- Everything around the NBA is rising fast, from league revenue, to team valuations, and even player contracts.
- While NBA players are already signing deals worth over $300 million, this could keep rising due to the league's upcoming new media rights deal.
- TheStreet spoke to NBA Cap specialist Colin Maher to understand how NBA contracts work and just how high they could go.
Mark Cuban just sold a majority stake in the NBA's Dallas Mavericks for a valuation worth $3.5 billion dollars, 23 years after he purchased the team for $285 million. In August, NBA legend Michael Jordan sold his majority stake in the Charlotte Hornets for a valuation worth $3 billion, just thirteen years after he paid $275 million for his stake.
NBA franchise values continue to rise fast, and the billionaire owners are commended for their shrewd business acumen and riding off into the sunset with their huge sums of money. On the other hand, the players who drive the league's revenue are also earning record sums of money, but several players who've received huge deals have faced ridicule from fans.
Take for instance Boston Celtics star Jaylen Brown, who signed a contract extension with the Boston Celtics this past summer.
Brown is an established NBA talent — a two-time All-Star who made the All-NBA Second Team last season. His Celtics have been a successful team since they drafted Brown in 2016 with the third overall pick, making at least the Eastern Conference Semifinals, including one NBA Finals appearance, in all seven years with Brown on the roster.
But Brown has never been the best player on any iteration of the Celtics, and yet he signed the NBA’s largest contract of all-time in July: A five-year deal worth $303 million, including a projected $65.6 million during the 2028-2029 season.
The Celtics gave the biggest contract in NBA history to a guy who has never shown himself to be close to one of the league’s five best players.
The alarm ringing and media firestorm over another unqualified top paid player seems to be the norm every NBA offseason. Like in 2016 when Mike Conley, who had at that time never made an All-Star appearance, signed the NBA’s biggest contract.
It was a 5-year deal worth $153 million, which is a massive sum, but only about half of what Brown signed just seven years later.
Whether or not players like Conley or Brown deserve to be the highest paid players is a fleeting argument — the market dictates the top players are worth max contracts, but because there are 30 NBA teams, not everyone can sign one of the five or ten best players. Many of the league’s largest contracts still end up in the hands of its best players like Nikola Jokic (five years, $264 million) and Stephen Curry (four years, $215 million).
Conley and Brown’s temporary placement at the top of the money ladder is simply due to timing. They were some of the top dogs available to sign new contracts or extensions in a specific offseason. Next year, another player will overtake Brown — maybe multiple — and that will continue to happen so long as the NBA salary cap continues to rise.
But the question is: Just how large could player contracts get given that the NBA is expecting an injection of new revenue from its next media rights deal which starts in the 2025-26 season?
The factors that make up an NBA contract
To answer that question, TheStreet spoke to Colin Maher, an NBA cap specialist and contributor to the site No Trade Clause.
Maher told TheStreet there are two main factors to consider: the NBA’s salary cap, which is the amount of money each team can allot to its player contracts every year, and cap smoothing, which the NBA and National Basketball Players Association (NBPA) agreed upon in the latest Collective Bargaining Agreement (CBA) between the two parties.
The salary cap is important because the maximum salary a player can sign is a percentage of the salary cap figure per year. The maximum a salary can go is 35% of the determined salary cap of each franchise, which a player can obtain by hitting certain criteria like playing 10 or more years in the NBA or by obtaining specific awards like cracking an All-NBA team after logging at least seven years in the NBA, which is how Brown signed his deal.
The salary cap is determined by the NBA’s basketball-related income every year. For the current 2023-2024 NBA season, the salary cap is $136.02 million, meaning the most a player can make this year is about $47.61 million. That’s the amount that Jokic and 2023 MVP Joel Embiid both make this year.
The NBA salary cap therefore gets a boost when the league’s revenue and income rises. During the 2021-2022 season, the NBA reported revenue of $10 billion while reporting an income of $2.7 billion.
TheStreet/Statista/Spotrac
Notice that the league has seen a steady rise in revenue increase every year, with a dip from 2019-2021, the two seasons most affected by the COVID-19 pandemic.
There are many factors that can influence the rise of league revenue such as ticket sales and sponsorships, but one of the largest shares of the pie is the league’s media rights deal. The league is paid about $2.67 billion annually by The Walt Disney Co. (DIS) -) to air on ESPN and ABC and Warner Bros. Discovery (WBD) -) to air on TNT. That means that about a fourth of the league’s revenue comes from its media rights deal, and that percentage chunk was even bigger in the past years when the league’s revenue was much lower.
The NBA’s next media rights deal could increase by up to two or three times what it’s currently receiving. When the current media rights deal kicked in back in 2016, it triggered a 35% spike in the salary cap, the main reason the Golden State Warriors had the space to sign Kevin Durant.
