Having Your Cake And Eating It Too

Darius Soriano —  October 21, 2011

This seems to be the owners position in these CBA talks.

Thursday night, after the third consecutive day of bargaining talks under the watchful eye of Federal mediator George Cohen, the sessions ended without a deal in place to bring the NBA back. The rhetoric was strong from both sides as the owners (represented by Adam Silver and Spurs owner Peter Holt) and the players (repped by Hunter and Fisher) both claimed the moral high ground in the talks while simultaneously slinging mud at the other side. It was a sight to see as the post meeting pressers played on a loop on my TV screen last night.

Accusations were slung forcefully but with calm voices. Both sides made claims about what the other side said all while framing their own position as the one worthy of our support. Both sides mentioned the fans but neither side (especially the owners – as I’ll get to in a second) made a move in good faith that could actually reward the paying patrons with the thing they desire most: games to watch in the coming month with an agreement to bring back the league.

Beyond the rhetoric though, the main take away was that the owners are not willing to budge off wanting a much more favorable split on the BRI and a new “system” in which the league operates. Adam Silver firmly expressed the belief that the owners are unwilling to move off these demands and essentially calls them a necessity to have in place before the NBA resumes. He explained and supproted this position by stating it is the only way to ensure that owners have the opportunity to make a profit (the BRI split) and have a more competitive league where every team has the opportunity to compete (the more favorable system).

Silver further expressed that the players were willing to “trade” on the issues where they’d concede percentage points on the BRI in further givebacks to the owners but would want to discuss a more favorable system in place to account for that concession. That the players wanted to see if they could come to an agreement on some of the major system issues first, getting some of the things that they want in a system that would make give backs on the BRI more palatable.

This proposal was rebuffed, however.

As Billy Hunter and Derek Fisher stated in their press conference and the great Ken Berger of CBS later reported, the owners drew a line in the sand. They want 50% of the BRI (the equivalent of approximately $280 million dollars in “give backs” in the first year with that dollar amount only growing as revenue grows – as it is expected to do) and they want the players to agree to that upfront before any further system issues are tackled. And then when it’s time to tackle those issues, they’re going to want the types of structural changes that they’ve been pursuing all along.

(As an aside, Silver and Holt also argued that the BRI split and the system changes they want aren’t connected at all. They say that one speaks to profitability and the other speaks to competitive balance. I don’t see this argument at all. The owners want a more restictive system that limits spending. They want a hard-ish salary cap – either through a punitive luxury tax or a straight forward NFL style cap. But any system that limits spending or caps it at a certain level then creates the ceiling in which expenses are maxed out. That ceiling then becomes the line that revenue needs to exceed in order to become profit. So, how can the owners say that the two aren’t linked when both are connected to profitability for the owners? Try as they might to frame the hard cap as a way to achieve competitive balance, I instead see another money grab by the owners. Why it’s not being framed this way is beyond me.)

So, here we are. The owners want their cake and they want to eat it to. They don’t want a compromise. They want a win on every issue that’s being discussed. Not only that, they want a blowout win. The type where the home team fans leave early because the rout is so large. Well, guess what gentleman, the fans are leaving early. They’re disgusted with how these negotations are playing out.

Darius Soriano

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62 responses to Having Your Cake And Eating It Too

  1. “Not only that, they want a blowout win. The type where the home team fans leave early because the rout is so large. Well, guess what gentleman, the fans are leaving early. They’re disgusted with how these negotations are playing out.”

    100% spot on. Excellent as always, Darius.

  2. Owners are greedy pricks.

    For anyone inclined to blame the players and call them overpaid, think about how you would feel if your boss called you into his office and told you:

    “We just had one of our most successful years ever: Revenues were at a record high, we’re more popular than ever, and we can be almost certain our revenue is going to grow quite nicely in the next few years through some renegotiations on our current contracts with our partners. Now we’re going to need you to take a 12% pay cut. Why? Because we fast-talked some new investors into buying into the company for obscene amounts of money, and now they’re demanding better and guaranteed returns on their cash. Oh, and we’re also going to be completely revamping our entire compensation structure to make it much more difficult for you to secure compensation and job security with our company in the future. Take it or go (bleep) yourself.”

