The NBA has reached an agreement to renew their television contract with ESPN and TNT for an additional nine years. According to a report from the New York Times, the networks will pay the league a staggering $24 billion over the course of the agreement, which begins in the 2016-17 season.
This is a massive revenue increase for the league that is bound to have a tremendous impact. The new agreement will increase the NBA's TV revenue from an average of about $930 million per year to $2.66 billion, which in effect will cause the salary cap to rise dramatically. Nobody knows yet how much it will increase or how fast, but estimates have ranged anywhere between $80 million to $90 million. That's quite a jump from the current $63.2 million cap. The cap has gone up less than $14 million from the $49.5 million level it was at a decade ago, but could increase by much more than that in just two years.
The league is still trying to determine the best way to handle the rising cap without having a massive jump from one year to the next. Grantland's Zach Lowe has been told that the current plan is to start the TV ad revenue at $2.1 million in the first year of the new deal and escalate incrementally each season so as to smooth out the increases over several years. There has also been talk of having a higher than expected cap increase next season so that the jump starting in 2016 doesn't seem as drastic. There are a lot of ideas floating around and much still to be negotiated with the networks to assure the process flows smoothly, but the result will include a quickly rising salary cap.
This increase in revenue and rising cap situation is bound to impact all teams, but let's take a look at how this news specifically effects the Boston Celtics.
The expected cap increase for the 2016-17 season happens to coincide with when some guy named Kevin Durant reaches free agency. It was already going to be a crazy summer with teams looking to clear space to be able to make a pitch to the reigning MVP, but now most teams could have enough cap space to offer a max contract. Boston has never been considered a prime destination for free agents, despite it's rich history and market size. With more teams able to throw piles of money at free agents, it makes it that much harder for Boston to find a star to come here.
Making things worse, the New York teams and the Lakers could end up having space for multiple max contracts by 2016, presuming they don't tie up their cap in the meantime. That could lead to more super teams being created in those markets.
Rajon Rondo is entering the final year of his contract, which will have him aiming to prove he's worthy of a max deal. This puts Boston in position to potentially sign an elite player to a max contract prior to the drastic cap increases, which would make that deal look like a bargain in a few years if he's still playing at a high level. The Celtics will be the only team able to sign him to a 5-year deal, with the most money and long term security, which gives them an edge in retaining their star point guard. As a Bird's Rights veteran with 10+ years of experience, Rondo could be offered a deal worth 35% of the salary cap by the Celtics, which would put his salary in the first year of the new deal somewhere in the neighborhood of $23 million (depending on how much the cap rises next year). While that seems like a huge amount, even for a proven All-Star like Rondo, keep in mind that max deals for players with his experience could start at over $30 million once this new TV deal kicks in a couple years from now. Any team that signs a star before the salary cap jumps is doing themselves of a huge favor.
Of course Rondo and his agent know this as well, which is why it's possible Rondo could settle for a short term deal so that he can sign his long-term max deal after the cap jumps. However, given his recent injury history, he may be content to lock in five years of security now instead of taking the risk on a bigger pay day down the line. Even if he does decide to take a one-year deal so he can sign a bigger max contract after the cap jump, that gives Boston an additional year to evaluate their roster and see how Rondo fits into their long term plans, which allows them to be more flexible.
Green presents an interesting scenario due to his $9.2 million player option for next season. Presumably he was expected to decline the option and sign a new long-term deal after this season, but with the cap going up in 2016-17, it may now make more sense for him to opt in for that extra year.
This isn't ideal for the Celtics, since it means if they intend to keep Green around for the long run they may now have to pay him more than they expected. It also deprives them of some flexibility in looking ahead if they are less certain of what Green will do about his option. Another factor is that if teams expect him to pick up the option it could limit his trade value, if Boston decided to explore that option. A team like the Indiana Pacers, in need of a one-year replacement for Paul George, may be less interested if they may be locked in for an additional year with him.
A player on an expiring deal can be a valuable trade chip and Boston just so happens to have one next season when Gerald Wallace's albatross contract enters it's final year. The problem is, with the cap jumping up so much the following season, there will be less teams eager to shed pay roll by trading for expiring contracts. Wallace's $10.1 million contract can still be useful as salary filler if Boston is able to cash in some of it's chips for a star player, but the market for expiring deals will be more dried up than ever if essentially every team is going to have cap space.
Boston owns Brooklyn's first-round draft picks in 2016 and 2018, with the rights to swap picks in 2017. The rising cap could make those picks even more valuable, as having young talent on cheap deals gives Boston more flexibility to work with. While the rising cap will make the cost of max contracts soar, the rookie scale contracts are locked in through the 2020-21 season. It's possible that the league could re-negotiate the rookie scale in light of this new TV deal, but as it stands now, future draft picks appear to have gotten a slight bump in value. That's good news for the Celtics, given that they are loaded with extra picks over the next several years.