The NBA has lost millions of dollars since the coronavirus forced the suspension of the regular season, and with no end to the pandemic seemingly on the horizon, something had to be done to stop the bleeding. On Friday, the NBA and its players took the first step in that direction by agreeing to a short-term salary compromise, the league announced. While players will receive their full paychecks on May 1, starting on May 15, 25 percent of their salaries will be withheld. The plan also includes details that will allow for the gradual reduction of salaries in line with the force majeure clause should the league be forced to officially cancel regular-season games, which appears to be a near-certainty at this point.
NBA players are paid twice per month: on the first and 15th. Standard contracts stipulate that players be given 1/24th of their salary on each such payday, but certain players have negotiated for altered pay schedules, including lump payments earlier in the season.
This agreement helps solve the NBA's biggest immediate financial issue: cashflow. Players are typically paid with revenue that the NBA isn't generating right now, so this measure will help combat the enormous losses the league is facing at the moment. The owners initially wanted to institute a pay cut on April 15, but delaying that for another month was critical for players who don't have max contracts to fall back on. C.J. McCollum, a union vice president, recently estimated that one-third of players live paycheck to paycheck, so giving them their full pay a little while longer was vital. As important as this was for the hard-hit owners, the league still has a ways to go in rebuilding its financial infrastructure as a result of this virus.
The salary cap, for instance, is based on projected league revenue. The NBA has already lost quite a bit of that revenue for this season, which may have to be factored into future caps, and next season's revenue is up in the air as well considering recent discussions about major cities banning sporting events into 2021. At the very least, it seems unlikely that teams will generate gate revenue next season, as a safety measure that has been widely discussed is playing games without fans in the stands. The two sides still need to hammer out a long-term agreement that addresses those issues. This virus will change the league's finances for years to come.
For the time being, this step is encouraging in that it proves a willingness to collaborate and cooperate between the league and its players. The league has had labor peace for nearly a decade now, and both commissioner Adam Silver and NBPA executive director Michele Roberts have proven malleable enough to navigate through crises, but this situation is historically unprecedented. While lockouts have stopped games, the NBA has never been forced into an extended closure by outside events.
No plan for lasting through such a closure existed because the mere thought that something like this might happen was so preposterous that the players and owners didn't think to chart out specific provisions in the collective bargaining agreement to prepare for it. They're having to do so on the fly now, and while this was an important first step, there is still a long way to go before the NBA finds financial equilibrium again.