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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: Caitlin Clark, the biggest star in women’s basketball, is making significantly less than expected. What gives?

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: A proposed college football “Super League” is being discussed.

• 💪 Weekly Reminders that Sports are Awesome: Masters rap recaps, Verne Lundquist says goodbye after 40 years calling the Masters, and Boban Marjanovic gives the crowd what they want.

Hey team,

As expected, Caitlin Clark was drafted #1 overall by the Indiana Fever during Monday night’s WNBA Draft.

Anchored by the star power of Clark, Angel Reese, and several other high profile draft picks, the draft was a major hit, drawing 2.5 million viewers (no WNBA game has gotten over 1 million viewers since 2008) and garnering major social media buzz. One fun note — this is the first time Prada has ever outfitted a women’s basketball player for a draft.

This excitement turned into anger for many when they learned how much Caitlin Clark would be making in her rookie season: $76,535.

Yes, Clark will still make millions of dollars this year from league marketing agreements, endorsements from her robust NIL portfolio that will roll over into general sponsorships, and a rumored eight-figure deal with Nike (including her own signature shoe as my good friend Kelsey Smith called out in our predictions podcast from the beginning of the year).

But, putting aside the aforementioned off-court earnings, this is still grossly underpaying the biggest women’s basketball star ever.

Several prominent public figures, from President Joe Biden to Hoda Kotb to Russell Wilson, called out the dollar amount as a sharp indictment on the inequities that have plagued women’s sports for too long.

That’s true, and the outrage can be justified.

Here’s the challenge, though: that’s all she’s legally allowed to make.

Welcome to the nuanced world of salary caps, revenue shares, and collective bargaining.

In this week’s SBP, you’ll learn:

• How leagues’ CBAs work and what they mean for the players

• How Caitlin Clark and the current players can change the trajectory of women’s basketball

• Three things you can do today to grow the women’s game

League Labor Negotiation 101

All professional sports leagues have two sides in labor discussions, also known as collective bargaining agreements (CBA):

1. The league, headed by the commissioner, represents the interests of the club owners.

2. The union, headed by a president and several players, represents the interests of the players in the league.

All leagues need these agreements in place in order to legally operate.

These are negotiated in multi-year agreements, meaning that once a CBA is agreed upon, the terms within the CBA will carry on for the subsequent seasons for the life of the term.

In the event an agreement cannot be reached, you get a players’ strike or a lockout like we have seen with the MLB, NBA, and NHL in the past few decades.

There are several key items that are negotiated as a part of these agreements, but the two main deal points at the center of every CBA are:

1. The revenue split between the owners and players

2. How the salary cap (what each team can pay its players to fill out a roster) is calculated

These points are interconnected, and every league uses the revenue share and salary cap to implement agreed upon player salary bands for specific situations — i.e., a league minimum, a “rookie pay scale” — that enable fairness, repeatability, and stability across the league.

This brings us to the WNBA.

Many people are up in arms about what Clark is getting paid on her four-year, $338k rookie deal:

• 2024: $76,535

• 2025: $78,066

• 2026: $85,873

• 2027: $97,582

It’s fair to be upset about how low these amounts are, but this amount of money is what the first four picks in the WNBA Draft, regardless of stature or stardom, are required to make under the league’s collective bargaining agreement (CBA) that was agreed upon with the players’ union back in 2020.

Meaning, the Fever legally cannot pay her more without violating the league’s rules and being punished.

A number of people are pointing at how much the NBA’s #1 overall pick from last year, Victor Wenbanyama, is making in Year 1 of his rookie deal — $12.2 million — as a comp to highlight the disparity.

There is some value to this reasoning in that it shows how far the W lags behind its male counterpart, but I also think it is a reductionist argument that misses many of the nuances.

Namely, these are completely different leagues in terms of revenue and maturity.

Let’s dig into those.

Not in the Same League

Let’s start with three critical differences between the NBA and the W that influence this challenge: total revenue, salaries/salary caps, and revenue split.

Anchored by a $2.7 billion annual TV deal, the NBA reportedly made $10 billion in 2022-23. For comparison, the W made 2% of that — $200 million ($60 million annual TV deal).

This trickles down to salaries, where the W’s highest paid player made $242k in 2023, about 16% of the NBA’s league minimum salary ($1.5 million).

Taking it a step further, that $1.5 million is higher than the W’s average salary cap — $1.2 million.

Much of this has to do with the NBA’s 50-year head start on the W, the star power in the league the last several decades, and the prioritized investment in the league by owners and the media.

But, any argument about there needing to be equal pay or using the two as comps is economically nonsensical, and no one inside the WNBA game believes they should be making the same as the NBA players.

What they do believe?

They should be getting more of the revenue generated and there is a path to making more money.

