reserves 10 percent of player salaries in escrow to mitigate the risk of salaries exceeding the players' share of BRI, highlighting the league's cautious approach to financial management amid these changes.