Windhorst: "players have no idea about the capwave that's about to hit them"

[Richard4444]

According to CBA rules, NBA can reduce the cap space or tear the CBA by Force Majeure clause. Every other solution must be agreed upon with the owners and Players Association.

Increasing the escrow is a better solution for the owners and for the free agents. If the losses are bigger than the escrow, the difference is paid by the owners. In addition, these parts dont want to reduce the cap space. If the cap space drops, owners cant pay many free agents, and quite a few of them would have to pay luxury.

Players under contract dont want to increase the escrow too much. They want guaranteed money. They would prefer the reduction of cap space.

I think the majority of players are under contract, including almost all the big names. I dont think will be an easy negotiation.

It doesn't matter if the players have already got paid full salary under contract. At the end they have to follow the BRI split by the end of each season. Just because escrow is less than the revenue loss, it doesn't mean that the owners would take the loss all by themselves. The owners have the right to ask the players to reimburse those loss to make it back to the 49-51% split. But players would still prefer to not have such a big escrow percentage because it's always better to have the money in their bank account first than to have cheque being held by the employer.

Escrow is just a way for the owners to hold the money and it doesn't necessary correlate to the salary cap. Because at the end it's the revenue that determines the cap, not how you settle the payment. If they want to keep the cap flat, they should spend more time on determine whether they would like to to level the revenue loss out in the next few seasons or take a one year hit.

I heard, in theory, players would have to give the money back if the losses are bigger than the escrow. But I think its hard to apply this rule. Especially if the player changes teams (he cant compensate on the next salary).

[benson13]

I've Googled this, and I'm getting different answers. One link said player salaries are capped at 51% of BRI, and the players will be on the hook if it comes in over that. Another link said salaries are guaranteed.

Does anyone know which it is?

[Rapcity_11]

So the profit is supposed to be split 50/50 between players and owners. so Owners theoretically making 100 million Profit every year. not sure how much revenue you need to lose to lose 100 million in profit but dont think the teams will be losing that much. Teams should still be able to break even at least and be happy that the value of franchise is definitely higher than when they bought it.

However Billionaires did not become billionaires by being satisfied with small profits they will make the players share the pain to increase there profit

I'm not sure where you're getting the 100 million in profit every year. But it's not a 50/50 profit split between the league and players. It's a 50/50 revenue split. That's a very big difference.

+1

The problem I have with arguments is the wording is not correct. Profit and revenue sound the same but are very different.

https://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-profit.asp

Revenue vs. Profit: An Overview
Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. Profit, typically called net profit or the bottom line, is the amount of income that remains after accounting for all expenses, debts, additional income streams and operating costs.

This is also misleading. BRI is not strictly revenue.

Regular season gate receipts, minus taxes, facility fees, reasonable expenses, and certain charges including those related to arena financing

http://www.cbafaq.com/salarycap.htm#Q11

[Rapcity_11]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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This whole line of thinking is preposterous and frankly dumb, why don't we raise the cap by 50% to 150m, then increase the escrow to 40%. This will effectively will effectively result in 90m in cap. Owners and players will both get 50/50 given that no Morey scale incidents happen again.

Why stop there, 200m cap with 55% escrow.

1 billion in salary cap with 91% escrow.

Except there is obviously logic to keeping the cap relatively flat. There is no logic for your ridiculous examples.

[CptCrunch]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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This whole line of thinking is preposterous and frankly dumb, why don't we raise the cap by 50% to 150m, then increase the escrow to 40%. This will effectively will effectively result in 90m in cap. Owners and players will both get 50/50 given that no Morey scale incidents happen again.

Why stop there, 200m cap with 55% escrow.

1 billion in salary cap with 91% escrow.

Except there is obviously logic to keeping the cap relatively flat. There is no logic for your ridiculous examples.

Flattening the cap is just optics, it does nothing, absolute $0 impact, to the bottom line of players nor owners.

In fact, the whole escrow system is wholly beneficial to the owners with 0 benefits to the players.

Flattening the cap while raising the escrow is basically pulling wool over the eyes of the dumb. Makes the dumb feel better perhaps.

[Rapcity_11]

This whole line of thinking is preposterous and frankly dumb, why don't we raise the cap by 50% to 150m, then increase the escrow to 40%. This will effectively will effectively result in 90m in cap. Owners and players will both get 50/50 given that no Morey scale incidents happen again.

Why stop there, 200m cap with 55% escrow.

1 billion in salary cap with 91% escrow.

Except there is obviously logic to keeping the cap relatively flat. There is no logic for your ridiculous examples.

Flattening the cap is just optics, it does nothing, absolute $0 impact, to the bottom line of players nor owners.

In fact, the whole escrow system is wholly beneficial to the owners with 0 benefits to the players.

Flattening the cap while raising the escrow is basically pulling wool over the eyes of the dumb. Makes the dumb feel better perhaps.

1. Wrong. It has the impact of spreading the revenue decrease across ALL the players, instead of disproportionally the '20 FA's.
2. What about the luxury tax?

