One of the biggest headlines in the sports world this year has been the dramatic increase in the NBA’s cap space. The cap space of a franchise, regardless of the sport, is a complex topic to understand. Before diving into the logistics of the sudden increase in the NBA’s cap space, I want to emphasize a bit more on the basics of an NBA contract. Listed below are all the payroll rules for every league in North America-

Luxury tax rules by sport

Major League Baseball- Luxury tax

National Basketball Association- Soft salary cap + luxury tax

National Football League- Hard salary cap

National Hockey League- Hard salary cap

Major League Soccer- Hard salary cap

The NFL, NHL, and MLS all have a hard salary cap which means that no team can spend more than the maximum amount of money the league has set for player salaries. This prohibits any big market franchise from acquiring all the talent in the league and exhibits a more competitive league. The NBA, however, is a little different. The NBA has a soft salary cap with an additional luxury tax for teams that exceed the salary cap. According to the CBA (Collective Bargaining Agreement), teams have to spend 90% of the salary cap each year in order to assure fair distribution of money within players. This simply means that NBA franchises are not completely prohibited from exceeding the salary cap (hence the term “soft”) as long as they pay a certain percentage of each additional dollar they spend over the threshold to the NBA’s front office. It’s quite interesting how different leagues have different pay structures for their players, but the NBA salary cap is definitely one of its kind. For the 2015/16 NBA season, the salary cap was $70 million and the luxury tax limit was $84.74 million. This simply means that the soft salary cap was $70 million and teams could only spend up to $84.74 million considering the “luxury tax” to entice free agents to their franchise over other teams. For the 2016/17 season, the salary cap jumped to $94.14 million and the luxury tax limit was $113.29 million. For the 2017/18 season, the latest projection is $99 million for the salary cap and $113 million for the luxury tax limit.

The main reason for the sudden increase in the NBA’s cap space is the new TV deal the association signed with ESPN and Turner for $24 billion/9 years before the start of the 2016-17 season. That’s nearly three times as much as the previous deal, which was valued at $930 million a season and expired in 2016. Under the previous contract, ESPN paid the NBA $485 million per season, while Turner paid $445 million. Under this new massive $24 billion contract, ESPN will pay the NBA $1.4 billion per year, while Turner will pay $1.2 billion. This contract has had a ripple effect on the entire pay structure for players in the league. Long gone are the days where a 5 year/$80 million contract was considered a “blockbuster” deal. Take Chandler Parsons- a guy who gets paid $95 million over 4 years ($26.6 million on average annually) for literally doing nothing but ride the bench as the team’s cheerleader. Chandler Parsons has only played 161 games over the last 3 82-game seasons. His 3 point shooting percentage last year with the Grizzlies was an embarrassing 26.9%. You’re pretty much paying a guy a million dollars a year for each percent of his existing 3 point shooting average. Let’s not forget that he has made only 1 appearance in the playoffs over the last 3 seasons due to injuries. The point here is not to bash on Chandler Parsons. He was actually my favorite Rocket while he played in Houston. The point here is to show how ridiculously inflated the NBA’s salary cap has become since 2016. Guys like Reggie Jackson, Otto Porter, and Ryan Anderson are nothing more than role players, but their contracts almost equate to what Kobe Bryant made in the prime of his career. My man James Harden just signed an NBA all-time record extension with the Houston Rockets for a whopping $228 million/ 4 years. Of course, that is on top of the additional $200 million/ 13 years Adidas contract that he signed in 2015.

Yes, James. I’d feel the same way if I collected your paycheck.

Shown below is the NBA’s cap space and its gradual increase over the years dating back to the 1984/85 season.

The sports industry has the world by its throat. Whether it’s the NBA, NFL, UEFA, or MLB, it is a way for people to unite together regardless of their political classification, race, nationality, or religion. Even during a tough recession in 2008, the cap space for the NBA increased and ticket sales weren’t impacted largely. Recession or not, the spirit of a sports fanatic never dies and as long as fans keep rooting for their team, I don’t see a decrease in players’ salaries anytime in the near future.

NBA / sports finance

NBA’s Ridiculous Salary Cap Increase

NBA’s Ridiculous Salary Cap Increase

NBA’s Ridiculous Salary Cap Increase