NBA prepares for Salary Cap boon, as TV partners prepare for lower ratings

The National Basketball Association’s biggest championship will not be in June, but July.

Although basketball culture is currently enthralled with the Golden State Warriors and their quest for 73 wins, fans, media insiders, coaches, front office officials, and owners are all keeping a close eye on the large salary cap expansion that will follow shortly after the NBA Finals ends in late June, and no matter who plays in it, every NBA team will win this title. That’s because the NBA’s new TV deals signed in 2014 with TNT and ESPN/ABC—the channels that host primetime games, playoffs, and in ESPN/ABC’s case, the NBA Finals—will dramatically improve the salary cap depth. Currently, the NBA salary cap is at $67.1 million, with a luxury tax threshold of $81.6 million, according to Jeff Zillgitt of USA Today.

By the beginning of the 2016-17 NBA season, which officially starts July 1 of this year, the cap will be at a total of $89 million, with a luxury tax of $108 million. This will spike in July 2017 to $108 million for the cap, and $127 for the luxury tax. In two years, the cap will nearly double, and the luxury tax will grow by 50%. This is significant because many teams can go spending if they aren’t up to standards talent wise. For instance, the Los Angeles Lakers in this offseason alone will be able to spend up to as much as $62 million dollars, while the Philadelphia 76ers can spend up to about $61 million. Both of these teams are in the basement of their respective conferences, the Western, and the Eastern.

In fact, the top 5 teams by maximum cap space: the Lakers, 76ers, Boston Celtics, Dallas Mavericks, and Washington Wizards, are all major media markets, finishing in the top 10 according to Nielsen’s 2016 estimates. Namely, Los Angeles (2nd), Philadelphia (4th), and Boston (8th) are media markets which possess teams that are cornerstones of NBA history. However, all three of these teams have been maligned as of late: none of them have won a playoff game since 2013.

This might explain why the NBA’s ratings are down recently: with multiple traditional markets suffering, including both New York teams, the NBA’s ratings are down locally and nationally since the 2014 TNT and ESPN/ABC TV contracts were signed. On TNT, the national audience’s ratings are down 8.2%, while ESPN/ABC is down 5.6% from 2014-15. Artie Bulgrin, ESPN’s senior vice president for global research, attributed the decline to the fact that the best teams are not in the top media markets right now. “It’s Golden State,” Bulgrin said. “It’s not New York, Chicago, or [the Lakers].”

But what if the issue comes from another source altogether? According to the Wall Street Journal, ESPN’s subscriber base has lost seven million in the last two years, and TNT has lost four million. The league might reap benefits from the TV deal at first, but with the rate cable subscriptions are dropping, and the decline of major market teams across the league, this could lead to a situation where owners spend less than expected, and create another labor stoppage like the one in late 2011. The NBA has had trouble regaining the 1990s ratings since the 1999 lockout and retirement of Michael Jordan, and it seems as if things might not improve in the coming years after this money jump.

Sources

http://www.usatoday.com/story/sports/nba/2015/04/18/rising-salary-cap-luxury-tax-threshold-dollar-amounts/25974437/

http://basketball.realgm.com/analysis/240096/The-Maximum-Available-2016-Cap-Space-For-All-30-NBA-Teams

http://www.tvb.org/media/file/2015-2016-dma-ranks.pdf

http://www.wsj.com/articles/whats-wrong-with-the-nbas-tv-ratings-1450744363

 

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