[Ryoga Hibiki]

This whole line of thinking is preposterous and frankly dumb, why don't we raise the cap by 50% to 150m, then increase the escrow to 40%. This will effectively will effectively result in 90m in cap. Owners and players will both get 50/50 given that no Morey scale incidents happen again.

Why stop there, 200m cap with 55% escrow.

1 billion in salary cap with 91% escrow.

Except there is obviously logic to keeping the cap relatively flat. There is no logic for your ridiculous examples.

Flattening the cap is just optics, it does nothing, absolute $0 impact, to the bottom line of players nor owners.

In fact, the whole escrow system is wholly beneficial to the owners with 0 benefits to the players.

Flattening the cap while raising the escrow is basically pulling wool over the eyes of the dumb. Makes the dumb feel better perhaps.

it's the same long term, shoet term there would be noncap space around killing the market for the players hitting free agency.

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[jbk1234]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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The cap just needs to adjust to reflect revenue like any other year. The only possible compromise is keeping it flat with a firm agreement to “make up” the losses in future years by keeping it flat even after revenue rises above the level required for $109m.

Setting aside the very serious questions as to whether the owners are in a position to just absorb those types of losses for now, we know some of them aren't, and whether the league as a whole could financially operate that way for two seasons, an open question in my mind, if you were a younger player, would agree to that deal? You're on a rookie contract now, but when you come off, the cap will be artificially held lower just as you're about to get paid? Also, what if revenues don't return to 2019 levels for many, many years?

Of all the options, I think the players saying we'll get you on the back end is the least plausible.

[vxmike]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

Sent from my SAMSUNG-SM-J327A using RealGM mobile app

The cap just needs to adjust to reflect revenue like any other year. The only possible compromise is keeping it flat with a firm agreement to “make up” the losses in future years by keeping it flat even after revenue rises above the level required for $109m.

Setting aside the very serious questions as to whether the owners are in a position to just absorb those types of losses for now, we know some of them aren't, and whether the league as a whole could financially operate that way for two seasons, an open question in my mind, if you were a younger player, would agree to that deal? You're on a rookie contract now, but when you come off, the cap will be artificially held lower just as you're about to get paid? Also, what if revenues don't return to 2019 levels for many, many years?

Of all the options, I think the players saying we'll get you on the back end is the least plausible.

You’re probably right. Realistically they just ought to let the cap settle to where it belongs like they do every year.

[Mamba81p]

I've Googled this, and I'm getting different answers. One link said player salaries are capped at 51% of BRI, and the players will be on the hook if it comes in over that. Another link said salaries are guaranteed.

Does anyone know which it is?

The players are on the hook only for the escrow money and bonuses. Everything else is guaranteed. If they make more than 51% even after they give the escrow money, then in theory they keep the rest of the money, but the league has other methods to adjust, like lowering the salary cap(also there is another fund that is about 1% of BRI), and that's the issue they are going to have.

[G35]

I'm not sure where you're getting the 100 million in profit every year. But it's not a 50/50 profit split between the league and players. It's a 50/50 revenue split. That's a very big difference.

+1

The problem I have with arguments is the wording is not correct. Profit and revenue sound the same but are very different.

https://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-profit.asp

Revenue vs. Profit: An Overview
Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. Profit, typically called net profit or the bottom line, is the amount of income that remains after accounting for all expenses, debts, additional income streams and operating costs.

This is also misleading. BRI is not strictly revenue.

Regular season gate receipts, minus taxes, facility fees, reasonable expenses, and certain charges including those related to arena financing

http://www.cbafaq.com/salarycap.htm#Q11

I am distinguishing between the definition between the words revenue and profit. This can be applied to any business situation not just the NBA. If you want to make that distinction go ahead, I was concerned about the incorrect usage of the word.....

[DelAbbot]

Relax! Jay Powell will buy whatever it is that keeps the cap up yoy.

[Jkam31]

You do realize if the situation comes where the owners will have to keep the cap artificially high in perpetuity, the league won't be profitable and the values of the franchise will drop as well, so no, what you are saying is objectively not sustainable nor realistic.

No I do not realize that... In fact I am arguing the exact opposite. You think the like $15 million per team that is being talked about that each owner would subsizide would drop franchise valuations and take a huge chunk out of league profits? LOL!

I don't mean to be an ass, but I think you guys kind of have no idea how much money the NBA makes and how incredibly solid of an investment these franchies have been for the mega-rich for the last few decades.

Subzidizing $15 million or so per team per year to make sure that teams can actually be built properly and players get paid what they are now at least..... that is absolutely nothing.

LMAO these teams have been great investments for decades? 7 years ago it took a mayor putting together a group of 300 investors to keep a team in place. 10 years ago 1 team was sold at a $120 million loss and the other was turned over to the league for the debt the team owed the league. While people today scream about Seattle getting their team back, it was on the market for 2 years and only sold to a group who had every intention of moving the team.

