Players Will Likely Want Bigger Cut of Revenue Pie

The NBA (National Basketball Association) recently inked new TV deals with ESPN and Turner that will reportedly pay the league $2.66 billion per year starting in 2016-17. The nine-year deal will represent a massive increase over the $930 million per year that the league is currently receiving from ESPN and Turner.

Both the NBA and the Players Union can opt out of the current CBA (Collective Bargaining Agreement) after the end of the 2016-17 season. It is thought that the players, led by LeBron James and Chris Paul, will almost certainly choose to opt out at that time.

Speaking of LeBron James, the Cleveland Cavaliers superstar raised eyebrows when he chose to only sign a two year deal with the Cavs. The reason, according to James, was simple - it was strictly business, as he saw that the NBA would soon be inking lucrative new national TV deals which would raise the salary cap by a substantial margin. Why lock himself into a long-term deal, James thought, when he could sign a short-term deal and make substantially more in a couple of years. After all, with all of the new revenues will come an increased salary cap and players like LeBron will look to make substantially more.

The owners were able to get the players to agree to an owner-friendly deal in 2011 after making the case that the league's teams were collectively posting significant losses. Things have changed since 2011, however, in three key ways:

1) Franchise valuations are through the roof, helped, in large part, by Steve Ballmer's recent $2 billion purchase of the Los Angeles Clippers

2) Local TV deals are adding many millions of dollars to the bottom lines of teams such as the Los Angeles Lakers. Unlike the NFL, the NBA has both a national TV deal and local TV rights. This has allowed teams like the Lakers, for instance, to collect $200 million a year from Time Warner Cable for their local TV rights.

3) The new national TV deal will roughly triple what the league is currently bringing in from their national TV deal rights

Superstar players like LeBron James have already put the league on notice that they will be looking for a bigger piece of the pie in a couple of years. Their basic argument? Don't try to tell us that you are losing money anymore, as we won't be buying it.

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There is some thought that the players will be looking for the elimination of max contracts as part of their new deal (the maximum amount that a player can earn is limited to a % of their team's salary cap). If max contracts were to be eliminated, players like James or Kevin Durant could potentially earn in excess of $50 million per year.

The owners, however, are likely going to push for the end to guaranteed contracts. Sure, they'll likely say, max contracts can end, but don't expect these $50 million/year deals to be fully guaranteed.

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In short - the NBA and its players are likely heading towards another bitter and prolonged labor dispute in a couple of years.

Filed under: General Knowledge