Project 2015/16 Salary Cap

[HurricaneKid]

Numbers re: the Turner and ESPN (and ABC) negotiations are starting to leak out. It looks to me like the league revenues are going to go up AT LEAST 40M/team. So that would directly cause the cap to go up 20M. Are we looking at an 83-85M cap in two years? That would explain some of the offseason deals and non deals (LeBron 2 yr deal, etc).

Is there a smoothing calculation in the CBA to avoid such a sudden jump? Why aren't more contracts scheduled to expire just before every (well, most) team gets a pile of money to spend? What other factors are going to massively affect it? Any big regional deals to be inked between now and then (LAL deal affected every time substantially)?

Whats your guess?

[Dunkenstein]

Numbers re: the Turner and ESPN (and ABC) negotiations are starting to leak out. It looks to me like the league revenues are going to go up AT LEAST 40M/team. So that would directly cause the cap to go up 20M. Are we looking at an 83-85M cap in two years?

I've heard some teams are predicting a cap in 2016-17 of $90M.

[giberish]

First - the new media deals would start for the 2015-6 season - but not hit the cap/tax until the 2016-7 season as BRI is taken from the year before (the July moratorium is for finishing all the bookkeeping to arrive at final #'s).

Second, both the the old deals, and likely the new deals, increase with time. So even if the new deal averages $40M/yr more than the old deal averaged, the last year of the old deal is for significantly more than the average, while the first year of the new deal will (almost certainly) be for significantly less than the average. So the 1-year revenue jump is likely to be $10M/team or less.

The cap is likely to go up by $3-5M/yr, but keep going up at that rate for several years.

[DBoys]

Numbers re: the Turner and ESPN (and ABC) negotiations are starting to leak out. It looks to me like the league revenues are going to go up AT LEAST 40M/team.

What are the gross numbers being mentioned for
1 old deal total $
2 old deal # of years
3 new deal total $
4 new deal # of years

[HurricaneKid]

Numbers re: the Turner and ESPN (and ABC) negotiations are starting to leak out. It looks to me like the league revenues are going to go up AT LEAST 40M/team.

What are the gross numbers being mentioned for
1 old deal total $
2 old deal # of years
3 new deal total $
4 new deal # of years

1) ~900MM/season
2) 7 years
3) ~2.1B/season
4) Probably 8 years, possibly 9

[DBoys]

Thanks. Do you have a link to the source of those numbers?

[DBoys]

After a bit of playing with the calculator, it looks like the early predictions of an 80M cap in 2016-17 might be about right, with that size of a TV contract.

[DBoys]

First - the new media deals would start for the 2015-6 season - but not hit the cap/tax until the 2016-7 season....

In the current setup, I don't think that's right. As I understand it, they have changed the process and use "Projected BRI" to set the cap. See http://www.cbafaq.com/salarycap.htm#Q13

However, even though your rationale may have been askew, I believe your note that we won't see a cap jump until the 2016-17 season was correct. Per SBD, the current deal goes through June 2016, so the new one won't begin until the 2016-17 season. See http://www.sportsbusinessdaily.com/Jour ... media.aspx

[giberish]

After a bit of playing with the calculator, it looks like the early predictions of an 80M cap in 2016-17 might be about right, with that size of a TV contract.

Are you assuming a TV deal that's flat for all 8/9 years? Based on history (and a desire for a smoother revenue increase) I'd expect that the first year of the new TV deal will be well below the average. If the average is $2.1B, then the first year is likely to be $1.5B or so.

[DBoys]

After a bit of playing with the calculator, it looks like the early predictions of an 80M cap in 2016-17 might be about right, with that size of a TV contract.

Are you assuming a TV deal that's flat for all 8/9 years? Based on history (and a desire for a smoother revenue increase) I'd expect that the first year of the new TV deal will be well below the average. If the average is $2.1B, then the first year is likely to be $1.5B or so.

Nope, I assumed there were raises built into both deals.

My calculations were not intended to be precise, so I broadly rounded all numbers to something that seems reasonable to me. In that vein, I used 50M annual raises in the old TV deal, and double that (100M) annual raises in the new one since the deal average is twice as big.

