WNBA Revenue-Sharing CBA Debate | Spotrac News

The WNBA and WNBPA have been engaged in labor negotiations since last October, when the players’ association voted to opt out of the Collective Bargaining Agreement (CBA) that was signed in 2020. The deadline for agreeing to a new CBA was October 31, but the league and players’ association agreed just a day before the deadline to a 30-day extension. The current CBA is set to expire on November 30, and the possibility of a work stoppage still looms.

As the league faces a significantly different and improved financial outlook than it did when the previous CBA was signed, there are multiple things that the players are looking to change with this new CBA, but reports suggest that one topic in particular is holding up negotiations: revenue sharing. So let’s look at how the current system works, what each side is fighting for, and what the proposed change could mean going forward.

The Current System

The expiring CBA does have a system of revenue sharing, but it has never kicked in, and players feel that even the hypothetical benefit is insufficient. This system is called incremental revenue sharing because it only shares revenue beyond certain growth targets. For the players to benefit from this system, league revenue needs to hit certain cumulative revenue targets.

To calculate the annual target, the annual league revenue for 2019 is increased by 20% from the prior season’s goal each year. The amount of revenue generated by the league in 2019 is unknown, but if it were hypothetically $50 million, then the 2020 target would be $60 million, increase to $72 million in 2021, and so on.

However, it isn’t just this annual target that needs to be met, but a cumulative revenue target. All revenues going back to 2020 are added together to calculate the cumulative revenue, and all the revenue targets combine to equal the cumulative revenue target. If the difference between the cumulative revenue and the cumulative revenue target is negative, then no revenue sharing occurs, regardless of whether the annual target was exceeded. This system creates a snowball effect that can put revenue sharing further out of reach each year.

If that cumulative revenue target and the annual revenue target are somehow met, then a percentage of the overage goes to the players. The revenue that is shared begins with the net overage, calculated by subtracting the cumulative overage of the previous season from the current season. Cumulative overage is the cumulative revenue minus the cumulative revenue target, and if the cumulative overage of the previous season is negative, then it is considered zero.

Net overage for 2024 = (2024 cumulative revenue – 2024 cumulative revenue target) – (2023 cumulative revenue – 2023 cumulative revenue target)

Once the net overage is calculated, 30% is automatically deducted as the “cost of revenue.” The remaining 70% is then split equally between the players and the league. The players’ portion is further divided, with half paid directly to players and the other half going to the WNBA marketing agreement pool. So 17.5% of the total net overage goes directly to players, 17.5% to the pool, and 65% to the league and its teams.

The direct revenue share payments are supposed to be made at the end of the season at the discretion of the WNBPA, so players don’t begin the season with any knowledge of what their payment could or would be.

The 17.5% added to the pool is used by the league to sign players to Player Marketing Agreements, referred to as PMAs or LMAs. These contracts benefit only a small portion of all WNBA players each season. They can have zero impact on non-star players, while a select few are paid upwards of $250,000. There is no guarantee of a balanced distribution of revenue.

So, even if the system were to kick in, players would not benefit that much or equally. And so far, they haven’t benefited at all. In this case, hindsight is 20/20 in recognizing how the COVID-19 pandemic impacted the 2020 and 2021 seasons, putting the league in an insurmountable hole in regards to its revenue targets based on the 2019 season. Even as TV money, sponsorships and ticket sales surge, the cumulative targets remain out of reach.

This revenue structure also has no mechanisms to change the salary cap and thus significantly impact salaries, regardless of how well the league does financially. Instead, the salary cap rose by a fixed three percent for inflation every year of the expiring CBA. So, hypothetically, even if the league increased revenue by 20% each season from 2020-2025, salaries would have only increased by 19% even as revenue grew by 199%, and revenue sharing still wouldn’t kick in because it requires “excess revenue.”

As a result, it is estimated that as revenue has risen, players’ share of total revenue has decreased to around 9.3% in 2022, from 11.1% in 2019, according to a 2023 analysis by Bloomberg News. Comparatively, NBA players in 2022 kept roughly half of basketball-related income (which included ticket sales and broadcast revenue) and 39% of all revenue.

What Each Side Is Arguing For

Reporting from Annie Costabile for Front Office Sports and from The Athletic indicates that the league wants to continue with and has proposed in negotiations a model similar to the current CBA, where there is a hard, fixed salary cap and revenue-sharing is triggered only when and if certain targets are exceeded.

The league messaging from WNBA Commissioner Cathy Engelbert has focused on the league’s “sustainability,” which they argue requires a larger portion of revenue going to league owners and investors.

“We all agree we’re trying to return every dollar we possibly can to the players,” Engelbert said, “but we also want to incentivize investment from owners. We want owners to have a viable business.”

NBA commissioner Adam Silver, functionally Engelbert’s boss, doubled down on this rhetoric in an October 21 interview on NBC’s “The Today Show.” While Silver agreed that players should receive a higher share of total revenue than the widely referenced 9-10% figure it is estimated they currently get, he recommended the focus be on increasing the “absolute numbers” of salaries rather than revenue share because there is more revenue in the NBA.