But this is where cap smoothing has a massive influence on future contracts. In order to ensure that 2016 does not repeat itself, the new CBA includes a rule that the cap is only allowed to rise a maximum of 10% every year. But if the league even just doubles its media rights deal entering the 2025-2026 NBA season, that would likely trigger 10% increases for the remainder of the current CBA, which goes until the 2029-2030 season.
Maher said it’s likely the cap increases hit their maximum once the new media rights deal comes in part because the league has already been hitting it in recent years even with the current deal.
“The last three years, it’s raised 10% without the new money coming in,” Maher told TheStreet. “What I think is just going to happen, barring anything crazy happening as far as a pandemic or the league falling off for some strange reason, it's just going to be 10% increases every year until it catches up to the media deal.”
The league could see an increase in revenue well beyond the 10% maximum salary cap bump that the players will be receiving — even though the players are entitled to at least 49% of basketball-related income. Maher said he’s unsure what happens to that delta between promised salary and the income that players are expected to receive, though his prediction is that the NBPA will hand it to players in a prorated sum.
The NBPA did not respond to TheStreet’s request for clarification.
Calculating NBA contracts
While a player can receive as much as 35% of the cap, this figure is based only on the salary cap on the first year of the player’s contract. Because the salary cap is a moving figure decided every year, the exact number per year is only determined once the salary cap for each season is declared.
There are situations wherein a player who signed a max contract could make less than the 35% of the salary cap because while the salary cap can rise as much as 10% every year, players can only get an 8% increase of the first year of the contract every year. That 8% maximum increase in the first year is a fixed number for subsequent years.
Going back to the example of Brown, if the salary cap increases as assumed by Maher, Brown will make about $52.4 million next season, which is 35% of what would be a $149.6 million salary cap.
Jaylen Brown's projected max contract
| Year | Salary (in millions) | Salary Cap (in millions) | % of Salary Cap of Brown's Contract |
|---|---|---|---|
2024-25 |
$52.37 |
$149.62 |
35.00% |
2025-26 |
$56.56 |
$164.58 |
34.36% |
2026-27 |
$60.75 |
$181.04 |
33.55% |
2027-28 |
$64.94 |
$199.14 |
32.61% |
2028-29 |
$69.12 |
$219.06 |
31.56% |
Total Contract |
$303.7 |
In the 2028-29 season, the last of his five-year deal, Brown can make as much as $69.1 million. But that final year would only be 31.6% of the salary cap assuming a 10% salary cap increase.
Brown will likely be overtaken by his own teammate for the league’s biggest contract as soon as next summer. Celtics star Jayson Tatum is eligible for his own max extension in 2024 which will kick in the following year. If Maher's prediction — continuous 10% salary cap increases — comes to fruition, Tatum’s contract will be nearly $335 million.
Jayson Tatum's projected max contract
| Year | Salary (in millions) |
|---|---|
2025-26 |
$57.61 |
2026-27 |
$62.22 |
2027-28 |
$66.82 |
2028-29 |
$71.43 |
2029-30 |
$76.04 |
Total Contract |
$334.12 |
The NBA’s current CBA will run until the 2029-30 season and its media rights deals should run even further than that if it replicates the nine-year deal length of its previous deal which started in 2016. That means it’s likely that the 10% salary cap increases and 8% year-on-year increases per player will continue until at least 2029-30.
Assuming those constraints, the largest NBA contract in 2029-30, or in about seven years, could be $489 million, which is nearly two-thirds more than Brown’s contract signed last summer.
Potential max contract starting in 2029-30
| Year | Salary (in millions) |
|---|---|
2029-30 |
$84.34 |
2030-31 |
$91.09 |
2031-32 |
$97.83 |
2032-33 |
$104.58 |
2033-34 |
$111.33 |
Total Contract |
$489.17 |
Players who could receive that contract will be last year’s rookie class, which consists of the Orlando Magic’s Paolo Banchero and the Oklahoma City Thunder’s Chet Holmgren.
That also sets up rookie sensation Victor Wembanyama of the San Antonio Spurs as one of the candidates to receive the league’s first half-a-billion dollar deal if all stands pat for the following season.
While the value of these top deals may be predictable, he said that there's one interesting thing to watch out for given the new CBA: the number of max deals handed out. The new CBA now has bigger penalties for big spenders meaning that more teams may be frugal with their contracts.
"The numbers might be more predictable, but the amount of max contracts given out and whether teams start to just go, 'Okay, I'll give you the max every single time to their top two players, that might change," Maher said.
It's yet to be seen how that affects the market, but there is a world where this new CBA does limit the number players who receive the max contract. The penalties could also squeeze the role players in the middle looking for sizable deals after their rookie contracts expire.
So while fans will have to get used to their favorite stars making enormous sums of money to dribble a basketball, those who've criticized teams for throwing money at Jaylen Brown-level talent may finally find their reprieve.
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