Revenue stream to hit flood stage?

LeBron James means business. The four-time MVP signed a two-year deal worth $42.1 million with the Cleveland Cavaliers, according to ESPN's Brian Windhorst. Under the terms of the contract, James will also have an opt-out after one year to give him flexibility in an uncertain NBA landscape.

Surprised? Don't be. It may seem odd that James, who said in his letter published on SI.com that he wants to retire a Cav, chose to ink a short-term deal with the organization. But the brevity of this deal should be seen as a tactical maneuver to maximize his earning potential, not necessarily an attempt to hold the Cavaliers and its fanbase for ransom.

Times are a-changin' in the NBA. Get ready to hear about the summer of 2016. That's when the two monster deals expire: James', but more importantly, the league's television rights deal.

The TV deal

Teams around the league are preparing for an enormous bump in the salary cap for the 2016-17 season once the league's TV deal expires after the 2015-16 season. Two more seasons of normality and then, boom, open up the floodgates.

The NBA currently receives an annual $938 million as part of its eight-year, $7.5 billion agreement with ESPN/ABC and TNT/Turner that will expire in two years. But early estimates suggest that the annual payout could see an increase of 50 percent or greater to nearly $2 billion. For reference, the previous deal, signed in 2007, saw a 20 percent boost over the previous one.

A rising tide floats all boats. Under the current CBA, James can only receive a max contract pegged to a percentage of the NBA's salary cap. Thus, if the salary cap goes up, so does James' earning potential. The league determines the salary cap by looking at the league's BRI (basketball-related income), which derives a big chunk of its cash from television rights contracts. Bigger TV deal, bigger salary cap, bigger payday for James and the rest of the league's elite looking for max contracts.

But timing is important. Execs around the league say it is unclear whether the new TV deal will be signed in time to see a significant rise in the 2016-17 salary cap. There are more unknowns about how exactly it will be incorporated into the system. Salary caps are determined by revenue projections and if the new TV deal is struck before the expiration date in the summer of 2016, the league will have a pretty good idea where to draw the line for the salary cap the following season. The projections are important because the TV cash won't have to be pocketed in order to establish the new salary cap line.

So how high will the 2016-17 cap be?

It's too early to know for certain, but teams are expecting a monster number. We haven't seen a 10 percent increase in the salary cap since 2005-06. The 2014-15 salary cap rose 7.5 percent from 2013-14 and a league memo sent out earlier this week projects a five percent increase in 2015-16. The recent bumps were new. The salary cap barely moved for five seasons between 2008-09 and 2013-14.

Page
  • 1
  • |
  • 2
  • |
  • 3
Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...
See It, Share It
PHOTO: Patrick Crawford is pictured in this photo from his Facebook page.
Meteorologist Patrick Crawford KCEN/Facebook
Kate Middleton Learns Sign Language
Ben Stansall/AFP/Getty Images
PHOTO: George Stinney Jr., the youngest person ever executed in South Carolina, in 1944, is seen in this undated file photo.
South Carolina Department of Archives and History/AP Photo
PHOTO: Johns Hopkins University sent nearly 300 acceptance emails to students who had actually been denied.
Kim Hairston/Baltimore Sun/Getty Images