    I hope that you would have the will and self respect to stand up for yourselves in that situation, and I hope the players do as well. I was hoping for a speedy resolution so I could watch some Laker games, but now I just hope the players fight to the bitter end and something happens to force the owners to negotiate in good faith. I really doubt that happens, and I fully expect the players to cave at some point, but it will just piss me off and I know I won’t bother to tune into games not involving the Lakers like I have in the past. Even Laker games will lose some shine for me if the NBA becomes yet another example of labor getting screwed by ownership in the US.

  3. This blows.

    All this chatter over the lockout bums me.

    Owners need to make a profit. Even if the margin is low.
    Players need to be compensated for what revenue they bring to the table.

    I’m on the players side, by the way, but negotiations are tough, especially when insane amounts of money are involved.
    And I don’t see the owners as greedy twats, they are mostly intelligent businessmen that understand that they should put some dumbass offers on the table to get what they intended in the first place.

    To me, ultimately, its about more players speaking up and joining the cause. Lockout? Alright bitches, we’re going on a strike. How do you like them apples?

  4. Darius–

    Great work, as always. This blog is quite a refuge in these difficult NBA times.

    At the end of the penultimate paragraph, you write: ‘Why it’s not being framed this way is beyond me.’ You then answer the question perfectly two lines later with the very title of your post.

    It’s all PR– the owners are trying to get the following ideas out there as soundbites:

    1. we are struggling to make money. don’t you know the price of fueling a G5 these days?

    2. to those ends, it is only fair that we get a bigger share of BRI; after all, don’t we have a right to make a profit? Please forget that the league is growing rapidly and certainly will become increasingly profitable over the next couple of years no matter what we work out in terms of a new CBA.

    3. but we are not merely greedy guys– we also have a love of the game, so we are using this opportunity to make the game better, selfless people that we are. Hence our concern for balance– after all, no one really wants to see a Miami-LA finals when they could see Charlotte-Sacramento or Milwaukee-Minnesota.

    4. the players are overpaid and this is unsustainable. how in the world this could have happened is beyond us.

    in fact, the truth is more like:

    1. we are almost certainly all making tons of money and can only possibly make a contrary argument if we do manipulative things such as include depreciation and amount paid for a franchise over book value into our accounting practices. How one could accept depreciation of an asset such as a basketball team or stadium land in the same way as one would a computer or a car, well, let’s not talk about that. Let’s just assume teams ‘fall apart’ the way electronics and machines do and leave it at that.

    2. we want to make a bigger profit

    3. and a bigger one still, by grabbing with both hands

    4. either we gave Joe Johnson and Michael Redd and Gilbert Arenas and Rashard Lewis, etc etc etc max or near max contracts in a fit of madness, or else our accountants – presumably top guys as they work for billionaires! – have assured us: even if these guys are 2nd tier players, they still will bring in more revenue than even max deals in terms of jersey sales, TV revenue, concessions, luxury box sales, etc. This isn’t to say there aren’t occasional huge busts, but the very fact that so many non-top 10 players are often given max deals is either (1) collective hysteria by otherwise successful businessmen or (2) the result of sober business advice in which a player’s talent may not be the best determinant of contract value but rather some complicated matrix of marketability/face of the franchise. But, either way, it’s the owners’ responsibility, right?

    Rant over. Pain remains.

    A quick question about the CBA: does it preclude the players’ right to strike? If not, what if the players had chosen to go on strike in March 2011 before the playoffs began– I assume this was not an option, but that would be the only way I can see them having leverage that is even remotely on par with that of the owners.

    Still, even though the players have the strong moral ground here, they will certainly fold. It might as well happen sooner rather than later so we can watch some damn games.

  5. I think if the players would be willing to participate in the risks of financing a basketball operation as well as the revenue, then the negotiations would be over very soon.

