Jimmy Cao
On March 11, 2020, the Utah Jazz were scheduled to play the Oklahoma City Thunder in what was supposed to be a routine regular season NBA game.[1] But with literal seconds before the opening tip-off, the Thunder’s director of medical services sprinted onto the court in dramatic fashion to inform the referees of a bit of news that would send the sports world into purgatory: Utah Jazz center Rudy Gobert tested positive for COVID-19.[2]
Fast-forward one month and what seemed inconceivable at the time has become the new norm. The NBA season has been suspended indefinitely; the Masters has been postponed until November; the start of the NFL season remains in jeopardy. And a friendship has been soured, as Jazz guard Donovan Mitchell was reportedly angry at his teammate Gobert after he tested positive for COVID-19.[3]
With the NBA season halted, millions of fans worldwide must wait and see if they will ever get closure on one of the more exciting NBA seasons in recent memory. But what many fans might not expect from the season’s suspension is its potential impact on the NBA salary cap moving forward.
Under the NBA’s collective bargaining agreement, the NBA salary cap is calculated by taking 44.74% of the forecasted basketball-related income of the upcoming season, subtracting the cost of benefits, and dividing that figure among the 30 teams.[4] Given this formula, under normal circumstances teams can reliably predict the cap for the next two or three seasons.[5] But with the recent stoppage in play, including a potentially cancelled playoffs, the impact on league finances could be severe.
There is a lot of uncertainty yet to be resolved, all of which would impact the amount of revenue lost due to COVID-19 depending on whether the season is resumed, shortened, or cancelled altogether. Some media outlets are reporting a potential one-billion-dollar revenue loss if the season is cancelled entirely.[6] Even more unclear is how the loss would be distributed between the owners and the players. If NBA operations return to normal by next season and the forecasted basketball-related income is not impacted, the players will emerge relatively unscathed under the current salary cap formula. However, in such a scenario, team owners would likely mitigate their losses by leveraging numerous clauses in the CBA designed to share the burden of unexpected financial losses.[7] Such an action could lead to extensive legal battles between players and the Association, as players fight to retain their promised salaries in the event no compromise can be reached. On the other hand, if a compromise between players and owners is reached, then the salary cap, which has only declined twice in the past 35 years, could potentially be reduced by a record $8 million for next season.[8] A drop in the salary cap would mean teams would have less money to spend on free agents for the upcoming season, with second- and third-tier fringe players likely being the first casualty.
These issues pale in comparison to the devastating impact brought by the COVID-19 crisis. Billionaire owners and millionaire athletes losing some TV money should be relatively low on everyone’s list of concerns as we enter a new period of uncertainty. But for millions of basketball fans, one thing is for certain: the NBA season can’t start soon enough.
[1] https://www.espn.com/nba/story/_/id/28887057/jazz-center-rudy-gobert-tests-positive-coronavirus.
[2] Id.
[3] https://www.nj.com/knicks/2020/04/nba-rumors-rift-continues-between-jazz-teammates-donovan-mitchell-rudy-gobert-over-coronavirus.html.
[4] https://www.cbssports.com/nba/news/coronavirus-how-the-covid-19-outbreak-will-impact-the-nbas-salary-cap-moving-forward/.
[5] Id.
[6] https://www.washingtonpost.com/sports/2020/03/21/coronavirus-could-cost-nba-1-billion-bring-about-record-salary-cap-drop/.
[7] Id. Some clauses include: a force majeure clause which allows the NBA to terminate contracts entirely; an escrow account holding 10% of all player salaries.
[8] https://www.washingtonpost.com/sports/2020/03/21/coronavirus-could-cost-nba-1-billion-bring-about-record-salary-cap-drop/.