How COVID has affected NBA Player’s Contracts

NBA players are among the most paid professional athletes whose salaries are often a discussed topic amongst fans. It's evident that the pandemic came with some negative economic impacts, and basketball, being a professional sport, was not spared. Even after restarting the season, a lot of revenue was lost as fans could not attend the game events. This has a significant effect on how much the league earned.

That said, the COVID-19 pandemic is speculated to affect all NBA players, mostly the rising and all-star players and the 2020 free agents. Before we look at how COVID has affected the NBA player's contracts, let's see how let's see the formulae used to determine the players' salaries.

How the NBA Players' Salaries are Determined

Based on the league revenue from the previous season, the coming season’s salary cap can easily be determined. Simply put, the 2019-2020 league revenue will determine the 2021 salary cap. Following the 2016-CBA (Collective-Bargaining-Agreement), NBA owners and players take a 51-49 split of the basketball-related-income (BRI): in which players are slightly favored.

BRI consists of all the revenue collected from basketball-related income: brand deals, ticket sales, and sales of branded merchandise. The player's portion, 51% of the BRI, divided by 30 (which is the total NBA teams) gives the next season's spending threshold per team. The remaining 49% of the BRI is shared among the owners. Now that you know how the player's salaries come about let's see how COVID impacted the wage cap.

Speculated Revenue Lost Due to the Pandemic

It was estimated that the NBA would lose between $500 and $700 million in ticket sales. This is without fans in attendance. The fact that many people lost their jobs during the pandemic means that fans had to shift their spending priorities, and the league saw a drastic drop in the sale of licensed merchandise. The total estimated lost revenue in BRI due to the pandemic is something close to $ 1 billion. This is a large figure and would lower each team's next year's salary cap by millions of dollars compared to this year.

How the Contracts will be affected

The considerable BRI loss comes with multiple negative impacts, especially to the players' final salaries and contracts. In April, 10% of players’ salaries were deducted and put into the escrow account, just in case the season's estimated BRI isn't met. The rule was introduced to protect the League’s 51-49 CBA split, and with the effects of the pandemic, likely, players won't receive any amount from the escrow account. In fact, they may still be required to give up a part of their salaries.

Players with expired contracts are likely to be underpaid. This is because the teams will then have limited expenditures, and they will be forced to spend as little as possible. Besides the low pay, some players will be required to pay any amount they owe to club owners from the just-completed (2019-2020) season.

Max contracts are also expected to be lower than earlier expected. This is because it's tied to the percentage of NBA team's cap. Players who signed a super-max contract for the coming seasons will be paid less than the projected amounts, and future contracts will as well be affected. This comes as a disadvantage, especially to rising stars like Sixers' Ben Simmons, Nugget's Jamal Murray, and Raptor's Pascal Siakam, etc.

Moving Forward

Even as the NBA and NBPA try to reach an agreement on CBA modification, various speculations have surfaced on the future of the NBA contracts. A lot has also been taking place on the behind the scenes of NBA max-contracts and negotiations, often involving confidential legal bargains, contract clauses, and player preferences analysis.

The ongoing talks between the union and the NBA aim to resolve the current debate and settle on a favorable decision for both the players and club owners. If you take a smart guess, it's pretty evident that the talks are centered on increasing escrow taken from players' contracts and salaries. The BRI's full audits are yet to be released, which will determine who gets what amount as per the league's 51-49 CBA split.

From these developments, legal advice and representations are proving quite essential, especially for upcoming players and free agents. Coach consultation and contract revisions are also becoming crucial than ever before. Negotiating through the contract process is expected to be tough, considering the tough financial times. This calls for legal professionals who know and understand the NBA landscape better.

Final Thoughts

The CoVID-19 pandemic has been met with devastating effects across all the major economic sectors. NBA is one of the major sports that have had a fair share of the pandemic's economic impacts. As a result, legal consultations and contract revisions are becoming a priority to ensure the players' interests aren't overlooked.

It's worth noting that even with the CBA negotiations and modifications, NBA players are sure to walk away with some big chunk of money. Maybe not as much as they would expect, but the pay would still be very decent.