    As it is, they want a guaranteed revenue of several million dollars a year for each player, no matter what happens to the league financially.

    In these conditions, I would be as tough as the owners.

    This is why I really don’t see how this ends well for the players, unless they establish a league of their own. But I doubt such a league would get them million dollar salaries …

    P.S. I am assuming that the losses claimed by most franchises are real – I don’t see why people assume otherwise. Would the owners do all this if they were really making so much money? The business model has been broken for some time, and that is no secret.

  6. again, professional teams are NOT a business, they’re a CLUB.
    the club is for rich men to have bragging rights.

    if this was about business, we’d already have an agreement. since it’s a club, the fact that the attempt to break the union is costing more money than it will make doesn’t matter. if the owners only cared about making money, they’d be running their businesses.

  7. will one side winning over the other mean that ticket prices will go down? will jerseys be cheaper? no? then i couldn’t care less who wins. i’m a huge fan of the nba, but my life will go on with or without nba games.

    if we (the fans) really wanna have a good time, then i say we lock out the nba after they’re done and not attend any games or buy any fan gear until they cut prices by 50%. i think we can hold out longer than both the owners and the players. EASILY. now that’d be dope.

  8. This all makes me sad, let’s go back to talking about Kobe’s brilliance over the years. That piece made my eyes water, and not in a bad way.

  9. @5

    Even if the losses are legit it is the owners who got the CBA they wanted last time around. And it is the owners who sign off on ridiculous contracts to players who don’t deserve them (Joe Johnson gives his thanks). In short, the owners created the system. Then they abused the system. And now they are telling everyone they need to create a totally new system (and take a pound of flesh from the players in the process) in order for the league to flourish. But there is one problem. If they got everything they wanted last time around, and still screwed it up why should anyone trust them now?

    And all of this is in the midst of the league selling teams at record prices. I mean are the Warriors really worth $450 million when the Lakers (one of the most recognizable sports teams in the world) are valued at $600 million? When I see these kinds of things it is really hard to trust the owners’ narrative.

  10. T Rogers,
    “And it is the owners who sign off on ridiculous contracts to players who don’t deserve them ”

    The union talks about how the owners are to blame for losing money, because they make poor business decisions, but they don’t really want the owners to stop making those poor decisions. That’s where most of the players get most of their money.

  11. ^why should the players care about protecting the owners from themselves?

  12. 9 – “I mean are the Warriors really worth $450 million when the Lakers (one of the most recognizable sports teams in the world) are valued at $600 million?”

    Eye popping numbers, for sure. Also, hard to imagine the Lakers are only valued 33% more than the Warriors. Leaving aside the winning record, name recognition, management and history of the Lakers, going to Staples is night and day superior to visiting that dump the W’s call home.

  13. A large portion of the losses are from interest payments for the financed debts some of the newer owners incurred from purchasing their teams. Players don’t get any of the massive profit owners seem to get from the sale of even the most mediocre teams, why should they be responsible for the cOst of buying a team?

  14. 9 – no one seems to accept that basketball teams are an INVESTMENT. Despite all the boo-hooing of the owners, they generally are very good investments over the long haul. It’s not whether the Warriors are worth 450m today, it’s whether or not that will prove to be a good buy over time, factoring in adding value through better ownership, appreciation, the league’s increasing revenue, etc. Rest assured that when Mssrs Ellison and Guber sell that team, whether that’s in 5 years or 20, 450m is going to look like a steal. But that is part of what is so repugnant about the owner’s position– they are claiming the difference between that 450m and the team’s hard assets as actual expenses they can weigh against revenue and say they are running the team at a loss. Pure sophistry.

  15. Ex,

    The Union doesn’t control what decisions owners make with respect to player personnel. Would players *want* owners to over pay them? Of course. You think Shannon Brown or Luke Walton would turn down a 5 year/$120 million dollar deal if Dr. Buss called and offered it to them? But that’s the thing. Buss would have to offer it first. The owners are the chief manipulators of a system THEY designed and THEY now say is broken. They want to change it at a billion dollars and counting (over the life of the deal) cost to the players. All of this after the league had its most profitable season to date and is enjoying record popularity. I still fail to see how anyone can lay this situation mostly at the players’ feet.

