After a meeting this week failed to produce a compromise, the NBA is now preparing itself for the largest salary-cap jump in league history for the 2016-17 season.
It's a move that could have significant implications for potential 2016 free agents such asKevin Durant and LeBron James as well as teams that have positioned themselves to have cap space, most notably the Los Angeles Lakers and New York Knicks.
The NBA announced Wednesday that the players' union formally rejected a so-called "cap-smoothing" proposal that would pay players the same 51 percent of basketball-related income they get under the current collective-bargaining agreement, while artificially lowering the cap over several years. The plan was put forth to manage the influx of revenue that is coming with the $24 billion television deal that begins after next season.
NBA teams using internal data are projecting the salary cap to jump to between $88 million and $92 million per team, sources told ESPN. To compare, this season the cap is set at $63 million and next season it is projected to land at about $66 million. To put it into perspective, the largest salary-cap jump in history is $7 million in one season. What happens in 2016 could triple that leap.
Owners have been trying to avoid such a spike because it would dramatically raise salary levels for free agents that season. James, for example, could take his salary from about $22 million next season to around $30 million if he signs for the maximum salary in 2016.
National Basketball Players Association executive director Michele Roberts previously announced the players had unanimously rejected the NBA's offer, which would have artificially lowered the salary cap to prevent that big spike and phase in the increase over several years.
The NBA suggested that the difference be given to the union in a lump sum and divided evenly among all players. So instead of a few free agents in 2016 benefiting, all players would get a smaller piece of the TV rights deal increase. But Roberts believed long-term it would not be a benefit to the players.
"The proposal that the league submitted ... would artificially deflate the salary cap," Roberts said over All-Star Weekend. "And that, of course, meant that players' salaries would not increase as much as they would otherwise were it not for smoothing. That pretty much was what killed it. It killed it in the eyes of the economists that made the recommendations, and it killed it in the eyes of the players."
NBA commissioner Adam Silver and Roberts met Tuesday to talk about a compromise, their first formal negotiating session since Roberts was hired last summer, sources told ESPN.
The league, however, had little incentive to make a deal. The collective bargaining agreement that was signed in 2011 cut the players' portion of the revenue pie from 57 percent to 51 percent. The deal has functioned extremely well for the owners, who have seen operating margins and franchise values increase significantly. Now the players are prepare for the deal to function in their favor. Silver essentially admitted over All-Star Weekend this likely would be the outcome.
"I don't want to act like it's a terrible problem to have, where we're thrilled that based on the interest in the NBA we're able to command these big increases in the television market," Silver said. "And we will live with our deal."
Broadly, this development likely means two things for the short term of league business:
There may be some free agents this summer who only accept one-year contracts so they can retest the market in 2016, when it will be awash with available cash.
The likelihood of a lockout in 2017 when both sides can opt out of the current CBA just increased significantly, if not unexpectedly.
James, speaking before the Cleveland Cavaliers' practice in San Antonio on Wednesday, saluted Roberts' efforts so far and said the next key point will come at the NBPA meeting in Las Vegas this summer.
"We have a meeting, a huge meeting, in the summertime, obviously to go over everything that we want to execute," James, the vice president of the players' union, said. "Obviously right now is really not the time, and I think Michele is doing a really great job right now of giving her opinions in what she believes going forward as far as for us as the players. But my role right now, I don't want to pretty much talk about it right now."
Information from ESPN.com's Dave McMenamin was used in this report.