NBA commissioner Adam Silver cancelled the NBA season on March 11 after Utah Jazz's Rudy Gobert tested positive with COVID-19. A day after the NBA suspension, Silver released a statement through a letter penned to NBA fans, mentioning that the league will be on hiatus for at least a month. As the season suspension continues, the NBA is bound to face losses, either from cancelled regular-season games, shortened playoffs or playing games without fans in the stands.
The collective bargaining agreement (CBA) binds the NBA in a force majeure clause, which will withhold players salaries for every cancelled NBA game. According to ESPN, the league and players union are considering withholding 25% from all players salaries in a league escrow if the regular-season games are eventually cancelled. If this is done, then the players will not have to pay the teams back from their own money if the games are cancelled. For every game, around 1.1% of the salary can be cut. For high-paid players like Los Angeles Lakers star LeBron James, he could lose more than $400,000 per game. While all players receive their final paycheck on November 1 (after the season has ended), LeBron James would then need to pay the difference directly to the Lakers.
The CBA also guarantees players between 49 and 51% of the league's Basketball Related Income (BRI) to players. If the NBA lose the estimated $1.2 billion if the season is cancelled, the players would lose $600 million. Reports state that holding 25% of salaries in escrow could help and 10% of salaries are already held back by the NBA. It is given to the players if the salaries fail to reach the 'collectively bargained percentage' of revenue for the players. If the salaries exceed the amount, the amount is distributed among the owners.
Thinking it over a little more, if I had to guess, they put up everyone at the Mandalay Bay and set up something similar to what they have for the G-League showcase. All games in the same hotel they're staying - no one leaves the premises for the duration of the season https://t.co/w4W9TWDwQ2— Eric Pincus (@EricPincus) March 26, 2020
The NBA have already lost around $350,000 after Houston Rockets General Manager Daryl Morey tweeted in support of Hong Kong. It had caused the NBA to lower salary cap for 2020-21 to $115 million. Due to the NBA suspension, the league will also probably keep the entire escrow. As per reports, with the losses from Chinese markets included plus the 25% salaries withheld, there will be an additional amount of $329 million added to the losses. For a player like Lakers' Anthony Davis, who gets paid $24.4 million paid out of his $27.1 million salary throughout the year, a reduction will result in him being paid just $22 million.
A salary cap lower than $115 million will limit free agent options, including contract extensions of players. Ben Simmons and Jamal Murray could end with roughly $29 million each after a reduced salary cap. Even if the NBA plans to conduct games in one city like Las Vegas, they would still lose ticket revenues, while television broadcasters will also lose a significant amount of money.