  16. @11

    According to Forbes most recent valuations the Lakers are at $643 million. Take that number for what its worth. Maybe if Buss actually put the team up for sale it would net more than that. But that is really all we have to go off of at this point. It’s Forbes’ estimated value of the Lakers and the Warriors recent sale price.

  17. 11, 15) The point is that the players are being disingenuous when they say that the owners just need to make better business decisions. Because if they did, it would be horrible for the players. Better business decisions would mean contraction, with at least several teams going away completely, higher salaries for the superstars and for a few rookies, and much less for the middle-of-the-road and end-of-the-bench players, who make up the majority of the union.

  18. #17. Ex, I think it’s more accurate to say that the players simply want a system that allows the owners to make the types of decisions where their potential to earn is maintained. After that, let the chips fall. The players have agents that negotiate contracts just as the owners have executives that do the same. Whoever comes out of the negotiation with the upper hand is fair business.

    Meanwhile, the owners want to create a system that has ramifications on a players ability to earn and I think that’s what the players have issue with. It’s not so much disingenuous for the players to say “the owners need to make better decisions” because the alternative would be “the system is now set up where the decisions are made for them”. That’s an entirely different world than the current one and the players want to avoid it if at all possible.

  19. “the system is now set up where the decisions are made for them”

    Ultimately, a system that has limits to protect the owners from being complete idiots is best for the league and for the players. Otherwise you would end up with teams going bankrupt, teams moving more often, teams having exceptionally low payrolls.

  20. #19. Actually, no. The argument then shifts back to whether or not ownership deserves such protections built into the agreement that governs the league.

    Said another way: All owners are vetted thoroughly before they’re allowed to purchase a team. The league *must approve each sale*. If the league is letting dummies with no self control (for lack of a better term) buy teams or owners put those type of people in charge of their franchises, do they *deserve* the protection such an agreement affords them?

    What’s best for the league *are* well run franchises. But getting well run franchises should be the result of smart people, should it not? If the league feels the need to protect itself from the decision making instincts of its owners, I’d argue they’re worse off than just suffering economic losses.

    Or, to say it all much shorter, you say “Ultimately, a system that has limits to protect the owners from being complete idiots is best for the league and for the players.” To which I respond, no. It’s better to have capable people running these franchises that don’t need the protection.

  21. We hear a lot about teams losing money because of bad personnel decisions, and that’s certainly going to be more or less accurate on a team by team basis, but league wide as Suga_Shane on twitter has pointed out, there’s no uncertainty about the amount players make.

    Right now they make 57% of income. If income is lower than expected they make less, more they make more. So on a league wide basis, Rashard Lewis’s contract didn’t bump that figure to 58%. Maybe it specifically hurts the Magic’s finances but all the rhetoric is about league wide numbers.

    SO: If the League as a whole is losing money it’s because their NON-PLAYER expenses are exceeding the 43% that they get. What I have never seen (potentially because I’m misunderstanding this whole thing) is an explanation as to which costs are exceeding the expectations of owners. What is more expensive now than it was when they agreed to the last 2 CBAs (Particularly the last one where they missed no time)?

    From what I understand income has risen since then, so it’s not from a shrinking revenue pool, it’d be that costs are rising faster than predicted? Is it the costs of their arenas? They aren’t recouping the costs on their $10 beers?

    If I understand Shane’s analysis on this, what’s the answer? If I’m misunderstanding it, how?

  22. 19, but they wouldn’t end up bankrupt or moving if they didn’t make bad business decisions.

    If it’s an issue with one team outspending another, then that comes down to revenue sharing, not BRI split between the league and the players. The owner’s wanting a lower BRI is purely due to greed and wanting a guaranteed profit, which is ludicrous in any economic system, let alone capitalism.

