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

• 📰 This Week’s Topic: The WNBA has a paradox on its hands. It’s coming off of arguably its biggest year ever and there is a ton of momentum around the league. The issue: structural challenges in the cap table, weary investors waiting for the hockey stick growth to translate to real dollars, and a restless players’ union could mean a major labor dispute is on the horizon. We look at the vantage points of each group.

• 🍸️ 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”: Shohei’s 50th home run ball went for how much in an auction?

• 💪 Weekly Reminders that Sports are Awesome: An excellent ad celebrating a championship, and Steve Ballmer is one of us (sorta).

Hey team,

The WNBA had a historic 2024 season, smashing major attendance, viewership, and revenue goals while entering into the mainstream sports discussion for much of the season and ushering in its biggest, most marketable star ever — Caitlin Clark.

This success culminated in a WNBA Finals that came down to a winner-take-all Game 5 this past weekend that saw the New York Liberty claim their first title in franchise history by beating the Minnesota Lynx in overtime.

About as positive of an ending as you could have.

All is not smooth sailing, though, as the WNBA’s player association opted out of its collective bargaining agreement the very next day.

Originally signed in 2020 and set to run through 2027, this now means the league and the players’ union have essentially one year (October 31, 2025) to come to a new agreement or risk a work stoppage.

These types of opt-outs are relatively common, and while they can get contentious, both sides usually come to an agreement before the deadline because of how much money is at stake. Plus, it was expected that the players would do this given the massive growth the league has experienced while operating under 2020 guidelines.

The difference here, and potential cause for concern, is that the W finds itself in a more complex corporate environment: structural challenges in the cap table, weary investors waiting for the hockey stick growth to translate to real dollars, and a restless players’ union could mean a major labor dispute is on the horizon.

As Biggie used to say, “mo’ money, mo’ problems.”

In this week’s SBP, you’ll learn:

• Additional numbers showing the league’s growth

• How leagues’ CBAs work and why the W’s intricate cap table gives this labor negotiation new dimensions

• The vantage points of each group

The W’s Positive Momentum

To put the 2024 WNBA season in context, here are a few stats as the season has now wrapped up:

• Its most watched regular season in 24 years (ESPN viewership up 170% YoY; average viewership around 675k)

• Its highest attendance in 2022 years (4.71 million)

• Its most-viewed playoffs in 25 years, including a 2.15 million number for the winner-take-all Game 5

Plus, the league, in conjunction with the NBA, announced a new, 11-year media rights deal in July with Disney, Amazon Prime Video and NBC that is set to start with the 2026 season. It is valued at about $2.2 billion ($200 million per year), and future agreements with additional partners could bring the league's overall media deals closer to $3 billion — nearly 6x the current one.

This momentum, coupled with a general increase in interest in sports investment and three new expansion teams joining the league in the next two seasons, has driven team valuations up over the past few years, resulting in the average team now being worth just under $100 million.

On top of all of that, the league has its biggest, most marketable star ever — Caitlin Clark — now in its ranks, and it’s driving interest for all players.

Clark lived up to the hype in her first season, easily winning Rookie of the Year honors and making first team All-WNBA. Her marketing profile grew significantly too, racking up endorsements with Gatorade, State Farm, and the crown jewel — a $28 million deal with Nike. It’s likely to continue, too, as SportsPro named her the fourth most marketable athlete in the world.

This increased attention from Clark, along with the major marketing presence of fellow rookies Angel Reese and Cameron Brink who enjoyed the NIL years in college, has further elevated the already ascending profiles of some of the W’s other major stars — i.e., A’ja Wilson, Sabrina Ionescu, and Napheesa Collier.

Speaking of Collier, her and fellow superstar Breanna Stewart are launching Unrivaled, their new 3-on-3 league that will take place in Miami and play in the months before the WNBA season — critical when most players go abroad to play during the offseason and make extra (and often better) money.

The league has agreed on a multi-year TV rights deal with Warner Brothers Discovery — airing on TNT and TruTV — and it is seeking to change the current paradigm on compensation.

