For the third time this year, the NBA and NBPA have extended the deadline for either side to opt-out and give 45-day notice to terminate the CBA. This time, the deadline has been pushed to October 30. The current CBA was established in 2016 and was set to run seven years, with the opportunity to terminate coming after the sixth year. But with the COVID-19 pandemic sweeping the world, the NBA is now working in a completely different financial arena. As Commissioner Adam Silver has said:
“Everything that we’re doing exists outside the current collective bargaining agreement. We need to negotiate everything — when training camp starts, when we start [the season], how we’re going to continue operating potentially under reduced [revenue], frankly. Those discussions are ongoing.”
Luckily, both sides seem motivated to negotiate and keep the CBA intact. After the second extension to the deadline, NBPA Executive Director Michele Roberts stated, “Extending is an easy call. If everyone continues to be well-intentioned on how we deal with the economic effects of this virus, we’ll just make the appropriate adjustments, and there won’t be a need to terminate the CBA at all.” If they cannot come to an agreement, and ultimately terminate the CBA, there will likely be significant stoppages as the sides will have to renegotiate an entirely new CBA before being able to move forward.
There are a few significant questions that need to be answered in order to press on to the start of the 2020-21 season, whether or not termination of the CBA happens. The main issue is the salary cap, which increases and decreases with league revenue. With the decreases in revenue from the past season, exceptions will have to be made to current mechanics if the salary cap is to be stable or if it is to increase. Around 40 percent of total revenues for NBA teams comes from fan attendance at games, meaning a substantial amount of revenue was lost this past season, which would lead to a lower salary cap next season. In order to avoid a reduced market for upcoming free agents, and to keep teams out of a lower luxury tax, it seems that the league may artificially inflate the salary cap to keep it at or around the $109 million that it was at for 2019-20.
Another significant issue within the salary cap problem is the NBA’s escrow system. In a given season, about half of the revenue goes to players and the other half goes to teams. However, with the expected decrease in revenues, player salaries would take up a much larger portion than their negotiated split. Typically, 10% of player salaries are kept in escrow to ensure each side receives only their negotiated share of revenue. However, a potential option for the upcoming season is to increase the percentage of player salaries put in escrow, possibly around 20%, per Brian Windhorst and Tim Bontemps of ESPN. This system would model a proposal in the NFL where 35% of player salaries would be held in escrow to help face the costs of the pandemic. Obviously, this could be a large sticking point for players who would see a greater hit to their salaries in order to play this season. However, if it does not come from the players, the Governors will have to bear the entirety of the costs, which could lead to a holdout on their side.
The last issue to be discussed is the schedule of the 2020-21 season. Adam Silver has made it clear that he would like for fans to be present at the games before starting the season. However, with the problems and precautions of COVID-19 still in full effect, it seems unlikely that the league will be able to get both a season starting soon and stadiums full of fans. When faced with that dilemma, which will they choose? We may have an answer. On October 23, ESPN reported that the NBA was pursuing a 72-game schedule starting some time before Christmas. This would be a season in which fans would not be able to fully participate in person at least at the beginning of the season, due to COVID-19 restrictions. It is likely that the League and Board of Governors would be doing all that they could to gradually bring fans back in order to recoup some of the losses.
The salary cap questions at least will need to be sorted out by the current projected draft night, November 18. That way, teams will be able to negotiate with their picks and players on that night. So even if the CBA is still intact after October 30, there is still a hard deadline for the parties to negotiate through a lot of the problems still up in the air. Hopefully an agreement will be found that is acceptable to all groups involved so that another year of basketball can come quickly and effectively.