The Waive and Stretch: The Upcoming New TV Deal Impact, The Jaylen Brown Extension, The Anthony Davis Extension, And More
Welcome back to another edition of The Waive and Stretch Newsletter. A quick shameless plug to note that I am looking to work in basketball in any capacity and would love to connect with anyone in the industry or trying to break in. Please feel free to share this Substack with anyone who might find it interesting. Let's get into it!
What Caught My Attention This Week
The Impact That The Upcoming New Television Deal Will Have On The Salary Cap
With relatively little going on in the NBA along with finally a slowdown in the day job, I have been able to start digging through something that has been excessively discussed but not something that I’ve seen somebody actually try and estimate, and that is the upcoming spike in BRI related to a new national television deal that the NBA is negotiating, set to hit in 2025-2026. So, I set out to see if I could come up with a reasonable calculation to come up with an estimate on this new TV deal’s impact on the salary cap for the foreseeable future (I would like to preface this with the caveat that this is just a rough calculation based on numbers I’ve been able to pull from the public and the Collective Bargaining Agreement and is by no means precise). This lead me to doing some sleuthing through Article VII of the new CBA. First, I estimated how much the new TV deal will be annually. Multiple reports estimate the NBA increasing from their current deal anywhere from 2x -3x. My model uses 2.25x, fairly conservative in my opinion. Then, I had to figure out the growth rate the non-television deal revenue would grow at year-over-year. For this, I used the below screenshot to get to 4.5%, which comes from Article VII, Section 12 (a)(17)(ii).
With these two new numbers, I was able to estimate the 2025/2026 Forecasted BRI, resulting in a 36.5% increase over 2024/2025. Applying that bump to a 2024/2025 salary cap of $149.6 million (an assumed 10% increase over 23/24) would result in a 25/26 salary cap of $204.3 million. That is a non-smoothed cap jump of $54.7 million. Of course, we all know that cap smoothing has been implemented in the form of 10% cap increases in the salary cap. Thusly, this cap spike will be spread out over multiple years, benefitting multiple free agency classes. But how many years, exactly? Well, you can see my estimation in the table below.
The above assumes a 4.5% growth in the salary cap annually outside of any 25/26 carry-over resulting from the 10% limits. This results in the max cap jumps in the first four years of the new television deal, and an 8.2% bump in 2029-2030. Even if you assume 0% growth outside of the 25/26 carry-over, you still get 3 years at the 10% max cap increase.
So, what should the takeaways be from this? Well, from a team side, I would try to start locking in guys or as long as possible on new deals or extensions through this period. The salary cap growth is going to outpace any yearly raises on contracts, and so deals are going to get smaller and smaller as a % of the cap as we get deeper into the contracts. And you probably can worry a little less on the $$$ amounts than normal, but should try to fight off the player option as much as you can. Take Anthony Edwards for example. In 2028-2029, he will be making roughly 22.5% of the salary cap, assuming he doesn’t make All-NBA next year. If he had a player option, he could have opted and signed a deal worth at least 30% of the cap, a potential $16 million swing in that year alone. By avoiding the player option the Wolves saved themselves a lot of money.
From an agent/player perspective, it is the complete opposite. New deals are going to keep re-setting market rates as we hit this inflationary environment. Every player’s individual situation is different, but generally I would try to get a player as many bites out of the rising cap apple as possible. Teams are going to have to spend and the tools available to teams to do so has expanded in the new CBA. I would be willing to bet that cap space as a means for signing free agents has hit its nadir in value, and will become prevalent as the cap rises.
Again, I would like to reiterate that my numbers are just rough estimates and that obviously nothing is set in stone. But we are in line for a large influx of revenue from a new national television deal, and it will have a rather large impact on the salary cap over multiple seasons. It is going to be fascinating to see how that impacts everything from free agency, to extensions, trades, etc.
Two More Things That Caught My Eye
1. The Anthony Davis Extension
The Lakers and Anthony Davis have reportedly agreed to a three year extension, worth up to $186 million, with a player option in the final year. This number assumes the full 10% cap increases in 2024/2025 and 2025/2026. a 4.5% increase in 2024/2025 and a 10% increase in 2025/2026 would result in a three year, $177.3 million. Either way, this will be tacked onto the 2 year, $83.8 deal remaining. This deal is a no-brainer for both sides. Davis bags some long-term money and can get back on the market at 34 for one more big deal. The Lakers lock in Davis for at least the next four years, during a period where the cap will be rising at the 10% max amount for a number of years, as I alluded to above.
2. The Jaylen Brown Extension’s impact On The Celtics Cap Sheet
There’s been much discussion around the 5 year, up to $303.7 million extension that Jaylen Brown signed with the Boston Celtics. EPV actually has him worth more than that over the life of the extension. Regardless, that plus the impending supermax for Jayson Tatum that will start in 2025/2026 could cause quite the cap crunch for the Celtics. Including the two supermaxes for the Js, the Celtics will have 5 players under contract in 2025/2026 and will be $40 million under the tax line. New deals for Derrick White and Malcolm Brogdon could push them over the tax with 7 more roster spots to fill. The Celtics are going to be an interesting test case whether a team can build around two supermax players in the New CBA Era.
Fake Rookie Extension Of The Week
Player: Devin Vassell
Team: San Antonio Spurs
Deal: 5 Years, $110 million
The San Antonio Spurs have a history of coming to terms on a rookie scale extension, and getting players on pretty great value deals on those extensions. This is why I have Vassell signing a deal at this number when EPV would peg his 5 year value at over $130 million. Regardless, I think it would be very smart to lock him in to a 5 year deal, considering the rising cap environment that I broke down earlier in the newsletter. If signed to this number, it could become one of the bigger value contracts down the line, especially if the Spurs decline the salary year over year, similar to how they did with Keldon Johnson. This deal would also be utilizing the new rule in the CBA where non-max rookie scale extensions can go out to 5 years.