NBA Salary Cap Could Take Big Hit With China Controversy, Ratings Decline and younger audience

NBA Commissioner Adam Silver addressed the media in Chicago on Saturday evening during All-Star weekend, and he spent the bulk of his time addressing issues with future salary caps, and how China and an emerging youthful audience could slice into the league's potential revenue.

SIlver took the podium and said many of the Chinese media could not attend the weekend festivities because of travel restrictions with the Coronavirus, but then addressed media questions about the NBA's relationship with China after that.

For a quick recap of how the NBA came to a sluggish standoff with China, it goes back to last fall when Hong Kong protests against China began, and Houston Rockets general manager Daryl Morey tweeted that he supported a Hong Kong free from Chinese communism.

U.S. lawmakers from both sides of the aisle agreed and supported the Hong Kong people, and there was a quick backlash from China against the NBA.

Some star NBA players, including LeBron James of the Los Angeles Lakers, acknowledged "ramifications" that could happen. James even said Morey "wasn't educated" on the happenings in China.

"We all have freedom of speech, but at times, there are ramifications for a negative that can happen," James said then. "I don't want to get into a feud with Daryl, but I believe he wasn't educated on the situation at hand, and he spoke. Some of the people have been harmed, and not financially but physically, emotionally and spiritually."

Silver on Saturday publicly said the NBA could lose hundreds of millions in dollars from lost revenue in China as the government decided to not air the league's games on its state-run CCTV. That lost revenue, as well as a younger generation getting their NBA fix on platforms other than traditional TV, creates a huge revenue gap that could affect salary cap projections and negotiations.

"In terms of precise numbers, it's still a little bit uncertain. We've lowered our cap projection slightly, part of that was due to reduced revenue in China, and part of it was due to the normal variations in business projections, so I don't know yet where we'll ultimately come out," Silver said.

"What I know from the data that we look at, it continues to be an enormous interest in the NBA and China. And my sense is that there will be a return to normalcy fairly soon, but I can't say exactly when, when it comes to CCTV."

Silver said China still has a "strong relationship with our fans," and that games are still being streamed there. He said ratings through that avenue are on pace with last season.

As for CCTV, the games still are not on the air.

"My sense is they will [be back on the air] at some point in the future," SIlver said. "We are not pressing them. I believe it's a decision that's outside of certainly our control, and I will say I'm often not even sure exactly where that decision lies. I think that our view is the league, we should continue doing the things that we've done."

Silver was asked if the losses from China would be in the billions of dollars, and he refuted that, but noted the loss could be in the hundreds of millions.

"Probably less than 400 million dollars, maybe even less than that. It's substantial," Silver said. "I don't want to run from that. We were taken off the air in China for a period of time and it caused our business, mainly our business partners in China, who felt at the time it was inappropriate to have business relationships with us."

"I don't have any sense that there's any permanent damage to our business there, and as I've said before, we accept the consequences of our system and our values, and it's not a position any business wants to be in, but those are the results. But, far lower than those multi-billion dollar numbers."

Silver went on to say NBA broadcast dollars are "backloaded in the playoffs," which gives the league uncertainty.

"I think in part it has to do with what happens over the remainder of the season. So much of the value of NBA broadcasts, for example, are backloaded in the playoff, so we don't quite know yet where that will come out," the NBA commissioner said.

Another chunk of revenue decline comes with star players sitting out because of injury, like James sitting out much of last season, and many Golden State Warriors stars sitting out this season along with Zion Williamson, the No. 1 draft pick by the New Orleans Pelicans who recently made his NBA debut.

Silver also accredited a younger generation getting their streaming services through platforms outside of traditional, revenue-generating TV.

"We haven't found a way to connect those young fans to our broadcast, through whatever platform they're going to be delivered," Silver said.

Silver touted Disney's transformation with Disney-Plus, and said the ESPN+ is more of a companion right now with the new Disney streaming service, but "it's not a secret they're looking at some of those same issues."

He said AT&T's acquisition of Time Warner Media had promise of finding ways to tap into a new, potential revenue source.

"We may be more affected by it because we have such a young fan base, but I'm super-confident over time we will work through it because there remains an enormous interest in our players and our game."

NBA in China
Head coach Kenny Atkinson of the Brooklyn Nets speaks with Dzanan Musa #13 during the match against the Los Angeles Lakers during a preseason game as part of 2019 NBA Global Games China at Shenzhen Universiade Center on October 12, 2019 in Shenzhen, Guangdong, China. Photo by Zhong Zhi/Getty Images