    21, I believe it’s due to lower gate receipts, so a lot of people are paying to go to games, but not actually going, which causes greater “losses” from lack of concession/parking/merchandise sales etc.

  23. #21. J.D.,
    What you didn’t mention is that the owners already remove $300 million (I believe that’s the figure) off the top of the BRI before the revenue split for certain team expenses. Essentially, the owners are already receiving money to cover some expenses. Basically, this is another “fixed” allocation of funds that they’ll have each season that they should be appropriately allocating to cover costs.

    This only speaks further to mismanagement. If player costs are fixed and the owners get a fixed amount to cover expenses, their balance sheets should be pretty easy to forecast each year. In my day job I’m tasked at looking at PNL statements and analyzing budgets and you can bet these franchises are too. How can they still be losing as much money as they are? The answer is that they’re spending more money on individual player contracts than they should be.

    This is why they want a more favorable split to the BRI AND a fixed salary cap (as I mentioned in the post). They want to restrict every team’s ability to spend while bringing a greater share of the revenue to fix their balance sheets. Instead, it could be argued, they should be looking in the mirror and not handing out contracts that they can’t honor without going into the red. In other words, quit spending so damn much and find a revenue sharing plan that works better for the league. Maybe one that includes more local revenue streams like local tv contracts that aren’t included in the BRI split.

  24. I think this is really and truly a matter of the owners squeezing the players because they think they can. And you know what? I think they are correct in that assessment, even if it takes a lost season to accomplish (see: NHL lost season).

    Check out the first line of comment #2: it’s a pretty good summary.

  25. If Zephid’s point is correct – that a major problem is that many people are now buying tickets but not going to the games (I must say I’ve never heard this argument before, but find it intriguing), this is a direct result of season ticket holder marketing being directed at corporations rather than individuals. Among other evils, this also results in annoying complaints about big city markets like LA– that the fans in the best seats are not ‘true fans’ and are just ogling celebrities or whatever. It is certainly not true in the playoffs, but on a Tuesday night in March, the passion and knowledge of the fan is indeed inversely proportional to proximity to the court (I say this as a mid-level season ticket holder.) More reason to hate the owners– they sell their best seats to banks and law firms (which they are of course entitled to do), then get pissed when no one from the secretarial pool decides to brave the 101 to watch Lakers-Kings on a rainy Monday night.

  26. Here’s numbers on BRI since 2006: http://members.cox.net/lmcoon/salarycap.htm#Q17

    Every year they’ve gone up. Player portion always = 57%, owner portion always = 43% (plus whatever’s taken from the top. $300M is what owner are proposing now I think, but it doesn’t really matter to this discussion). Therefore, the money owners have had to pay for all expenses has INCREASED every year since 2006.

    Individual player salaries don’t subtract from that pool because they are always part of the 57%. Therefore in order to be losing more money now than they were in 2006, non-player expenses must have increased faster than income. But I have no clue at all what those are.

    I can see caveats to that, but to keep this simple, let me just ask if that understanding is wrong.

  27. Okay, that ink has the numbers.

    2010: Total BRI: $3.643 billion
    Guaranteed Player amount (57%): $2.077 billion
    Actual Salary Promised: $2.247 billion (~150 million over 57%, or $3 million per team on average)

    That overage is taxed after a certain threshhold. $111,075,358 in taxes are collected and $3,702,512 is redistributed to either every team or every team with an income under a certain amount.

    In addition there’s $5 million per team taken in escrow from the total players’ salaries (~170 M total). I don’t understand how the Escrow is distributed or collected as much.

    So taken altogether, Salaries exceed 57% by $150 Million, of which $111-280 Million is returned. So the most the league should be losing is ~$40 million per year over the 57%, and could be making ~$120 million over the 43%.

    So if the owners are losing $300 miilion a year over what they were, something other than players would have to account for it (though they may ask players to decrease their cut as a result).

    I just want to know what the owners chalk it up to. SOmeone on twitter mentioned Amorticization (I have no idea how to spell that) or however you spell that, but shouldn’t that be easy to predict?