All 30 players selected will have equity in the league (vesting over a four-year period), and the league minimum salary will be more than $100,000, a record for women’s pro sports. 26 players have committed, and one of the remaining spots is being held for Clark, who some outlets are saying will receive a “Messi-like” offer to join.

Despite all of the good news, it’s important to note that the WNBA has lost money in every season, and it did lose significant money again in 2024 ($40 million). That being said, this year’s losses were expected given the investment in all teams flying charter, and it ended up coming in about $10 million less than expected due to increased revenues from attendance and corporate partnerships. With the increased media rights, there is the expectation the league will be able to reach profitability in the next few years.

Looking at all of these tailwinds, it’s understandable why the players are wanting to renegotiate.

League labor negotiation 101, and the W’s situation

We covered collective bargaining agreements (CBAs) and the W in depth back in April when there was a public outcry after people learned that then-new WNBA #1 overall pick Caitlin Clark was set to make only $76,000 salary in her first season, but here is a quick refresher.

All professional sports leagues have two sides in CBAs:

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.

They are often 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.

As an example, 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, and it makes sense given there are only two interested parties.

This is different in the W, which has other groups involved. The reported ownership stakes are:

• NBA: 42%

• WNBA: 42%

• Equity holders from a 2022 fundraise: 16%

The confusing part is that there are investors who fit into two, or sometimes even all three, buckets, meaning that who truly owns what is a bit of a black box. As an example, sources recently told the New York Post that the NBA owns nearly 75% of the W if you count all of the various stakes held by the league or its owners.

Regardless, this structure means that the W is splitting the revenue pie several ways before hitting the clubs and players’ bank accounts. Bloomberg has an in-depth piece on how they get to the calculation, but here’s the key takeaway: salaries as a total share of revenue in the W were just 9.3% in 2022, down from 11.1% in 2019. In practice, this means that under the current CBA, the max WNBA salary is $252k.

This third party dynamic also complicates labor negotiations because it means there are other vested interests wanting what’s theirs.

The WNBPA has already signaled that it wants to rework the formula for calculating players’ salaries and tie them to the league’s financial growth, and it would like to get rid of its “hard” salary cap in favor of a “soft cap” that allows for more creative contract structures. The question becomes if that is going to work for all of the groups sitting on the other sides of the table.

Vantage Points: WNBA Labor Negotiations

The WNBPA

You are WNBPA executive director Terri Carmichael Jackson.

Better facilities, family planning/child care, and pensions are major deal points for you, but far and away the biggest focus is on reshaping the revenue sharing and salary cap.

You are watching the league’s exponential growth but also seeing your constituents — the players — not receive any incremental upside due to the previously negotiated CBA.

This is 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 while this agreement included 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 — it feels drastically low compared to where the league is now nearly five years later.

Some of your players have gotten a bit out over their skis on what they think their salaries should be under this new CBA, but the expectation is that you will be able to make some transformative changes.

Given the amount leverage you have due to the tailwinds mentioned earlier, the increased interest/spotlight on the league and its perceived pay inequities, and that one of your comparable leagues — the NWSL — just agreed to a new CBA with massive changes, it makes complete sense why you’d opt out and try to get a new deal.

The League

You are WNBA commissioner Cathy Engelbert.

You are trying to thread the needle between managing the league’s growth initiatives, keeping the peace with an outspoken players’ union, and beginning to provide some financial benefit to all of the various entities that have pumped hundreds of millions of dollars into the league since its formation nearly 30 years ago.

As the 2020 CBA showed, you are willing to work with the players on their key initiatives while developing mitigation strategies to keep the league not only afloat but moving forward. But, this is likely to be your toughest negotiation yet given the increased revenues and number of groups that want their cut of the pie.

You are likely thinking of a way you can try to clean up the W’s cap table, but you may be a victim of your own success because these investors see the growth too and want to ride the wave a bit longer.

Plus, the NBA is likely not interested in divesting, and you are most likely not fully ready to leave the NBA’s nest yet.

This leaves you in a bit of a pickle, and you are the one with the least amount of leverage. Your best bet is likely reaching an agreement with these investment groups on restructuring their deals or buying them out over time with the increase revenues from the media deals and some give from the WNBPA.

