Jul 16, 2010

When we last left the drama that is the NBA, I was a little worried that we might be headed towards a lockout.  Players were receiving 57% of all basketball related income (BRI), much to the chagrin of the owners, owners were looking to eliminate the soft cap, limit contract length and salary, and eliminate the bird rules.

Did I forget to mention that the owners wanted to make all of those changes retroactive?

Here we are now, well into the NBA’s free agency period and summer league games, and I’d like to say that things are looking up, but we’ve heard very little on the labor negotiation front, other than David Stern’s mention that the NBA lost approximately $370M last season.  A statement that NBAPA head Billy Hunter vehemently disagrees with,

Union director Billy Hunter made that statement in a telephone interview with ESPN.com, saying the commissioner’s assertion of the severity of the owners’ financial woes “just doesn’t hold water.”

“I’m preparing for a lockout right now and I haven’t seen anything to change that notion. Hopefully I’ll see something over the next several months,” Hunter said. “As of this moment, it’s full speed ahead for me in preparing the players for a worst-case scenario.”

Hunter, who also spoke Wednesday to several other news organizations, said the players do not believe the owners’ claim that they lost a combined $370 million last season — a statement Stern reiterated in public comments Monday following an owners meeting in Las Vegas.

“There might not be any losses at all. It depends on what accounting procedure is used,” Hunter said. “If you decide you don’t count interest and depreciation, you already lop off 250 of the 370 million dollars, and everything else was predicated upon what they were projecting, which was a decline in attendance that didn’t happen. Attendance was the second-highest ever.” (via ESPN)

Its not exactly the most optimistic of outlooks when two sides are at least $370 million dollars apart.

The owners of course, are arguing that the system is inherently flawed, in part because the system is revenue based.  The BRI, of which the players receive 57%, is based on things like team gate receipts and concession sales; owners costs aren’t really ever considered.  That sentiment is echoed by NBA deputy commissioner Adam Silver,

“Part of the problem with the existing system is it’s based largely on revenue, not net revenue,” Silver said Monday. “Although our actual revenue numbers were better than what we projected, it came at a large cost. Our teams did a spectacular job in a down economy of increasing ticket sales, but that came at the cost of additional promotions, additional marketing, additional staff.”

The owners’ argument seems to have some validity on its face.  It was only a year ago when half of the teams needed to be bailed-out due to not being profitable, they’ve opened themselves up to new streams of revenue (via the courtside liquor ad), and as Silver mentioned, they increased spending on things like marketing and promotions in order to get fans in the seats.  All signs that costs were increasing, or at least that they’ve expected costs to increase…and why wouldn’t they? It was a recession.

Of course, what we’ve actually seen recently is an increase in the 2010-2011 salary cap (it was expected to decrease), great ratings for the finals, and the highest BRI in the history of the NBA.  So now, the question that begs to be asked is “How much of the owners’ decisions were a result of actual losses versus an attempt to mitigate expected losses (and have things turn out better than expected)?”

With the Union and the League on opposite sides of the spectrum, this is one of many questions that will have to be examined, and answered, before we’ll see basketball played in the 2011-2012 season.

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