The BackPage Weekly | The NBA/NBPA Collective Bargaining Agreement – Key Takeaways & A Progressive Player-centric Deal
Written by Chris Paget and Conall Devlin
On a global scale, the NBA are without question leaders in embracing change, new opportunities and innovation – see for example Backpage Weekly #6 . On 1 April 2023, the NBA and National Basketball Players Association (NBPA) announced it had reached a tentative agreement on a new Collective Bargaining Agreement (CBA), which will begin on 1 July 2023 and will last until at least the end of 2028-2029 season pending ratification from NBPA members and NBA team governors which is expected in the coming weeks.
In this week’s BackPage Weekly, we analyse some of the significant reported changes to NBA operations and consider whether there are any elements of this deal that may signpost changes of direction or new opportunities on this side of the Pond.
First off, let’s look at some of the key developments:
🏀 Player investment in NBA and WNBA teams
In a ground-breaking development and a first for major professional sports leagues, players will now be able to own minority shares in NBA and WNBA teams. The NBPA will be able to make an NBA investment on the players’ behalf through a NBPA selected private equity fund investment arm, though the size of the union’s contribution to the firm cannot be more than 5 percent of the fund. Players will also be able to take a direct shareholding in WNBA teams but only in those teams that do not have NBA team owners as its owners. These shares will be limited to no more than 4% of a team, and players as a whole cannot own more than 8% of a team. Key mechanics to how the parties can avoid conflicts of interests here will need to be determined in the published CBA, such as:
Will players be allowed to acquire shares in specific teams or will this investment be made in a portfolio of ownership shares in multiple franchises held by the NBPA’s selected private equity fund?
If a player acquires shares in a team and subsequently leaves that team, will he/she be able to retain their shares or how will these shares be divested and/or can a player own a stake in a team that they play for?
🏀 Player ability to promote and/or invest in betting and cannabis companies
Taking advantage of the nullification of the Professional and Amateur Sports Protection Act and in a move against the direction of travel in the UK (see BackPage Weekly #8 and the recent news of Premier League clubs agreeing to cease betting front of shirt sponsorships (see our Reading List below)) the new CBA will allow players to endorse and invest in sports betting companies. This is subject to players not being entitled to use any NBA/WNBA IP or other associations in any personal activations. Players can also invest in cannabis companies, aligning with the NBA’s decision to remove testing for marijuana. These developments are, of course, provided that gambling/cannabis is legal in the jurisdictions where they are being promoted.
🏀 Player share of Licensing Revenue
The NBA/WNBA operates in a revenue-sharing system between the owners and the players, each taking 50% of basketball-related income (BRI). The NBA, like many professional sport leagues, has a salary cap. We won’t go into a discussion of the mechanics of the salary cap here, save to say that is calculated using a projection of the next season's revenue. While the 50/50 split will not change in the new CBA, the major improvement for the players is the inclusion of the very lucrative NBA/WNBA’s licensing revenue – which was previously excluded from BRI and paid directly to owners – and will now not only be shared 50/50 with the players but may also increase the projected team revenue and thus salary cap moving forward.
🏀 Minimum games requirement for awards
The fixture scheduling for the NBA is intense with each franchise currently playing in at least 82 regular season games. Unlike the NFL, where there is greater scarcity of games and (subject to injuries) you can count on seeing the top players perform, the number and regulatory of NBA matches is a double edged sword. On the one hand it creates fantastic consistency of content and a consistent narrative, but on the other hand it creates a potential saturation (and a dilution of its appeal) which is potentially compounded with star players necessarily requiring periods of rest or so-called “load management”.
The NBA is clearly aware of the power of having its star players grace the court night in night out. Therefore, in an attempt to discourage the prevalence of so-called “load management”, the NBA has shifted the position on the qualification eligibility for the much coveted individual player awards, including MVP, All-NBA and All-Defense teams. Prospectively, players will (unless an exception applies) be required to play for at least 20 minutes in 65 of the 82 regular season games (with the slight caveat that 15 minutes will constitute ‘playing’ in no more than 2 of the 65 games). As the winning these player awards also enables players to qualify for max salary contracts they would otherwise be ineligible for, the change has financial as well as accolade driven teeth.
Final remarks
While elements of these changes are specific to the NBA franchise model, others are informative of key trends that we are already seeing in the leading UK and EU sports leagues. For example:
the renegotiated CBA highlights quite clearly the increasing prevalence of player power and the pattern of fandom in the younger demographic being as much (if not more) aligned with the player than the team;
Elite level sport faces competition from other mediums of entertainment for attention. The visibility and regularity of star performers plying their trade is crucial for media rights valuations, gate receipts, sponsorship and generally the bottom line for the sport and its stakeholders. Likewise, money talks and players (and their advisers) are aware of this value and are increasingly getting cut in financially. The new CBA acknowledges this through a greater share of BRI for players but also the broadening of scope of off-court personal endorsements;
Players who compete regularly in the top leagues are rewarded handsomely. However, careers aren’t getting longer and with financial strife in a post career world becoming ever more prevalent, the need and desire of players to compound their wealth and plan for the future continues (and needs to continue) to be front of mind. The rise of the Athlete Investor is one such by-product and the new CBA provides for this through its investment back into the sport. Likewise, it perhaps also recognises that prospectively funding and investment via debt is more expensive and less attractive as interest rates rise and will likely settle some way above the historic lows of the last decade.
As a major sports league organisation that has long been heralded as one of the most progressive, the NBA may prove influential in shaping the approach of other sports leagues that face the same macro economic, financial and generational consumption habit shifting head winds.