Using that format, the old deal would be bigger than 900M in its final year, and the new one would be smaller than 2.1B in its initial year, but there's still a significant jump when it moves from the old deal to the new one. (For that transition from old deal to new, my raise assumptions created a one-year jump from 1.1B to 1.75B in TV revenues.)

After backing out the national TV annual increase, there are other revenues creating an annual increase of their own. I simply plugged in an "other revenue increase" per year by using the most recent audit numbers and backing out the 50M national TV revenue increased I had assumed, which left another 200M annual revenue increase from other sources. I included that amount as an ongoing annual increase as well, even though in real life that number varies from year to year.

[giberish]

After a bit of playing with the calculator, it looks like the early predictions of an 80M cap in 2016-17 might be about right, with that size of a TV contract.

Are you assuming a TV deal that's flat for all 8/9 years? Based on history (and a desire for a smoother revenue increase) I'd expect that the first year of the new TV deal will be well below the average. If the average is $2.1B, then the first year is likely to be $1.5B or so.

Nope, I assumed there were raises built into both deals.

My calculations were not intended to be precise, so I broadly rounded all numbers to something that seems reasonable to me. In that vein, I used 50M annual raises in the old TV deal, and double that (100M) annual raises in the new one since the deal average is twice as big.

Using that format, the old deal would be bigger than 900M in its final year, and the new one would be smaller than 2.1B in its initial year, but there's still a significant jump when it moves from the old deal to the new one. (For that transition from old deal to new, my raise assumptions created a one-year jump from 1.1B to 1.75B in TV revenues.)

I'd expect that the one-year jump will be less than this, with greater year-to-year raises within each TV deal (though presumably the details of the current deal are known to at least some people). So that the jump is more like 1.2B to 1.5B, with $150M (or a bit more on an 8 year deal) year-to-year increases afterward.

[DBoys]

I'd expect that the one-year jump will be less than this, with greater year-to-year raises within each TV deal (though presumably the details of the current deal are known to at least some people). So that the jump is more like 1.2B to 1.5B, with $150M (or a bit more on an 8 year deal) year-to-year increases afterward.

Just for comparative purposes, I plugged in your numbers to figure out what the future cap might look like.

My assumptions produce a cap that looks something like this:
2014-15 $63M ... 2015-16 $67M ... 2016-17 $79.5M ... 2017-18 $84M

Your assumptions produce a cap that looks something like this
2014-15 $63M ... 2015-16 $67M ... 2016-17 $73.5M ... 2017-18 $79M

[giberish]

I'd expect that the one-year jump will be less than this, with greater year-to-year raises within each TV deal (though presumably the details of the current deal are known to at least some people). So that the jump is more like 1.2B to 1.5B, with $150M (or a bit more on an 8 year deal) year-to-year increases afterward.

Just for comparative purposes, I plugged in your numbers to figure out what the future cap might look like.

My assumptions produce a cap that looks something like this:
2014-15 $63M ... 2015-16 $67M ... 2016-17 $79.5M ... 2017-18 $84M

Your assumptions produce a cap that looks something like this
2014-15 $63M ... 2015-16 $67M ... 2016-17 $73.5M ... 2017-18 $79M

I think that's what the NBA would try for. Rather than a $12.5M jump from one year to the next, have a $6-7M jump, then a bunch of $5-6M/yr increases.

[HurricaneKid]

Owners aren't going to tell the networks they don't want their money until the end of the 8 years. In fact, according to Zach Lowe, it looks like they are pushing to get some of the money into the cap NEXT year:

The NBA is on the verge of signing a new national TV contract that will double the current deal, a windfall that will launch the salary cap into the stratosphere.

One problem: No one knows when, or how, that cap jump will happen. It’s at $63 million for this season, and teams are projecting it could leap as high as $80 million for the 2016-17 season — the first under the new TV contract. Depending on how the league and its TV partners structure the inflow of cash, there could be one or two more mini-jolts before the cap settles into a new normal around $90 million.2

Grantland reported in July that the league is considering methods of pinching the onrush of money to avoid a gargantuan one-year jump in the cap level. Teams are speculating that the league might apply future TV money to the 2015-16 cap, nudging it up above the current projection of $66.5 million.

