The Economics Behind the NBA

The NBA is always fun to watch, but the real fun is following the money.

Jacob Rutzick, Staff Writer

Hang on for a minute...we're trying to find some more stories you might like.

Email This Story

The NBA has always been fun and exciting for its near 90 year life time. However, one facet of the National Basketball association that is constantly overlooked is the financial side of the game. The Collective Bargaining Agreement (CBA), the NBA and NBPA contract about the financing in the NBA, is constantly changing. The NBA and NBPA often take a long time to agree on the CBA; this delay has lead to plenty of NBA lockouts. With constant changing to the CBA contracts in the NBA are also under constant changes. Many obscure rules have been added over the NBA’s 90 year life.

For starters, the NBA has a soft salary cap which mean that teams are allowed to go over the salary cap, but teams are punished for doing so. The first punishment is the luxury tax. The luxury tax forces teams to pay a certain amount per dollar over the tax line. The tax line is about 20 million dollars over the soft cap limit. There is still a punishment for going in the 20 million dollar gap between the soft cap and the tax line. The punishment is the lowering of the mid-level exception. The mid-level exception allows teams to go over the salary cap to sign a player or players. The standard mid-level exception is just over 8 million dollars. However, when a team goes over the salary cap the mid-level exception drops to 5.3 million dollars.

Recently, with the Anthony Davis drama, the Derrick Rose rule has been in the news. The Derrick Rose allows players who are successful early in their career to earn more money on their first contract after their rookie deal. Other rules such as the Larry Bird rule which allows teams to go over the salary cap to sign players that were already on their roster. A players Bird rights are traded with them when the player is traded.

Some of the biggest problems the NBA is trying to address with the financial side of the league. Teams in bigger markets who have are more money have a serious advantage over smaller market teams. Even though big and small market teams are subject to the same rules the bigger market teams have the money to go over the salary cap. The Lakers, Clippers, Nets, and Knicks the teams in New York and Los Angeles have a major advantage over teams like the Memphis Grizzlies. The next CBA will be negotiated before the 2024 season so perhaps the NBA will try and make these vital changes five years from now.

Print Friendly, PDF & Email