The NBA’s salary cap and luxury tax have been steadily increasing in recent years following the league’s massive television deal and recent collective bargaining deals. The cap, which grew by over $50 million between 2014 and 2020, was expected to climb even higher than its $109.14 million threshold, but recent events have put that in jeopardy. Now, after Houston Rockets general manager Daryl Morey burnt bridges with the Chinese market, the cap could dip beneath what teams previously believed it to be.
Daryl Morey’s catastrophic tweet
The controversy began when Morey tweeted out an image supporting protesters in Hong Kong who were taking a stand against Chinese authorities over a new extradition law. The tweet was deleted, but the drama had just begun. The Chinese market accounts for a huge sum of the NBA’s revenue as the largest overseas viewers of the NBA. By standing with the protesters, many saw Morey as speaking out against the government.
Tencent, the NBA’s streaming partner in China, dropped the hammer, and the Rockets, a popular team thanks to Yao Ming’s NBA career, were pulled from the broadcasts. That caused things to snowball, and the league had a PR disaster on its hands. Players were speaking out against China and Morey, and the league did not know how to handle it. It came to critical mass when LeBron James publicly criticized Morey for not understanding the situation, a quote that caused further controversy stateside.
Although the initial shock subsided, the fallout was expected to hit the NBA, with millions of dollars potentially gone from its predicted revenue.
How much revenue could be lost?
According to Jeff Zillgitt and Mark Medina of USA Today, the Chinese market accounts for billions in potential revenue in the overseas market. The NBA grew in popularity in China during the late 1970s when an exhibition game with the Washington Bullets introduced millions to the league. That grew exponentially as the league gained Chinese players, culminating in Ming’s entrance, which solidified that market.
Several players, such as Klay Thompson and CJ McCollum, have shoe deals in China that could be hurt if the relationship isn’t mended, as well.
How Daryl Morey might affect the salary cap
During the last collective bargaining session, the league’s players were able to get between 49% and 51% of the league’s income. As the league brought in more money, it meant that player salaries skyrocketed. If the league loses the Chinese market, the revenue goes down. Thus the percentage that the players receive will add up to less money.
Some had predicted the 2020-21 cap to be in the $116 million range, but after the league ran an audit of its projected revenue, that figure slipped down to $113 million per team. If each of the 30 teams loses $3 million of cap space, that’s $90 million lost for the teams and players, but somewhere around $180 million for the league as a whole. Daryl Morey’s tweet might not be the only reason for the drop, but it likely plays a part in the NBA salary cap adjustments.
For teams who are hovering around the cap, that does not necessarily mean too much, but for those who are already in the luxury tax, it could get tricky. That is why the league put the numbers out before the trade deadline.
Those lower caps could affect the pay of several max contract players, whose pay is dictated by the cap. Ben Simmons, Jamal Murray, and Pascal Siakam, for instance, have contracts that are directly tied that way. It is a mess that, while small in scale, can deeply affect teams who were not ready for the dip.
Time will tell whether or not these relationships are hurt forever or temporarily. The numbers of NBA viewers in China who are gone forever might not be known for some time, but if the league does not do something soon, the cap could take a hit for years to come.