2011: The Death of Sports — NBA Edition
So…what’s your favorite sport?
Cause you only have a year and a half left to enjoy it.
In case you didn’t get the memo, American sports are ending in 2011 (the Mayan Calendar was a year off, who knew?). Collective bargaining agreements, revenue sharing, and anti-trust law are just a few of the issues separating your favorite sport’s owners and players. Is the gap so wide that we’ll see a work stoppage in 2011? Let’s examine.
National Basketball Association.
Parties? NBA team owners, NBA players association, Commissioner David Stern
Collective Bargaining Agreement Expiration Date? July 1, 2011 (owners have option to extend additional year…not likely.)
What’s the Problem?
Money. But of course, its deeper than that. Currently, the CBA has the players receiving 57% of the league’s basketball related income. Due to the NBA’s overall economic health (remember the bailout?), the owners are more than likely hoping to lower the players’ percentage to around the 50% level. Not surprisingly, the players don’t seem too willing to part with 7% of league related income, so we’re likely to see some heated debate on that point.
Making matters more contentious is the fact that the owners are looking to do away with the current “soft cap” and to limit player contracts to a four year maximum. On its face, that may not seem too detrimental from the players standpoint, but in reality, that very much is the case. The move from a soft cap to hard cap does away with the Bird rules (rules that allowed teams to go over the cap to retain their own players who have become free agents), meaning an increased probability that a high priced player would either be forced to leave a team due to free agency or take a pay cut. For those players that don’t want to test the free agent market, their choices are obviously limited. And of course, the shorter contracts also save the owners money, to the players detriment. Paying the last year of a four year deal is obviously a lot cheaper than the last year of a seven year deal.
In short, it looks like we’re headed into a pretty sticky situation. Especially when the owner’s proposed deal came 18 months in advance, and would all but do away of the idea of a maximum payout guarantee,
The proposal, a source familiar with talks said, includes rollbacks that could reduce maximum guaranteed salaries, both for veterans such as Kobe Bryant and LeBron James, as well as up-and-comers like Kevin Durant and Derrick Rose, to almost a third of what they would have been eligible for under the current agreement.
Presenting a new proposal nearly 18 months in advance of the current deal’s anticipated expiration is unprecedented, several sources said. Doing so right before All-Star Weekend also seems odd, particularly since Dallas Mavericks owner Mark Cuban, the weekend’s host owner, has crowed about the event drawing a record 100,000 fans and a surrounding spectacle dwarfing that of the NFL’s Super Bowl XLIV.
“It’s the most dire economic time, so they want to take advantage of that and scare the players now,” the agent said. “It is a negotiation. This is what you do.”
The total value for a veteran maximum deal would be well under $60 million and for players currently on rookie salary-scale deals well under $50 million, the source familiar with the proposal said. Fully guaranteed maximum deals also could be a thing of the past, with the proposal allowing for less than half of any contract to be guaranteed. (via ESPN)
To make matters worse? According to that ESPN article, the owners are looking to make all of those proposed retroactive…I don’t see the players taking too kindly to that.
What’s the issue too many people are going to ignore?
A majority of the writings I’ve seen on the NBA lockout issue have dealt with the issues mentioned above; lower revenues for the players, shorter contracts, salary caps. That’s all well and good, and are certainly going to be talking points going forward…but there is another issue that needs to and will be addressed. The issue? Revenue Sharing.
Last year, the Orlando Magic made the NBA finals…and the team finished with a $2.2 million dollar loss (They received a $5 million dollar boost from their playoff run). The Los Angeles Clippers, on the other hand, won 19 games during the season and finished with a $10 million dollar profit.
SMALL MARKET NBA TEAMS CANT SURVIVE WITHOUT EFFECTIVE REVENUE SHARING.
Yes, I know that the Magic are expecting a new arena soon, and that new arena will placate the team for awhile, but what happens six or seven years from now when the new stadium novelty has worn off? The large teams won’t make as much revenue without the numerous smaller market teams, and the smaller market teams can’t survive without proper revenue sharing. Without sharing, every time there is a “situation”, the small market team is essentially precluded from making any money. Lose a big time fan draw because you can’t afford to pay them? Having a string of losing seasons? Economic downturn? These sort of problems almost all but guarantee the small market team won’t make money. If teams start stringing together a few years of operating in the red, the consequences may be much more dire than a bailout.
Quiet as its kept, the lack of effective revenue sharing also serves a secondary purpose; it keeps non-maximum contracts down. If a small market team can’t openly compete for a veteran player, the large market team can get away with offering less than they necessarily would have through competitive bidding. In essence, the rich are allowed to get richer through saving money, and the small market teams and players lose out. Revenue Sharing…just something to think about.
So, what happens in 2011?
The owners need money; especially small market teams. The players have some money but more than likely won’t be willing to give up 7% of the league’s basketball related income. The players also won’t be excited about smaller contracts or a hard salary cap. And of course, lost in everything is the idea of an effective revenue sharing plan amongst the small and large market teams.
Its not the most optimistic of situations.
P.S. For those wondering, “Why didn’t the NBA have something in place to handle situations such as these?” they did. It’s called the Luxury Tax and Escrow System and they aren’t going to bring in anywhere near enough money to fix the NBA’s small market money problems.
Conclusion?
No one should be surprised the owners made an unfair first proposal; its a first proposal. It probably is a little surprising that they made the proposal so early, because it almost implies that both sides are so far apart that they’re going to need the next 18 months to come to an agreement. Not good. The players, of course, are probably happy with the deal as is. I’m not sure that that works, seeing as how half the teams operated in the red last year. What do we know for sure? we will see some heated discussions in the future.
…and hopefully not a premature end of basketball in 2011.
Category: Basketball
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Interesting stuff. I’m still not sold on David Stern and company allowing a lockout or a strike to happen. Stern is very very image conscious and will probably be in his last year or two during this labor negotiation.
In this down economy the small markets have been killed (Orlando, while small market, makes a killing because they have the Orlando and Tampa TV markets to themselves, both top 20). But teams like Milwaukee and New Orleans are absolutely walking the tightrope to make money as evidenced by Milwaukee’s want for a new arena.
Should be a wild next 18 months or so.