LeBron James will reap $50m from TV deals

LeBron James' return to the Cleveland Cavaliers could mean $500 million a year in additional ticket sales and spending. Photo / AP - File

LeBron James will get more because he took less.

The four-time National Basketball Association Most Valuable Player signed a two-year contract with the Cleveland Cavaliers, even though he was eligible for a four-year deal, figuring a bump in television revenue after the 2015-16 season would enable him to be paid more in salary.

He was right.

The league and its broadcast partners on Monday announced new nine-year contracts that, according to a person with direct knowledge of the agreements, will pay the NBA $24 billion - almost triple what it's currently getting from the Walt Disney Co and Time Warner.

Because he signed a two-year contract, James becomes a free agent after the 2015-16 season, when the new TV contract begins.

"Certain agents and players have been timing their contracts," NBA Commissioner Adam Silver said at a press conference to announce the new agreements.

The salary cap, or team spending limit, is directly tied to league revenue, or what the NBA calls basketball-related income. The salary cap this season, which begins October 28, is a record $63 million. The cap may swell to more than $90 million when the new TV contracts begin.

Maximum player salaries are tied to the cap. For a player with at least 10 years of NBA service, like James, the first-year salary in a new contract is 35 per cent of the cap. As such, James will be paid about $22 million this season. If the cap goes up to $90 million, his first-year salary would be about $31.5 million, or $9.5 million more.

James can re-sign with Cleveland for five years or another team for four, meaning that he could reap at least $50 million more with allowed annual increases because he took the shorter contract during this past off-season. The exact numbers depend on all league revenue streams.

Silver said he hopes that he and Michele Roberts, the executive director of the NBA Players Association, can negotiate a way to "smooth" the influx of TV money from the new contracts. The commissioner wasn't specific.

Preliminary discussions have already started, Silver said.

Roberts said in a statement the new contracts are good news for stakeholders in the business of the NBA.

"It is clear that the league is now entering a period of unprecedented growth," Roberts said. "Our job will be to ensure that the players receive their fair share of the results of their efforts and that we do everything possible to maintain the growth and popularity of the game."

The collective bargaining agreement expires after the 2020-21 season. Owners and players can opt out of the contract after the 2016-17 season.

The league's new contract with ESPN includes a new over-the-top offering in which the NBA would receive an undisclosed equity stake. Over-the-top refers to content that's delivered from a third party such as Hulu or Netflix.

- Bloomberg