NBA players receive 51% of all “basketball-related income” under their current CBA. This correlates to the salary cap and the amount the players are able to make.

In the W, there is a much more complex formula for calculating the revenue share that is stunting the growth of salaries.

Bloomberg has an in-depth piece on it here, but here’s the net net: unlike the the NBA, the W splits out team and league revenues separately in its calculation, which impacts how the revenue share is formulated. Under this model, salaries as a total share of revenue in the W were just 9.3% in 2022, down from 11.1% in 2019.

This highlights a key challenge with CBAs. Some of their most visible points — salary caps and salary bands — are hard to get right since they shape the future but also don’t capture future developments until the next negotiation period is up, which can lead to incongruities.

The W’s current CBA was signed during a time of economic turmoil (2020) and this agreement had a number of improvements — salaries increased 100%, total cash compensation increased to $500k, and additional benefits included like basic hotel accommodations, women’s health care and maternity benefits — while also including risk mitigation strategies that kept the league afloat.

But, salaries stagnating is not a good look, particularly through the lens of 2024 with the growing support of the W and the arrival of Clark.

This will hopefully change in 2025, though.

Reasons for Hope

The W’s player union has the option to opt out of the current CBA in 2025 and renegotiate a number of these key deal points.

And, it’s in its strongest position ever.

The W has seen strong growth in attendance, revenue, viewership, and engagement in the post-COVID years, and that is before you factor in Clark’s arrival.

I said this last week, but we have never seen someone like her in the women’s game on or off the court. She has not played a game yet, and we’re already seeing her impact:

• Ticket prices for Indiana Fever games are up almost 200%, per the Athletic, and there is demand across the league for their away games

• Fanatics sold more Clark merchandise than any other draft pick in any sport, ever

• She is entering the cultural zeitgeist, continuing to snap up national advertisements and show up in mainstream news (including an SNL appearance last week)

This “perfect storm” also coincides with the next round of media rights negotiations, with the W projecting to grow from $60 million annually to at least $100 million.

All of this to say that we are likely to see a much different CBA this next time around, and we will hopefully start to see material progress towards larger salaries.

Do Your Part

This salary debate has been a double edged sword for the league:

1. On the negative side, it highlights the years of underinvestment, lack of media attention, and the imbalance in the revenue share the players earn

2. On the optimistic side, it brings hope that Clark — and other members of this highly touted, highly popular draft class — serve as change agents that enable the W to start making greater progress towards its financial goals

I understand and empathize with the anger and frustration felt by many with this situation — side #1 — and it’s going to take many years to see material progress towards salaries that would be deemed equitable.

Here’s the silver lining, though. You can directly contribute to making a material impact that leads to outcome in #2.

Here are three things you can do today to help grow the women’s game:

1. Watch: The WNBA has all of its games televised nationally each season across a host of networks and streaming services. Put it on your calendars, and set up viewing parties with your friends. Here is the season schedule.

2. Support: If you live in cities with a team, buy tickets to some of the home games. If you don’t have a club in your city, pick a favorite team and support via #’s 1 and 3. Follow ESPN W and Just Women’s Sports to help you choose.

3. Engage: Follow your favorite team and their players on social, buy some merchandise, and try to bring other friends/family into the fold.

There is a palpable energy around women’s basketball right now. Now is the time to lean in and help the sport capitalize on the momentum.

Be a part of the solution.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: Despite the massive popularity of Caitlin Clark, she is only set to make $76k salary in her rookie season. This has drawn a lot of outrage from fans and social media.

• Shot: In reality, this is all she can be paid. Rookie contracts are negotiated as a part of league’s collective bargaining agreements (CBAs) with the players’ unions.

• Shot: Many are pointing at the comps to what NBA rookies make — Victor Wenbanyama is making ~$12 million in his first year — but the reality is that the NBA is an exponentially larger entity than the W ($10 billion revenue in 2022-23 vs. $200 million, respectively). In addition, the W has an unfavorable revenue share structure (~10% of league revenue) compared to the NBA (~50%). This agreement may have made sense when it was negotiated during uncertain economic times in 2020, but it has not aged well given the growth of the W and the arrival of Clark.

  Shot: The players’ union can renegotiate its CBA in 2025, which coincides with the new media rights deal kicking in. Given the momentum and expected star power Clark (and other people from this draft class) bring to the table, the union will have significant leverage to make some progress on salaries.

• Chaser: There is a palpable energy around women’s basketball right now. Now is the time to lean in and help the sport capitalize on the momentum. Be a part of the solution by watching/attending games, buying merchandise, and engaging with the teams and players on social.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. The concept of a college football “Super League” has started to take shape.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Chris Vernon’s rap-themed Masters recaps never miss

2. A fitting send off to Verne Lundquist

3. Boban. Man of the people

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex