Breaking Down the NBA CBA

Good news, basketball fans. The NBA and the Players Association have agreed to terms on a new collective bargaining agreement, laying the groundwork for league operations for the next seven years. The agreement comes several months before the 2023/2024 season is set to start, eliminating the possibility of a lockout that last occurred in 2011.

The NBA CBA is a lengthy document that takes a certain level of legal acumen mixed with basketball obsession to fully comprehend. It often takes front offices months to get fully up to speed on the rules in which their league operates. With that being said, let’s breakdown a few of the most notable provisions in the new CBA without making our heads spin:

Revenue Sharing

The NBA operates in a revenue-sharing system between the owners and the players, each taking nearly 50% of the basketball-related income.[1] When the leagues make more money, the players sign contracts worth higher figures — a rising tide lifts all ships. The 50/50 split didn’t change in the latest CBA; however, the players secured a big victory in increasing the overall basketball-related income pie. Historically, the NBA’s licensing revenue was excluded from basketball-related income with the money generated exclusively going to the owners. The players bargained to have that figure included, $160M for the 2023/2024 season, for which the players will be entitled to $80M. That money will attribute to higher salaries for players.

Salary Cap Apron

The NBA is a “soft” salary cap league, which allows teams to spend above the salary cap figure under special circumstances. Teams are penalized in various ways for spending over the cap, including having to pay a special tax for every dollar spent over a certain threshold. The NBA also implements a luxury tax line, which is set above the cap figure, and forces teams that cross it to reimburse the cheaper teams that spend below. But for rich teams looking to compete for a championship, these penalties can feel like a drop in the bucket. The 2022/2023 salary cap figure was $123M, with the Golden State Warriors spending nearly $200M and taking on a host of monetary penalties.

The new CBA looks to address this spending disparity between the haves and the have-nots. Salary caps are set to promote competition between small market teams with modest evaluations and teams in booming territories such as Los Angles, New York City, and Silicon Valley, who have deep pockets to spend in pursuit of a championship. Up until the latest CBA, the disincentives for crossing certain salary cap thresholds were purely financial. As evidenced by the Warriors, certain teams are willing to swallow the extra financial burden if it means granting them a better roster to compete for a title. Under the new CBA, crossing certain spending thresholds will not only leave a hole in the owner’s wallet but will also hinder team building.

Teams that cross an apron set around $17.5M above the luxury tax line will be restricted from utilizing two important roster-building tools: the buyout market and the mid-level exception. Without getting too deep into the NBA front office weeds, these tools are routinely used by GMs of teams over the cap to still add talent in the offseason and during the season. Crossing this apron also stifles a team’s trade abilities. A team above the apron is no longer allowed to send cash out in trades or bring in more salary via trade than they send out. The clearcut best strategy for roster management is no longer an owner writing a blank check. GMs will have to be strategic around crossing this salary cap apron at risk of limiting their roster management toolkit.

This salary cap apron could be viewed as a further attempt by the league to even the playing field. However, critics will say that this suppresses team spending, something that should be encouraged for the benefit of the players. Let’s check in with Draymond Green to see what he thinks:

Minimum Games Played Requirement for Awards

If we picture the NBA as a giant ballroom, there happens to be a large elephant standing in the corner that nobody wants to make eye contact with. Over the past few seasons, local television ratings are down.[2] One of the explanations for the drop in ratings is “load management”, the phrase that was coined in the last decade to refer to the decision by a player and his team to sit out games for rest purposes unrelated to a specific injury. The rise in load management has caused star players wearing street clothes to become routine.

The NBA attempted to address this issue by building an incentive into the new CBA for players to play in more games. To qualify for individual awards, including MVP, All-NBA, and All-Defense, players now must play in 65 of the 82 regular season games. These awards may seem superficial, but under separate provisions within the CBA, winning these awards qualifies players for certain max salary contracts they would otherwise be ineligible for. Through these mechanisms, the NBA is telling its players the simple but crucial message: if you want to earn the most money, you must play.

Last year, four of the fifteen All-NBA spots were filled by players who suited up under the 65-game threshold. This year may be more, with stars such as Steph Curry, LeBron James, Kevin Durant, Kawhi Leonard, Paul George, Anthony Davis, Damian Lillard, Giannis Antetokounpo, Devin Booker, and Ja Morant all set to come in below 65 games played.[3]

In-Season Tournament

Another aspect of the new CBA that places an emphasis on regular season games is the in-season tournament. A lot of information is still yet to be made public on what exactly the tournament will look like, but this doesn’t come as much surprise as the NBA has been flirting with the idea of this tournament for years.

The league has one major hurdle when it comes to an in-season tournament — getting everyone to care. Fans must be invested for this idea to work. Players must treat this seriously and have an enticing reward for pushing to win. Without the entire NBA ecosystem buying in, this midseason tournament becomes regular-season games packaged in a different format. Now, back to Draymond Green for his thoughts:

The Draft – One and Done Stays

In recent years, there has been a lot of smoke in NBA circles about reworking the rules governing the NBA draft, including axing the “one-and-done” rule. This rule was negotiated as part of the 2005 CBA, forcing high school players to enter college for one season before jumping to the professional ranks. Originally, the owners fought for the one-and-done rule due to the risks and unpredictability of players leaping from a high-school cafeteria straight into the NBA. Now, the tides have turned. Owners would likely be in favor of younger players coming into the league and choosing to utilize the NBA’s version of a minor league, the G-League, instead of going to college. Better talent in the G-League equals more interest and money in the NBA.

During this round of negotiations, the Players Association was likely fighting to keep the one-and-done rule in place. There are around 400 roster spots in the NBA. The Players Association represents current and former NBA players, negotiating for their interests. If the draft were to be opened up to high schoolers, they would fill some of the 400 roster spots while earning some of the basketball related-income referenced above. Potential newcomers are a threat to the active player’s bargaining unit. The new CBA keeping the one-and-done rule in place is a win for the players.

More to Come

Labor negotiations are the ultimate give-and-take exercise, as evidenced by the provisions laid out above. Certain aspects can be considered a win for the players, others for the owners. The official CBA has not been made public yet, so we will have a fuller picture when that happens. But the timeliness of the agreement shows that the players and owners were both willing to swallow interests to avoid a potential lockout. And for that, basketball fans can breathe a sigh of relief.

Matt Netti is a 2021 graduate of Northeastern University School of Law. He currently works as an attorney fellow at the Office of the General Counsel for Northeastern University. You can follow him on Twitter and Instagram @MattNettiMN and find him on Linkedin at https://www.linkedin.com/in/matthew-netti/. You can find all his work at www.mattnetti.com

[1] Larry Coon, NBA Salary Cap FAQ, Sports Business Classroom (last visited April 6, 2023) http://www.cbafaq.com/salarycap.htm#Q15. [2] John Ourand, Warriors run up the RSN Score, Sports Business Journal (last visited April 6, 2023) https://www.sportsbusinessjournal.com/Journal/Issues/2022/02/28/Upfront/Ratings-and-Research.aspx. [3] Sam Quinn, NBA CBA 101: Everything to know about new agreement, from salary cap to free agency and beyond, CBS Sports, (last visited April 6, 2023) https://www.cbssports.com/nba/news/nba-cba-101-everything-to-know-about-new-agreement-from-salary-cap-to-free-agency-and-beyond/.