Introduction
To many casual fans, the financial workings of the NBA are not a concern. Their focus tends to be on superstar contracts, like Stephen Curry’s $62.6 million deal or Joel Embiid’s $192.9 million extension, rather than the inner workings of the league. Unfortunately, with the new CBA (collective bargaining agreement) passed in 2023 by the NBPA, the positive affirmations affiliated with new contracts and extensions might be overshadowed by the harsh financial penalties and roster restrictions teams face under the second apron, limiting teams’ ability to build around these high-profile stars.
What is the “Second Apron”?
To understand the workings of the second apron, a basic understanding of the NBA spending levels and salary cap is necessary. The minimum team salary for a team this upcoming season is $126.529 million, while the salary cap is at $140.588 million. If a team is anywhere in the middle of this range, they can trade and deal players with zero to limited ramifications. If your team is in the middle of the salary cap and tax level ($170.814 million), they cannot sign free agents that would exceed the tax level outright, but the MLE and bi-annual exceptions are still available in the market. Trades become slightly arduous as salaries must be matched to a degree, but there is no direct financial penalty or luxury tax. The next spending tier spans from the luxury tax threshold to the first apron ($178.132 million). Teams within this range lose the ability to execute sign-and-trade deals and are restricted from acquiring players from the buyout market. They would also incur a luxury tax penalty, which would increase depending on how much over a team was on the salary cap. Until 2023, this was the final threshold that a team could pass. Under the new CBA, a second apron was established at 188.931 million dollars. In addition to all prior restrictions, teams exceeding the second apron face even harsher penalties: they are prohibited from trading their draft pick seven years into the future, have that pick locked at 30th overall, lose access to trade exceptions, and are limited to offering only veteran minimum contracts.
What was the purpose of “Second Apron”?
From the Miami Heatles to the Golden State dynasty, the NBA has faced issues concerning superteams and parity in the league. From 2012 to 2018, only five unique teams made the finals, the least in NBA history through a seven-year period. To combat this problem and increase variety in the league, this new CBA was passed to make it harder for teams to retain their payrolls year to year. Another discussion point for team owners is the big difference in net wealth among the league. Even though none of these owners have money problems, there's a huge gap between those who are richest and poorest. Clay Bennett, owner of Oklahoma City Thunder with a net worth of $400 million, represents the low end while Steve Ballmer at top as LA Clippers' owner has an impressive fortune of $125.6 billion - 314 times more than what Bennett owns. This huge difference in wealth can greatly influence the way teams function and compete financially outside of games. NBA aims that these actions will not just restrict overspending, but also support small-market teams to stay competitive, equalize opportunities on the court, and let them keep and nurture talent without being overrun by richer franchises' expenditures.
Implications Across the League
The introduction of the second apron in the new CBA is poised to create ripple effects across the league; in fact, a lot has happened already. Here are some of the implications it has had on teams.
Denver Nuggets - Kentavious Caldwell-Pope
Earlier this offseason, KCP of the Denver Nuggets opted out of his 15.4 million dollar contract to test free agency. He ended up signing with the Orlando Magic for 3 years at a 22-million-dollar per year clip. Denver did have his bird rights and therefore could have signed him to the same contract, but because of the fear of passing the second apron, they let him walk. KCP was vital in securing the first championship for the Nuggets, with his high profile three-point shooting and perimeter defense. Without his services, it will definitely limit the Nuggets contention chances next year.
Suns Inability to Negotiate Buy-Out Contracts
The Phoenix Suns spend upwards of 150 million dollars on three players on their roster, which is already above the initial salary cap. Without a true point guard on their roster last year, they struggled with a stale offense which was a product of their isolation-heavy offense. While he might have not been the shot of contention the Suns needed, Kyle Lowry was on the buy-out market towards the end of the regular season. Since his previous salary was $28 million, $13.8 million over the MLE, they were not able to even court an offer to him.
Boston Celtics - New Ownership?
With the Celtics paying their entire starting five $163,393,862 next season, they are projected to be in the depths of cap hell. With the new salary cap system in place for this season, the current Celtics owners announced their plan to sell a majority interest in the team by 2024 or early 2025. While the exact motives behind the sales are unknown, affordability for Wyc Grousbeck ($400 million net worth) and Jayson Tatum’s supermax contract kicking in the following season had to be in consideration.
Even though the new CBA was designed to reward teams for nurturing their homegrown talent, the reality is that the second apron could have the opposite effect. A prime example is the 2016 Golden State Warriors, built around their own draft picks, like Stephen Curry, Klay Thompson, and Draymond Green. If the current CBA had been in place then, the Warriors would have been heavily penalized for their success, restricting them from improving their depth, and maybe even from signing Kevin Durant the following offseason. This paradox makes us reconsider whether the league’s intentions follow the outcomes, as it could discourage teams from keeping their homegrown stars long-term, which is a problem the current Oklahoma City Thunder might face in the future.
Conclusion
The new CBA in the NBA brings a second apron, and this changes how teams spend money. The goal was to stop too much spending and make teams more equal and competitive. But now, unexpected effects are being noticed already. Teams now must make tough choices about keeping important players, dealing with buyout markets, and managing increasing payrolls. Moreover, the limitations put on teams, even those that bring up their own talent, make people wonder if this method really fits with the NBA’s aims of fairness and equality. As we see more results from the second apron rule over time, it might change how things work in the league in ways nobody completely expected before. Whether this new system will foster true competitive balance or create new problems within the league is ambiguous, but one thing is clear: the second apron is set to redefine how NBA teams operate, and its impact could shape the future of the league for years to come.
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