On Independence Day of 2016, sports lovers country-wide in route to a drunken Fourth of July barbecue or boat ride were directed to their phones when Kevin Durant announced what the next chapter of his career would entail.
That morning, Durant dropping his “decision” to join the Golden State Warriors was a discourse that created an uproar directed not only at slandering Durant but the league at large.
How could Durant join the enemy?
And moreover: How could the league let this happen?
The questions were asked because answering how Durant could legally wedge his way into the already most talented team in the league took some time to understand. In 22 months of retrospect, it has become clear that the core of the process that made the move possible was miraculous happenstance.
The NBA happened to have just signed a $24-billion television deal with ESPN and TNT that injected $2.6 billion into the league annually. Throw that check into the NBA’s basketball-related income blender and you have an additional $24 million in salary — per team — that became available to be spent as each team saw fit.
League owners and general managers treated this gift card like a kid in a candy store. The Los Angeles Lakers threw $64 million at Timofey Mozgov, the New York Knicks $72 million at Joakim Noah, the Minnesota Timberwolves $64 million at Gorgui Dieng (and $21 million at Cole Aldrich) while the Warriors — now gifted with cap space — made a couple small cost-cutting moves that allowed them to sign Durant.
Had the TV deal not happened, there is no way the Warriors could have put together the roster they have today. A roster comprised of four All-Stars who are all (still) 30 years old or younger and insulating pieces who prop up those stars greatness.
The Next Cap Spike
The 2016 cap spike was unprecedented but it is not unrepeatable.
Through the growing popularity of the league, basketball-related income (BRI) will likely have a slow linear growth but that will not be enough to create another quantum leap. A spike can only be created by another massive jump in revenue from a previously untapped revenue forum.
On Monday morning, that door may have been opened when the Supreme Court ruled that states are free to authorize sports betting.
In 2017, the Nevada Gaming Control reported $4.8 billion dollars wagered in the state’s sportsbooks, per ESPN. More than a quarter of those dollars were wagered on basketball, both collegiate and professional. However, that nearly $1.5 billion only encapsulated “legal” bets made in the brick and mortar sportsbooks of Nevada. Outside of Vegas, conservative estimates suggest that another $150 billion was wagered on sports in illegal forums.
And there you have your untapped revenue forum.
NBA commissioner, Adam Silver, has been outspoken over the course of this legal process about bringing in gambling to the NBA’s landscape. In an Op-Ed for The New York Times, Silver wrote that it is time for sports gambling to be brought “out of the underground and into the sunlight.” Silver suggested that the NBA can regulate gambling for a one percent cut of all bets legally wagered.
The American Gaming Association has balked at the proposition, stating that this split would skim “20-29 percent of total revenue” in the NBA betting industry. This will certainly lead to a deliberation that may preclude a full percent share from happening, but it can be viewed with near certainty that the NBA will get theirs in this process.
How Big Will the Gambling Spike Be?
The exact amount the league receives and injects into their annual revenue (BRI) is still left to be determined through not only finding what that share is but through actually recognizing what the public’s appetite for legal gambling actually is.
That number could be astronomical. Look no further than legalized Marijuana revenue for anecdotal “out of the underground into the sunlight” evidence. The Washington Post estimates $132 billion in federal tax revenue will be reaped in the next decade from the legalization of marijuana.
To create a similar cap spike to 2016, the NBA would need to recognize approximately $140 billion in NBA gambling revenue. Again, once put through the BRI blender, that would shoot out close to the $24 million in additional cap space teams were gifted (or cursed) with two summers ago.
Will this happen?
Even for those bullish on the industry, $140 billion seems very liberal. However, the reason for optimism lies in the expedited process of sports betting being legalized. Many thought the legal process would drag out well into 2019. It’s mid-May of 2018, and here we are.
What This Could Mean For The Timberwolves
The Wolves are swiftly approaching a financial wall akin to the Warriors in the summer of 2016, a team who had three stars on maximum contracts — Draymond Green, Klay Thompson and Steph Curry — or on the precipice of receiving a massive salary boost.
With Andrew Wiggins starting a max deal in 2018-19 that begins at $25.3 million annually and Jimmy Butler and Karl-Anthony Towns a summer away from contracts that will pay them (up to) $32.4 million annually, the Wolves need a gift to add a fourth star.
If this legal process remains expeditious, the spike could be coming as soon as the 2019-20 season. That summer, the free agent class could include Kawhi Leonard, Klay Thompson, Paul George, Kemba Walker, Devin Booker and even LeBron James. Wait a year and Anthony Davis, Kyrie Irving, Draymond Green and Ben Simmons become available.
Of course, this is a unilateral benefit to every team in the league — e.g. the Sacramento Kings will receive the same benefit as the Wolves. What every team does not have is the allure of playing alongside Karl-Anthony Towns. With another season of progression, the Wolves’ intrigue could be a poor man’s version of the 2016 Warriors.
The reality of the current situation in Minnesota is that the Wolves likely do not have enough in Towns, Butler and Wiggins given the financial restrictions the franchise is staring down. Legalized sports wagering catching America by storm could be the team’s best — and perhaps only — bet at truly becoming a contender.
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