The NBA

You are NBA commissioner Adam Silver.

You are in a golden age, with a fat new, $76 billion media deal essentially complete and labor peace through the end of the decade.

This gives you time to think about growth initiatives — i.e., expansion teams, expansion to other parts of the world (NBA Africa), and likely the WNBA.

The W has been a significant investment over the years, and your favorite owner Jim Dolan has continued to raise hell about why you’re still messing with a business that loses this much money. Plus, some critics in WNBA circles think you are holding the league back from further growth by bundling it into broader negotiations on media rights and other revenue streams.

While some of these critiques are credible, you encourage him and other naysayers to think bigger.

Given the success of the NBA, you can afford to think ahead in 5 to 10-year increments on larger initiatives, and you see the upward trajectory of the W and what it represents for the game of basketball holistically.

This is a worthwhile investment, and you believe it’s in both leagues’ best interest for you to stay involved for much longer.

The Other Investors

You are one of the investors from the 2022 $75 million fundraise.

Your group should not be looked at as a monolith given some are truly outside investors — i.e., Laurene Powell Jobs, Michael Dell, and Condoleezza Rice — while others — i.e., Washington Mystics owner Ted Leonsis — are existing WNBA and NBA owners who chose to put additional money in.

You offered the W a capital infusion at a critical juncture, and the league (and you) are now reaping the benefits that came from this investment.

The question for you now is how long you want to stay in. There are likely some stipulations in the investment terms for this, but the true answer may also be what your motivations are.

It is better for the overall health of the league and the players for your portions to be bought out so that the cap table begins to get cleaned up. If that’s where your interest lies, begin negotiations now for phasing out once the new TV money kicks in and enjoy a nice profit.

If you’re looking for an outsized return, you are likely incentivized to stay in and catch the hockey stick growth that seems to be coming. What’s interesting is that your position could also (temporarily) kill the golden goose and cause a work stoppage.

Game on!

🍸️ 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: The WNBA is coming off of a landmark 2024 season, with viewership, attendance, and revenues all up and to the right. Plus, team valuations are soaring, there is heightened investment interest, and the league’s biggest star — Caitlin Clark — had an incredible rookie year.

• Shot: The challenge: there is a potential labor dispute on the horizon, as the players’ union opted out of its current collective bargaining agreement (CBA) the day after the WNBA Finals finished. These CBAs are usually rooted in revenue sharing and how the salary cap is constructed. The WNBPA wants to make significant changes to both.

• Shot: Most labor negotiations occur between the league and the players’ union, but the W has the additional wrinkle of the NBA and a group of outside investors also owning large stakes. This complicates things because you’re having to accommodate multiple incentives and interests now.

• Chaser:

  • The WNBPA’s vantage point: You have all of the leverage in the world right now. Opting out brings the league back to the table and could lead them to make some significant concessions on revenue sharing and salary cap calculation.

  • The WNBA’s vantage point: You are the one with the least leverage. You have to appease the players and not have the situation devolve into a lockout, but you also have these other investors you answer to that want to see returns on their money. Rock and a hard place.

  • The NBA’s vantage point: You have cleared most of your major initiatives through the end of the decade, so your focus is on long-term growth initiatives. The W is likely one of those, so you will try to continue to do what’s best for the league because it’s good for the overall health of the game, even if it means catching flak from angry NBA owners who believe you’ve spent too much money on the league and WNBA proponents who think the league should stand alone.

  • The other investors’ vantage point: Your motivations here likely depend on if you’re a true outside investor or if you’re an existing owner who took the chance to double down. If you’re motivated by seeing the league succeed, it’s likely time for you to step back so the cap table gets cleaned up and more money can get distributed to the players. If you’re looking for outsized returns, you’re likely holding on for the hockey stick growth.

🤯 “Whoa” of the Week

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

1. Shohei Ohtani’s 50th home run ball sold for an eye-watering number

💪 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. Speaking of the W, this ad celebrating the Liberty’s championship is so well done.

2. Steve Ballmer is truly one of a kind.

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