The NBA: Salary Cap and Labor Battles

While the NFL had the first hard salary cap, the NBA became the first professional sports league to implement a salary cap in the 1984–1985 season. The cap was designed to promote competitive balance, limiting the ability of wealthy, large-market franchises to control the top talent of the league with the highest spending power. However, the cap was introduced as "soft" from the beginning, meaning it contained many exceptions that allowed teams to exceed the salary cap. The most significant of these was the Larry Bird Rule, which allowed franchises to re-sign their own free agents without the salary counting against the cap. While the soft cap preserved some player contract power, it substantially hurt the competitive balance that the cap was originally intended to invoke.

The salary cap was a direct product of a collective bargaining agreement between the league and the National Basketball Players Association (NBPA). The combative nature of this relationship, similar to other major sports leagues, meant that every change to the cap required negotiation, and when those negotiations failed, lockouts ensued. The 1998–1999 lockout, which lasted 202 days and eliminated roughly half the season, represented the first major lockout. Owners sought to replace the soft cap with a hard cap, while players fought to preserve the original guidelines. The eventual settlement maintained the soft cap but introduced individual salary ceilings for players. 

By the late 2000s, the failures of the soft cap system had become increasingly apparent throughout the league. Star players had grown used to exploiting free agency rules to build super teams. The biggest example of this during the time period was the combination of LeBron James, Chris Bosh, and Dwyane Wade. The three aligned their free agency to simultaneously leave their current teams and meet in Miami to play for the Heat in 2010. This highlighted the extent to which players could surpass the original competitive balance of the salary cap. Statistical disparities reinforced the problem: the top ten spending teams in the 2010–2011 season averaged 50 wins, while the bottom ten averaged only 32.

The free agency free-for-all caused the 2011 lockout, which lasted 149 days and resulted in the cancellation of 16 regular-season games. Owners demanded a hard salary cap, similar to the NFL,  and a cutback in players' share of all basketball-related income (BRI) from 57 percent to 50 percent. Players accepted the reduction in BRI but successfully resisted the hard cap. The final agreement also negotiated higher luxury tax penalties, a mandatory salary spending floor, and shortened maximum contract lengths.

The history of the NBA salary cap shows that lockouts have been extremely effective as tools of leverage in being a catalyst for negotiation. Each lockout caused distinct changes to the salary cap of the NBA and proved again that the lack of a revenue stream forces owners and players alike into change.