The NBA will announced a new television deal that nearly triples the league’s national TV revenue on Monday, Richard Sandomir of the New York Times reports.
In the nine-year deal, ESPN and Turner will pay the NBA an average of $US2.66 billion a year starting in 2016-17. The two companies pay around $US930 million a year now.
Many expected the new deals to total $US2 billion annually. Those expectations turned out to be low.
One of the immediate effects of this is that the NBA salary cap will explode.
Without getting too far deep into the muck of the collective bargaining agreement, we estimate that the new TV deal will add ~$25.8 million to the salary cap. The cap is currently at $US63 million. It will go up to $US88.8 million when the new TV deal kicks in, resulting in a ~45% jump.
There are some key caveats here: 1) we don’t know if the value of the deal escalates annually or if the NBA takes a flat $US2.66 billion every year, and 2) we don’t know how the NBA plans to deal with this salary cap jump.
According to Grantland’s Zach Lowe, NBA executives think the league might implement a plan to gradually increase the cap “to minimize the impact of any massive one-year jump in revenue.”
A part of that plan could possibly involve proactively increasing the salary cap in 2015-16 — one year before the new TV deal kicks in — in order to avoid a sudden 45% jump, Lowe says.
This salary cap increase will have countless ripple effects throughout the league. Teams in salary cap hell (looking at you, Nets) will get some extra wiggle room. Teams that previously were unable to keep a core of young players together when they all needed contract extensions (Oklahoma City) will be able to do so. Teams that locked guys into long-term contracts before this TV deal was announced will make out like bandits.
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