How NBA Expansion Could Impact Collective Bargaining Agreement Negotiations

The NBA appears poised to eventually expand from 30 to 32 teams. It’s seemingly a question of when, not if.

In a since-deleted tweet, Willie Ramirez of the Associated Press reported that the NBA planned to announce expansion franchises in Las Vegas and Seattle at the end of September. However, Mick Akers of the Las Vegas Review-Journal later refuted that report.

Two primary factors may influence the league’s timetable for such an announcement: the ongoing negotiations over the next collective bargaining agreement and the upcoming national television contracts.

Under the current CBA, “proceeds from the grant of expansion teams” are “expressly excluded” from the definition of basketball-related income, which is the multi-billion-dollar pot of money that the players split with team governors. As of last October, Forbes estimated the average NBA team to be worth $2.48 billion, while three teams—the New York Knicks, Golden State Warriors and Los Angeles Lakers—were worth at least $5 billion.

Those valuations could go soaring in the next few seasons.

Last March, Jabari Young reported for CNBC that the NBA planned to “seek a $75 billion rights package” for its next national television contracts. It currently has a nine-year, $24 billion deal split between Disney (ESPN/ABC) and Warner Bros. Discovery (TNT).

If the league doubles or triples the value of its current national TV deal, that windfall would cause franchise values to skyrocket accordingly.

In January 2021, ESPN’s Brian Windhorst reported that officials within the league office had “floated the price tag of $2.5 billion each for two expansion teams in the near future.” He noted that since expansion fees aren’t split with players, adding two expansion teams could net each of the existing 30 teams roughly $160 million.

“Insiders say that behind the scenes this has become one of the league’s core plans to placate billionaires still chafing from losses of recent years,” Henry Abbott of TrueHoop reported earlier this year. “Expansion revenue could put those woes in the rearview mirror.”

NBA Commissioner Adam Silver tried to pour cold water on the expansion talk during his pre-NBA Finals press conference, telling reporters that the league was “not discussing that at this time.” However, he did add: “As I said before, at some point, this league invariably will expand. But it’s not at this moment that we are discussing it.”

Since expansion is among the NBA’s worst-kept secrets at this point, the league and the National Basketball Players Association figure to discuss it amidst their CBA negotiations. Both sides could aim to leverage the issue to their advantage.

If the players decide they want a cut of the expansion fees—which figure to be $5 billion at worst—the team governors will likely aim to extract major concessions from them elsewhere. They could start by targeting the league’s financial system.

The NBA currently has a soft salary cap, which means teams can exceed it in certain ways. Things such as Bird rights, the mid-level exception and traded player exceptions allow teams to either re-sign or acquire players even if they’re over the cap. While the league does have a punitive luxury tax for teams that drastically exceed the cap, deep-pocketed ownership groups have proven willing to swallow nine-figure tax bills for win-now squads.

The Golden State Warriors, who just won this past year’s championship, had a payroll north of $184 million, more than $70 million over the $112.4 million cap. They paid out an NBA-record $170.3 million in luxury tax alone, but they also won their fourth championship in the past eight seasons.

“You know, we kind of blew a hole in the system, and it’s not a good look from the league’s perspective,” Warriors CEO Joe Lacob told Tim Kawakami of The Athletic in early July. “They don’t want to see it happen. And there are limits. I’m not going to say what they are, but there are limits to what you can do.”

If players do insist on receiving a cut of expansion revenue, team governors could counter by pushing for a hard cap to prevent a team like the Warriors from outspending everyone else. Although a hard cap has long been a non-starter for the players association, Silver said in 2018 that the league would “continue to look at” it as a possibility.

If the players refuse to accept a CBA with a hard cap, the league could seek concessions elsewhere. Team governors might look to install a mechanism to prevent players with multiple years remaining on their contracts to publicly request trades, or perhaps they’ll attempt to rein in spending elsewhere.

“More punitive penalties for the luxury-tax system is a point of emphasis for the league and some team governors,” Shams Charania of The Athletic reported Monday. “Team executives believe the tax penalty will be arguably the biggest issue to resolve in the next CBA.”

Players could also look to leverage any future expansion proceeds. If they’re willing to allow team governors to continue receiving 100 percent of that money, they’d be giving up their share of a potential $5-plus billion pot. While they’ve been amenable to those terms in previous CBAs, expansion wasn’t nearly as imminent as it seems to be now.

If the players do go that route again, they’d likely look to make that money up somehow. Team governors probably won’t let them have a higher share of the overall BRI, but changes to restricted free agency, extension rules or the handling of supermax contracts might be fair game.

There’s typically a push-and-pull in any contract negotiation. A concession on one front usually leads to the other side looking to make that up elsewhere.

How the league and the NBPA handle proceeds from expansion teams could influence how much additional leverage one side has over the other.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac or RealGM. All odds via FanDuel Sportsbook.