Some Teams Project 10-15 Percent Cap Drop If NBA Loses China Business

[CelticsElite]

that horford deal may not age very well. 

https://sports.yahoo.com/sources-nba-teams-planning-for-scenario-in-which-salary-cap-would-drop-due-to-situation-with-china-003037770.html

At least five teams are having their salary cap personnel prepare for a scenario in which the cap for the 20-21 season could drop between 10 and 15 percent due to the NBA's situation with China, sources tell Keith Smith of Yahoo! Sports.

"It's like the cap spike, but opposite,” a league source said. “After all the money everyone spent last summer, this would have a major impact on all of us."

The NBA recently released a projection of $116 million for the 20-21 season, which is $7 million higher than the $109 million mark for 19-20.

Teams internally plan for a variety of scenarios, but a 10 to 15 percent drop would be dramatic.

“I haven’t really been in this spot before. The cap has only gone up in recent years. It’s really different. I have to wonder if the league would be pressed to consider some measures to not drop the cap down so far from where we are today at $109 [million]. Otherwise, a bunch of us are over the tax. It’d be nice to know now, because that changes how we approach trades and everything else throughout the season.”

A number of teams could unexpectedly find themselves in the luxury tax due to the sudden drop in the cap.

[SparzWizard]

Nobody will be giving mega deals this coming summer.

[Celtics4ever]

So start marketing the game in India.

[timpiker]

Hey NBA - play with The Devil you just might get burned.

[footey]

There goes Jaylen's max deal, if there ever was one in the offiing.

NBA made their bed, and must sleep in it.

[BitterJim]

There's a big deference between prepping for a situation where the cap goes down, including as much as 10-15%, and "project[ing] 10-15% cap drop". Being prepared for different situations does not mean that you think they are going to happen, likely to happen, or even possible

[celticsclay]

This seems like potentially big news, especially for us with Jaylen Brown. Some are saying the NBA salary cap could go down because of the ongoing situation with China.

https://www.nbcsports.com/boston/celtics/report-nba-teams-preparing-potential-salary-cap-drop-due-china-situation


What do people think of this, would this mean brown would get paid less?

thanks for merging this I did not see this on another thread. This seems a pretty crazy situation.

[keevsnick]

Given that the China situation is already starting to blow over I'd say this scenario is unlikely.

[celticsclay]

This seems like potentially big news, especially for us with Jaylen Brown. Some are saying the NBA salary cap could go down because of the ongoing situation with China.

https://www.nbcsports.com/boston/celtics/report-nba-teams-preparing-potential-salary-cap-drop-due-china-situation


What do people think of this, would this mean brown would get paid less?
[/quote

Given that the China situation is already starting to blow over it seems unlikely.

Lebron just poured some gasoline on it...

[nickagneta]

For the cap to drop that much it means the loss of Chinese money probably is costing the NBA some $600-800 million in basketball related income.

$600-800 million for a tweet.

[saltlover]

For the cap to drop that much it means the loss of Chinese money probably is costing the NBA some $600-800 million in basketball related income.

$600-800 million for a tweet.

Which is why that number seems questionable. Do you think they’re actually getting $600-800 million from China in a year?  That’s a lot of revenue to be earned from a media deal with a state-run media that has a questionable record, at best, of protecting intellectual property.

[nickagneta]

For the cap to drop that much it means the loss of Chinese money probably is costing the NBA some $600-800 million in basketball related income.

$600-800 million for a tweet.

Which is why that number seems questionable. Do you think they’re actually getting $600-800 million from China in a year?  That’s a lot of revenue to be earned from a media deal with a state-run media that has a questionable record, at best, of protecting intellectual property.

Yeah, it really does call into question whether the 10-15% is real, but, to be honest, with 1.4 billion Chinese and China being the 2nd largest economy in the world, I guess it could be real. But I think it might just be an exaggeration put out by the NBA to keep people from commenting on the situation any longer.

[KGs Knee]

For the cap to drop that much it means the loss of Chinese money probably is costing the NBA some $600-800 million in basketball related income.

$600-800 million for a tweet.

I hope the NBA loses a lot more than that.

This is what you get when you sell your soul for Chinese blood money.

[bdm860]

For the cap to drop that much it means the loss of Chinese money probably is costing the NBA some $600-800 million in basketball related income.

$600-800 million for a tweet.

Which is why that number seems questionable. Do you think they’re actually getting $600-800 million from China in a year?  That’s a lot of revenue to be earned from a media deal with a state-run media that has a questionable record, at best, of protecting intellectual property.

Yeah, it really does call into question whether the 10-15% is real, but, to be honest, with 1.4 billion Chinese and China being the 2nd largest economy in the world, I guess it could be real. But I think it might just be an exaggeration put out by the NBA to keep people from commenting on the situation any longer.

Maybe some teams out there are playing 4D chess (Celtics, Pelicans, Pacers, Kings anybody with a 2016 pick that needs an extension), try to make everybody think the cap is going to drop to scare their guys into signing deals now.



But let's think about it.  Based on how the cap was flat for so long (barely moved from '02-'15), is it fair to assume a lot of new the growth is coming from overseas?  When the cap went from $70m to $94m, that was mostly the new TV deal, but the cap has continued to go up to $99m then to $106m now, and projected $116m next year.  Where's all that growth coming from?  Sure some of that's organic (jersey sponsorships), but is the rest mostly international growth, with China being the largest portion?  If that;s the case, then it would make sense for the recent cap increases to be wiped out.

Tencent deal is $1.5m over 5 years, so $300m per year.

I can find this blurb from Forbes saying how international revenue is growing in the high teens.

with 300 million basketball players in China and annual revenue growing outside the U.S. at a rate in the high teens.

And this unsourced tidbit from Investopedia that says the NBA does well over $1b in merchandise per year.

Merchandise accounts for well over a billion dollars annually

Maybe $1.2b in total merchandise?  If 10% comes (or is expected to come) from China, that's $120m. 

Teams have individual sponsorship deals overseas, they do camps, and tournaments over the summer, the exhibition games that just happened.  SWAG $30m?

The ballpark total of my crazy guesses is $450m.

[edited out some bad math].

But wait, where did $600-$800m come from?  And is the 10%-15% drop based off of current cap of $109m or next year's cap of $116m?  For the cap to drop 15% from $116m, I have the NBA would have to lose $1.1b in BRI.  $116m * 30 teams / 44.74% = $7.8b in BRI expected next year.  A 15% drop is $98.6m * 30 teams / 44.74 = $$6.6b in BRI, that's a $1.2b drop on the high end!  That can't be right. (The 44.74% came from CBA FAQ).

[nickagneta]

Working backwards a $109 million cap is 109 million*30/.4475 = $7.34 billion in BRI

A 10% drop gives a cap number of $98.1 million *30/.4475 = $6.57 billion BRI

So that's a loss of $730 million. I was just estimating but was close