Almost every one of these teams owes a lot of money that they spend yearly from a line of credit the NBA gives teams. That line of credit is based on a valuation of the teams. That value includes a very big national TV contract and their regional broadcasting deals as well as arena income. On top of the line of credit a lot of these teams owe private lenders and banks money.

Once you calculate the coaching staff, back office staff, front office staff, players, travel, and everything else a lot of these teams are lucky if they break even in cash flow. Some of the revenue sharing instituted in 2011 helped, the lower percentage payout to players in the 2011 CBA also helped, but a lot of teams still struggle to get anywhere.

What many do not understand is that in 2013 the NBA signed the national TV deal which almost tripled that income starting in 2014. The huge salary jumps in 2016 and since were a direct result of that deal. That deal expires in 2023, which means a deal should be signed 2 years from now. The TV networks broke off those contract talks this summer though, and after this finals ratings mess that deal is not likely to be anywhere close to where they were at in the current deal without a huge jump in ratings next year. I am not exaggerating when I say half the league could be sold or go bankrupt if that national TV deal gets cut in half, and nobody is going to pay billions to get into a league losing half their teams.

Where are the ratings don’t matter crowd

[Dundalis]

I've seen many fans say they don't care about ratings and the financial health of the league. And they don't care if players are making less because they make so much anyway.

But I'm wondering how fans will feel when their team suddenly has no money for free agents and starts making roster moves simply to cut costs. That doesn't sound super awesome to me.

Well if everyone is doing it then everyone is getting worse. So can still be a relatively level playing field. But prob the cheap/small markets would do it mostly.

[prophet_of_rage]

18 month journey? I dont think the people/economy will stand for that

They don't have a choice. Ignoring this virus doesn't make it go away - it just makes it spread faster and do more damage, and it's already been proven out in many places that you can't have a fully functional economy, at least in the way it existed pre-pandemic, with covid cases rising out of control. People get freaked out and stop going out and spending money. As long as large swaths of the public are getting extremely sick and dying that'll be the case.

How do Sweden, Belarus and the non locked down countries look ?

Even if it was doing untold damage, societies cant afford it

Terrible

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[JHTruth]

I've seen many fans say they don't care about ratings and the financial health of the league. And they don't care if players are making less because they make so much anyway.

But I'm wondering how fans will feel when their team suddenly has no money for free agents and starts making roster moves simply to cut costs. That doesn't sound super awesome to me.

Teams have always made moves just to cut costs. Happens all the time.

But the big expirings out there will really increase in value.

I think it will be good for the league long-term. NBA players are vastly over-compensated compared to other sports.

[JHTruth]

18 month journey? I dont think the people/economy will stand for that

They don't have a choice. Ignoring this virus doesn't make it go away - it just makes it spread faster and do more damage, and it's already been proven out in many places that you can't have a fully functional economy, at least in the way it existed pre-pandemic, with covid cases rising out of control. People get freaked out and stop going out and spending money. As long as large swaths of the public are getting extremely sick and dying that'll be the case.

For most people COVID will be ancient history after the election if its not already. The Governors will start to open things back up and people will start heading back to the things they love like concerts, movies, games, etc. The NFL would have pretty full stadiums TODAY if they could..

[Edrees]

18 month journey? I dont think the people/economy will stand for that

They don't have a choice. Ignoring this virus doesn't make it go away - it just makes it spread faster and do more damage, and it's already been proven out in many places that you can't have a fully functional economy, at least in the way it existed pre-pandemic, with covid cases rising out of control. People get freaked out and stop going out and spending money. As long as large swaths of the public are getting extremely sick and dying that'll be the case.

For most people COVID will be ancient history after the election if its not already. The Governors will start to open things back up and people will start heading back to the things they love like concerts, movies, games, etc. The NFL would have pretty full stadiums TODAY if they could..

Concerts are not happening. Coachella and Ultra music festival are both already canceled (for 2020 the delayed dates). Those events take a huge amount of planning, and since people can't plan now, they can't hold them anytime soon. They basically decided not to reschedule this year's coachella and UMF and plan for summer 2021.

Games and movies, sure yeah.

[VanWest82]

18 month journey? I dont think the people/economy will stand for that

They don't have a choice. Ignoring this virus doesn't make it go away - it just makes it spread faster and do more damage, and it's already been proven out in many places that you can't have a fully functional economy, at least in the way it existed pre-pandemic, with covid cases rising out of control. People get freaked out and stop going out and spending money. As long as large swaths of the public are getting extremely sick and dying that'll be the case.

For most people COVID will be ancient history after the election if its not already. The Governors will start to open things back up and people will start heading back to the things they love like concerts, movies, games, etc. The NFL would have pretty full stadiums TODAY if they could..

Yes covid mostly exists as a US election issue. Good point.

[LivingLegend]

I've seen many fans say they don't care about ratings and the financial health of the league. And they don't care if players are making less because they make so much anyway.

But I'm wondering how fans will feel when their team suddenly has no money for free agents and starts making roster moves simply to cut costs. That doesn't sound super awesome to me.

The Cavs havent been able to sign a free agent since 93' so Im all good with it. Have fun large markets.