The “absolute numbers” that have been reportedly proposed by the league are a supermax salary of around $850,00 and a veteran minimum of around $300,000 in the first year of the proposal. This would be a significant increase from the 2025 supermax of $249,244 and veteran minimum of $78,831 that operated within a total salary cap of $1,507,100 per team. These numbers are also roughly in line with the growth in revenue from broadcast contracts, which will approximately quadruple beginning next season.

Contrary to some of the language used by the players’ association, this revenue-sharing system itself is technically uncapped because there is no maximum the players can receive of their 35% of any dollar above the cumulative revenue target. But the salary cap is separate and fixed, in other words, capped, so the risk that has come to fruition is players falling behind in total revenue share.

Both sides agree that the players should make more money. But the players want mechanisms in place so that their compensation will continue to align with increasing league finances, rather than fixed percentage increases.

The key argument from the players is that league revenue has been dramatically increasing, and they want their compensation to increase accordingly. They view this as league recognition of their contributions to the league’s growth, not just about making more money — though that isn’t an insignificant consideration.

The players’ association is seeking a system that is not subject to a particular threshold and is instead more straightforward, like the NBA and many other major men’s leagues, not leaving them behind while the league experiences rapid growth.

In the NBA, the salary cap is itself determined by the league’s basketball-related income (BRI). Players automatically share in NBA revenue because 49-51% of the BRI becomes the salary cap. So, when league revenue spikes, the salaries do so correspondingly. The NFL and NHL have similar arrangements where the cap represents roughly 50% of the league’s total revenue. The MLB is a little different because there is no salary floor, but the players still earn about 47% of revenue. Both the MLBPA and NBPA recently expressed their support for the WNBA players.

Even the NWSL, whose first season came roughly 15 years after the WNBA’s, now has a salary cap linked to revenue sharing thanks to its new CBA. Each season, the salary cap is increased by “team revenue share,” which is 10% of the sum of NWSL media revenue and sponsorship revenue divided by the number of teams in the league.

Players do not see themselves agreeing to any deal that does not increase their compensation and include a new revenue-sharing system where salaries are linked to a percentage of league revenue. Meanwhile, the league has not been shaken from its position that revenue sharing should be a stand-alone system separate from the salary cap.

What Potential Changes Could Entail

If the current system remains, The IX Basketball says many numbers would still need to be adjusted to reflect the state of the league. The 30% of net overage that is immediately cut off the top for the league’s “cost of revenue” could decrease to reflect wider margins, instantly upping the 17.5% that goes directly to players. They also argue that rank-and-file players should push for the entirety of the players’ share to go to direct payments rather than some going to the marketing fund that benefits players unequally.

If the players get the system they are fighting for, the primary question will be what percent of revenue they receive. Similarly salary-capped major men’s leagues in the U.S. typically share around 50% of their revenue with players, and WNBA players are unlikely to accept anything below 10% because that is where they already stand. Experts like Dr. Daniel Kelly II, Associate Dean and Clinical Professor at the Preston Robert Tisch Institute for Global Sport, argue that WNBA players need to work their way up to that 50/50 deal, and something like a 20% share with a growth escalator would set them up well and be more attainable.

Regardless of the final percentage, this system would require the league to be more transparent with the players’ association about their finances. WNBPA President Nneka Ogwumike accused the league of a lack of transparency in June.

“I feel like we’re going based off educated estimations. We still have a lack of transparency that [doesn’t] allow us to really know,” Ogwumike told Forbes. “There is nothing that we know when it comes to how much money the league is making.”

Currently, there is also transparency lacking up front because players don’t know until the end of the season if they will receive any revenue share, let alone how much.

This proposed change would also likely require the introduction of a soft salary cap system like the NBA has. As is, the only way a team can go above the salary cap during the regular season is if the league grants them hardship or emergency hardship exceptions. A soft cap like the NBA’s allows teams to sign players and make trades that exceed the cap under certain conditions, resulting in few NBA teams truly being under the cap during the season. The NBA also has what is commonly referred to as a “luxury tax” to control team spending by requiring teams with a team salary exceeding the predetermined tax level to pay a penalty for each dollar they exceed the tax level.

For both systems, what revenue should be up for grabs is up for debate. Costabile’s reporting indicates that the league wants only league office revenue that comes primarily from national media rights and corporate sponsorships to be eligible for revenue sharing. Individual team revenue — largely made up of ticket sales, merchandise, food and beverage sales, local corporate sponsorships and local broadcasting rights — would be considered separate, unlike in the NBA. The WNBPA considers this an insufficient “piece of a piece of the pie.”

If a direct percentage of revenue determines the salary cap itself, then the players share in the risk of salaries decreasing or plateauing along with revenue. Evidently, this is a risk the players are willing to take as they have propelled the WNBA to impressive levels of growth.