Salary Negotiation Strategies in the NBA and Beyond

In negotiation, one great deal often leads to others. For the National Basketball Association (NBA), its landmark 2016 national television contract sparked a wave of lucrative salary negotiations—not only for star players but also for those of more modest talent. Yet once the boom subsided, players’ inflated expectations collided with economic reality. The episode prompted negotiators to adopt salary negotiation strategies focused on the long term.

Charging Ahead

In October 2014, the NBA’s nine-year $24 billion deal giving networks ESPN and TNT broadcast rights to the league’s regular-season and postseason games was a clear win-win-win agreement. The NBA’s annual TV revenue was set to nearly triple starting in 2016, from $930 million to $2.6 billion. The networks expected to benefit from adding more regular-season games to their schedules while keeping technology companies such as Google and Apple out of the bidding for the time being. And players heading into free agency prepared to set new salary records.

But because teams’ annual salary cap is tied to league revenues, a problem loomed. After growing steadily at around 3.6% per year for a decade, the salary cap jumped 32% in 2016—from about $70 million per team per year to $94.1 million in 2016, writes Sam Quinn of CBS Sports. Players entering free agency in 2016 anticipated amazing long-term deals. But if teams spent the TV money all at once, they’d have little left for free agents in following years, setting up arbitrary pay inequities league-wide. In addition, top teams might try to stockpile talent in 2016, cementing their dominance for years and arguably diminishing the NBA’s appeal to fans.

To address these risks, the league proposed to the National Basketball Players Association (NBPA) that they distribute the players’ guaranteed 49% to 51% of profits from the TV deal evenly among players right away, then artificially slow annual salary-cap increases—a process called “smoothing”—instead of allowing a one-year jump in 2016. But the union rejected the proposal, unwilling to artificially lower players’ earning potential, according to NBC Sports.

On the Rebound

As the league predicted, NBA teams went on a spending spree in 2016, signing almost 150 free agents to deals worth more than $3.6 billion. For example, Timofey Mozgov, a decent center but hardly a standout, negotiated a four-year $64 million deal with the Los Angeles Lakers—more than twice what NBA Most Valuable Player Stephen Curry was earning.

Many of the 2016 deals were bad bets. Among 26 players who signed contracts worth a collective $1.7 billion, none was chosen for the All-Star game that season, and many performed below expectations.

Having blown through so much cash in 2016, teams had little left over in 2017 and 2018. Even as the salary cap climbed to $102 million, spending on player contracts dropped from $3.6 billion in 2016 to $2.4 billion in 2017, then to about $1.7 billion in 2018.

As a result of the uneven spending, “the sheer monetary values of players are connected less than ever before to their ability,” Ben Cohen wrote in a 2018 Wall Street Journal article. And as predicted, dominant teams such as the Golden State Warriors stayed on top, leading to complaints that the league wasn’t competitive enough. Critics said the NBPA could have avoided these issues by accepting the league’s smoothing offer in 2015.

Setting Up Better Salary Negotiation Strategies

In 2020, the league and the union had another chance to use smoothing to their advantage—and this time, they took it. After the 2019-2020 season was suspended because of the Covid-19 pandemic, league revenues tanked. The two sides agreed to keep the salary cap stable to prevent it from decreasing by tens of millions of dollars. The compromise kept trades and negotiations moving until revenue bounced back. The deal “proves that the two sides are capable of working together to solve unorthodox problems,” writes Quinn of CBS Sports.

Adopting these improved salary negotiation strategies, the league and the NBPA added a smoothing clause into their next collective-bargaining agreement (CBA) in 2024. They agreed that the salary cap would not rise more than 10% per season; in addition, it was guaranteed never to fall, though it could stay flat from year to year, as Forbes reports.

In July 2024, the NBA signed a blockbuster $76 billion, 11-year media rights deal with Disney, NBC, and Amazon Prime Video. Under their league contract, players are entitled to 50% of that amount. The salary cap was expected to rise from $141 million to $206 million within five years.

Long-Term Salary Negotiation Strategies

Wondering how to negotiate pay in an interview? When considering how to negotiate salary, job negotiators and employers alike can learn the following lessons from the NBA’s salary-cap issues:

• Prepare for domino effects. It’s common for each of our negotiations to affect our subsequent negotiations. When negotiating salary, carefully think through the possible long-term effects of a deal and prepare for them.
• Factor in fairness concerns. An organization’s financial ups and downs can significantly affect our salary negotiations. Because fairness concerns loom large for employees, strive for compensation negotiation strategies that will be equitable over time.
• Learn from the past. Don’t waste failed salary negotiations; instead, learn from them. Examine where your salary negotiation strategies might have gone wrong, and figure out how to correct course.

What other salary negotiation strategies have you found to be effective?