With Lockout Looming, Learn Up On The Issues

Darius Soriano —  June 27, 2011

Make no mistake, a lockout is coming. How long it lasts or if it will impact the start of next season is anyones guess, but unless there’s some sort of miracle breakthrough in negotiations before this Friday the current collective bargaining agreement will expire and the owners will do what is within their rights to do by locking out the players.

The issues at hand are plenty and I will not get into them all right now. But the major point that the owners feel needs to be addressed is the fact that many of them claim to be losing money on a yearly basis. And by losing money, they are not able to compete in the league or be a viable business. In order to rectify this issue, they’re looking to change the business model of the league through a new agreement with the players. Their notion is that the current system is broken and needs fixing. The players, obviously, don’t share this opinion and would like the current system to remain as close to intact as possible while still acknowledging that some change is needed.

Hence, the disagreement, and thus the lockout on the horizon. Until both sides can come to an agreement as to what a new system should look like, there will be no basketball, but rather negotiations to find a middle ground that both sides can walk away from feeling okay with.

But what should the new agreement look like? People with a better understanding of the issues than I have a lot of good ideas. One of them is Tim Donahue of the Indiana Pacers site 8 Points, 9 Seconds. He’s been covering the negotations between the owners and players as well as anyone out there and has made his own proposal, based off what he thinks will work for the NBA moving forward. It’s a must read and as a fan of this game, you should head over and learn something.

He touches on all the major issues, including a hard cap, how basketball related income (BRI) should be divided, contract length, and even delves into revenue sharing (which is currently not a part of the CBA negotiations). A key passage:

The hard cap level will be established by taking the Players’ projected share of BRI, reducing it by $100 million to account for benefits, and dividing it by 30.  For example, a BRI of $4.0 billion would generate a hard cap amount of $64.7 million.  At $5 billion, the cap would be $87 million.    (Note:  a hard cap established by the Players BRI split virtually guarantees that the negotiated salaries and benefits will not meet the Players’ guarantee.  This hole will be filled by the owners, but the mechanics need to be sorted out.  I have an idea, but I can’t decide whether it’s brilliant or insane, so we’ll leave that sit for today.)

After going into a lot more detail (again, go read the post), Donahue also states:

This arrangement will reduce the long-term commitments of the owners, but it will not leave the players entirely “disposable.”  Front offices will still need to plan years into the future, but they should be able to avoid being trapped for three, four, or five years at a time. The owners’ have been (not inaccurately) accused of trying to “guarantee” profits for at both the league and team level.  However, it should be noted that the Players’ insistence on holding onto their guaranteed contracts and over half of the BRI amounts more or less to the same thing. As I said earlier, the Players should maximize their BRI, while the owners should seek to maximize their control.

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As I briefly mentioned above, the other key to a viable business model for the league is revenue sharing amongst the owners. Over at Pro Basketball Talk, Kurt has an informative post up about this issue:

In the NFL — the gold standard for revenue sharing among professional sports — about 70 percent of what is considered football related income is shared (which is an issue because that used to be more than 80 percent just a few years back). In the NBA, that number is about 25 percent. That NFL number is driven largely by the massive national television contracts the league has.

Or look at it this way, The Lakers new local television contract that kicks in next seasons and will pay them upwards of $150 million a season, which is more than some teams will make in total revenue in a season. Yet, under the current system the Lakers have to share none of that money. It’s an issue the owners need to deal with. Big market owners have valid concerns that if they share more money that needs to be invested back into the business and not just pocketed by owners.

How this all turns out remains to be seen but understand that until this gets sorted out, there won’t be any basketball. No team will be able to sign free agents. Trades will not happen. The preparations by all teams for next season will be put on hold.  And as someone who suffered through the 1999 season that saw the cancellation of the all-star game in a 50 game campaign and a dip in the overall popularity of the league, I’m hoping against hope that a solution can be found. But the fact is that major issues remain and the two sides don’t seem to be very close on coming to an agreement.


Darius Soriano

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