For the second time, the NBA and the National Basketball Players Association agreed to push back a 60-day window that preserves each side’s rights to terminate the collective bargaining agreement amid the coronavirus pandemic, sources told ESPN.
The NBA and NBPA agreed on an Oct. 15 deadline to complete talks on modifications to the CBA for the 2020-21 season, a date that guarantees an uninterrupted completion of the NBA playoffs and allows more time for the league and union to make better-informed decisions based upon on the virus’ course and the league’s revenue projections for next season.
The NBA and NBPA extended the original negotiating deadline in May to Sept. 10, sources said.
“Extending is an easy call,” NBPA executive director Michele Roberts told ESPN on Tuesday. “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.”
The NBA is moving toward pushing back this year’s draft, scheduled for Oct. 16, along with the Oct. 18 start of free agency, partly because of a strong likelihood that the tentative opening of the 2020-21 season will be delayed from Dec. 1, sources told ESPN.
On Friday’s board of governors call with the league office, discussions on starting dates for next season ranged from December to March, sources said. There’s still a consensus hope the season can begin sometime in late December or January, sources told ESPN.
The NBA and NBPA can now negotiate the resetting of the 2020-21 salary-cap and luxury-tax numbers based upon audits of this season and projections of the next year, allowing for teams, agents and players to have the proper time to prepare for the financial realities of the pandemic’s impact on the league.
The league’s and union’s biggest motivating force to delay the start of next season comes with the hopes that teams can eventually find ways to bring fans safely back into arenas for games, an integral part of the league’s revenue stream. Commissioner Adam Silver says game-night receipts account for approximately 40% of the league’s revenues.
Despite current and projected revenue losses affecting the union’s 51-49 revenue split with the league, there’s optimism that the sides can reach agreements on temporary changes to the CBA — including the salary-cap and luxury-tax thresholds — that would preclude the need to enact the nuclear option of terminating the CBA.
The termination of the CBA would largely be a mechanism to scrap the current financial structure and would almost assuredly lead to a significant stoppage in play. The NBA’s current CBA extends through the 2023-24 season, with a mutual opt-out available after the 2022-23 season.
In an ordinary year, the NBA and NBPA calculate the new salary cap between the end of the draft and the start of free agency. This year, the league is addressing the urgency of teams to have those new cap and luxury tax figures before the draft because it dramatically influences how teams approach decisions — including trades and the buying and selling of picks.
The financial realities of the league’s revenues cratering out without fans in arenas would have dramatic impact on teams, especially smaller-market franchises dependent on gate receipts and revenue sharing from big markets such as Los Angeles, New York and Golden State. In a scenario where gate receipts are gone — or dramatically limited — big-market teams will be limited in the money that they can share with those in smaller cities.
Among worst-case scenarios, some small-market teams tell ESPN that they fear they could lose north of $20 million in revenue sharing next season. Those sorts of projections impact competitive balance and are the models that the NBA and NBPA would want to sidestep in these CBA discussions.
For instance, the CBA has a projected 2020-21 salary cap of $115 million, with a luxury tax threshold of $139 million. Amid the loss of revenue streams, some teams fear that cap and tax could fall as far as $25 million to $30 million. Without the NBA and NBPA negotiating a new mechanism for the cap, the league could be facing 25 of its 30 teams stuck in luxury tax payments based on projected payrolls — something that would chill free agency and limit many organizations’ ability to operate in a normal manner in the marketplace.
For example, the Golden State Warriors‘ projected tax penalty of $45 million would rise to $160 million prior to the start of free agency.
“This CBA was not built for an extended pandemic,” Silver told the NBPA membership, according to audio obtained by ESPN in May. “There’s not a mechanism in it that works to properly set the cap when you’ve got so much uncertainty; when our revenue could be $10 billion or it could be $6 billion. Or less.”
ESPN’s Bobby Marks contributed to this report.