Teams bracing for major losses in 2020-21 season
The restart of the 2019-20 season has yet to be underway, but teams are already bracing for what could come during next season. Major uncertainty surrounds the NBA, which ponied up every possible effort to resume its season after coming to a halt on March 11.
Word around the league is that franchises are preparing for major losses in the upcoming campaign, as sacrifices will have to be made one way or another to go through with the 2020-21 season.
“The truth is, things are changing so fast that, when it comes to next season, the best we can do is put a stake in the ground and make a guess,” an Eastern Conference team president told ESPN’s Brian Windhorst and Tim Bontemps. “The reality is nobody is probably going to operate in the black next season.
“The only question is how much each of us are going to lose.”
The most apparent loss is that of gate revenue, as fans will not be allowed to attend games in the Orlando bubble and the league is preparing for the potential of playing in empty stadiums once the 2020-21 season starts, possible in December as previously outlined.
NBA commissioner Adam Silver noted in a conference call back in May that roughly 40% of the league’s once-projected $8.4 billion in revenue came from NBA arenas. Players are expected to have guaranteed contracts hovering around $4 billion next season and the collective bargaining agreement assures a 50-50 split of basketball revenue — making the problem abundantly clear.
“This CBA was not built for an extended pandemic,” Silver told the players in the call. “There’s not a mechanism in it that works to properly accept a [salary] cap when you’ve got so much uncertainty; when we’d be going [into] next season saying, ‘Well, our revenue could be $10 billion or it could be $6 billion. Or less.'”
That uncertainty has led the league to think of potential ways to ease that burden for players and owners.
As it is today, 10% of players’ salaries are held in escrow to help balance the projection and actual revenue for the season. The large cap spike in 2016 helped players not only recover that escrow but also get some additional payout, which was $355,000 per player in 2017.
The NBA could consider increasing the escrow amount to 20%, for one season, allowing for a cash reserve at the end of the season once the financial situation is known fully.
Another option would be to artificially inflate the cap, which would avoid imminent free agents from suffering devastating contractual losses. A sudden drop would cause more than a few teams to fall into the tax, while “smoothing” could benefit players as well as their teams over the long haul.
“In one case, the owners want a loan from the players. And in the other case, the players want a loan from the owners,” one prominent agent said. “It will probably end up somewhere in the middle and it will get done after some yelling and posturing.”
The NBA could soon resemble the MLB in terms of hammering out a deal that works for both parties, but the overall sentiment is that those negotiations shouldn’t put the 2020-21 season at risk.
“There’s cash flow,” a team president said. “With TV deals, teams should have over $100 million [each] coming in. We should be able to fund the season.”