Photo by Brad Penner-USA TODAY Sports

NBA’s business is good, see: Salary Cap

The NBA’s moratorium officially lifted at midnight as the league announced the salary cap for the 2014-15 season increased by 7.5 percent to an all-time high of $63.065 million.

The increase in the salary cap is a signal of the good business in the NBA right now.

According to Larry Coon, the salary cap is set as 44.74 percent of the basketball-related income. Basketball-related income includes revenue generated from gate receipts, from the television and broadcast deal, proceeds from team sponsorship and several more sources.

Basketball-related income is a good measure of the basketball world’s business. And business is very good.

Despite the lockout that took away half of the 2011-12 season, the NBA’s business is going very very well. There is clearly a large increase in basketball-related income — the salary cap is up 8.7 percent from the 2012 season. This year was a major, major success for the NBA’s business. There is definitely some good will bought from Adam Silver’s initial tenure as the league’s commissioner.

Of course, revenues are up, but that does not mean profitability is up either.

 

Nets owner Mikhail Prokhorov just shelled out the largest tax bill in NBA history. JUSTIN LANE/EPA

The Nets reportedly lost $144 million in basketball operations last year as their payroll bloated to well over $100 million. Brooklyn paid $90 million in luxury tax payments alone.

The new collective bargaining agreement was as much about controlling costs as it was ensuring owners generated revenue. The Nets are certainly an outlier as they have spent to try and get out of a hole and remain contenders. There are rumors that Brooklyn will soon look to reign in it spending and control its costs.

Part of the Heat’s problem in trying to figure out their future with or without LeBron James is the fact they are going to face a hard cap this year because they are a taxpayer who will use their bi-annual exception and mid-level exception to approach the “apron” — a line $4 million above the tax line. To use both, the Heat would be subject to a hard cap.

You can see why there is some hesitancy to return to Miami and be subject to a restricted roster.

Both owners and players have the ability to opt out of the collective bargaining agreement in 2017. It is expected one side will do so and the players are already preparing for this possibility. By then, too, the NBA will have a new broadcast rights agreement that should pump even more money into the NBA. The players will want a bigger piece of that pie.

But for today, with the signing moratorium lifted, players will share the spoils and sign new contracts. The gates are open for the NBA. Time to spend.

Philip Rossman-Reich

About Philip Rossman-Reich

Philip Rossman-Reich is the managing editor for Crossover Chronicles and Orlando Magic Daily. You can follow him on twitter @OMagicDaily

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