[giberish]

It's clear that the league doesn't want a huge 1-year cap/tax jump. The simplest way is a strongly backloaded deal - but that pushes money to the owners off for a few years, and may end up with an awkward fall to the next deal if TV money doesn't continue to rise for another decade.

Pushing some money up early would also work if the TV people agree (and if it's CBA legal). Presumably this money would come out of the first year or two of the new deal.

[165bows]

Owners aren't going to tell the networks they don't want their money until the end of the 8 years. In fact, according to Zach Lowe, it looks like they are pushing to get some of the money into the cap NEXT year:

The NBA is on the verge of signing a new national TV contract that will double the current deal, a windfall that will launch the salary cap into the stratosphere.

One problem: No one knows when, or how, that cap jump will happen. It’s at $63 million for this season, and teams are projecting it could leap as high as $80 million for the 2016-17 season — the first under the new TV contract. Depending on how the league and its TV partners structure the inflow of cash, there could be one or two more mini-jolts before the cap settles into a new normal around $90 million.2

Grantland reported in July that the league is considering methods of pinching the onrush of money to avoid a gargantuan one-year jump in the cap level. Teams are speculating that the league might apply future TV money to the 2015-16 cap, nudging it up above the current projection of $66.5 million.

There's obvious logistics reasons for avoiding a huge cap jump after next year. It just seems, let's call it, out of character for the owners to hand out that much money.

$4M per team (as an estimate obviously would vary a bit per team) would be $120M. Then any additional raises that were built into those players' salaries would be additional increased costs for subsequent years. This move could potentially double that money paid out. Eg, a team that would otherwise have been at the cap hands out a three year deal for $12M.

I really only see this happening if the owners get some other kind of giveback from the players.

[HurricaneKid]

Owners aren't going to tell the networks they don't want their money until the end of the 8 years. In fact, according to Zach Lowe, it looks like they are pushing to get some of the money into the cap NEXT year:

The NBA is on the verge of signing a new national TV contract that will double the current deal, a windfall that will launch the salary cap into the stratosphere.

One problem: No one knows when, or how, that cap jump will happen. It’s at $63 million for this season, and teams are projecting it could leap as high as $80 million for the 2016-17 season — the first under the new TV contract. Depending on how the league and its TV partners structure the inflow of cash, there could be one or two more mini-jolts before the cap settles into a new normal around $90 million.2

Grantland reported in July that the league is considering methods of pinching the onrush of money to avoid a gargantuan one-year jump in the cap level. Teams are speculating that the league might apply future TV money to the 2015-16 cap, nudging it up above the current projection of $66.5 million.

There's obvious logistics reasons for avoiding a huge cap jump after next year. It just seems, let's call it, out of character for the owners to hand out that much money.

$4M per team (as an estimate obviously would vary a bit per team) would be $120M. Then any additional raises that were built into those players' salaries would be additional increased costs for subsequent years. This move could potentially double that money paid out. Eg, a team that would otherwise have been at the cap hands out a three year deal for $12M.

I really only see this happening if the owners get some other kind of giveback from the players.

If you got a massive raise at work and it pushed you into a new tax bracket would you tell your boss not to give you the raise but to just pay it out in 8 years? Its just not the way these things are done. Who knows if they even own the team in 8 years? Bumping up next years cap would smooth it out some as well. As it would take funds from the mid/end of the deal and put it up front.

There is also the whole 9% escrow thing... We'll see where BRI ends up.

[KJandHondo35]

@ZachLowe_NBA: There it is. RT @RichSandomir: NBA to announce $24 billion/9 yr deal w/ ESPN and TNT on Monday. Annual average value nearly 3x current deal.

~ Average: 2.67b per year.

[DBoys]

No way the cap isn't well over 80M in 2016-17 no matter what.

[Dunkenstein]

In an article on CBSsports.com, Ken Berger states, "According to team executives who have crunched the numbers, the windfall could result in a $91.2 million salary cap in 2016-17 ." That echoes what I said in #2 above.

However, I'm also hearing that the NBA and the NBPA are discussing how to apply this massive increase in revenue so that salaries grow more gradually over time.