paulbball wrote:Some more back of napkin math/thoughts.
1. Player salaries are fixed, so there are only 3 edge case players who will be hurt by this: Lillard, Murray and Simmons (yes, other players will be hurt but they will be signing smaller contracts with accurate numbers on paper before they dot the i's, not the Lillard thought he was getting 196m, but might only end up with 166m situation). Players will now get 52.6 to 54.1% of the total league revenue based on a 10-15% projected revenue decrease. This might cause some teams will cry and force a CBA negotiation. Last time the CBA was renegotiated, we went down from 57% to a target of 50%.
2. This will doubly hurt the teams. Roughly speaking, the NBA had a revenue of 8 Billion last year. The league payed 51% in revenue as salary. The average earnings before interest, tax, depreciation and amortization was 61 million (or 1.8 Billion total) last season, which means the total NBA operational and fixed cost was a grand total of around 2 Billion. These costs and salary costs (unless renegotiated as mentioned above) are going to be fixed even if revenue goes down meaning any decrease in revenue will come out of the pockets of the owners. This means the average owner is going to lose 26 million to 40 million on average resulting in an average EBITA between 21 and 35 million this year assuming a 10-15% decrease in revenue.
61m average to 21 to 35m. This is basically a 43 to 66% decrease in earnings. Also this is EBITA, not profit. Only half the NBA teams make money anyways. My conjecture is that at least 20 teams will lose money this year if the cap drops by 10-15%.
Not sure what you mean by only 3 players. Every player with a maximum contract, meaning it is a percentage of the cap, stands to have salary downsized if the cap decreases. No player can earn more than the maximum salary, according to his veteran status, for the year, which is determined by the size of the cap. If the cap decreases those salaries will be adjusted.