  28. J.D. – I say this fondly, so please don’t take it the wrong way :0)

    But seriously, the care with which you are making this analysis seems to imply you think the owners are on the up and up. Unless your sarcasm is really subtle, that is.

    Isn’t it at least as likely the owners are cooking the books, and simply trying to break the players? I mean, to me it sure looks that way …

  29. #2 – unfortunately, the hypothetical boss speech you cite is actually happening in businesses all over the land, each and every day. It’s a vicious trend with workers (especially in sales and retail) having hours, pay and benefits cut while being warned that their hours won’t be coming back, and if they don’t continue to surpass previous sales or production numbers, that hours will be further cut. “Now go get ‘em!”

  30. Dave M – no doubt!

  31. I just had a very helpful discussion with @elastyk , who has a history in the financial world and while he’s not an expert on the specifics, he agreed that it sounded right that some investment had devalued, resulting in losses on paper.

    One theoretical explanation might be an arena. They build the arena pre-crash and assume a certain value of that property (or sign an agreement based on that value). 2008 crash happens, that property halves in value, but they still pay interest on the pre-crash value, just like anybody paying a morgtage. On paper that’s a big loss and could have a big enough, unpredicted affect to turn income increases into unexpected losses.

    The reason I’m asking this is because so much of the conversation is “Owners want to save themselves from bad player contracts” but I think the numbers show those aren’t really part of the fundamental problem. That fundamental problem may be understandable- the same bad projections that hit anybody who bought property during the bubble. It may also be reasonable to “share” these unexpected losses with the players (and with owners that don’t have them- hence revenue sharing). However, even if reasonable, there is no very little discussion of the lockout in these terms, or investigation into what the actual root causes are.

    The most glaring absence of information in this regard is from the league itself. If these losses are this big, and due to legitimate reasons they have all the reason in the world to open their books. On the other hand, these could also be convenient paper losses with which to leverage a huge % advantage with the expectation of a lucrative new TV contract. A lot of speculation from me, but at the very least I do think it’s clear we can stop blaming player salaries from the numbers in that BRI link.

  32. R.- I have every reason to doubt the owners, but even if they are, I am seeking to understand their position. Only then can we really examine it’s flaws in earnest.

  33. J.D. – fair enough.

  34. JD, you’re right on your numbers. Owners offer a certain salary per player, but a % is held in escrow and adjusted at the end of the year up or down to meet the 57% share. If more that escrow amount was needed, it’s deducted the following year.

    Also, owners do deduct expenses from the top. But owners also only calculate BRI split on certain hand picked items. The biggest items that are partially deducted from BRI to me are the luxury suites, arena naming rights, and in arena signage and ads. Owners only share 40% of these revenues that means players only get 57% of 40% or a whooping 23%! That’s millions in luxury box tickets and advertisement money.

    There’s also millions if not billions of “hidden” profits from owning a team. I won’t get to far into it but here’s a few examples: Jerry Buss starting Prime Ticket and selling it for millions. Rather and Proky with the Atlantic Yards project. Cuban and the Mavs and HDNet Television. All of these are business opertunities that wouldn’t be possible without the NBA and its players.

    On the flipside, the players make millions in endorsments that are only possible because they are megastars in a game that makes a point to markets stars over team

    My feeling is that the owners don’t mind missing a season. I did the analysis on the numbers and they can afford to miss a whole season and stay in the black at a 53/47 split.

    The only conclusion I can come up with is that the players’ biggest mistake was agreeing to negotiate a CBA based on BRI in the first place.

    Excuse my mistakes or if I didn’t finish a point, I’m replying from a blackberry at a vet’s office.

  35. #5,6,9 (and others). The NBA claims that it operates like a business and that the league, as a whole, is losing money. That may be true. However, teams are not necessarily run like good businesses. Wealthy potential owners may value teams significantly more than their actual financial value. For instance, despite being valued at $360m, the Pistons were sold for $420m. Similarly, the Warriors were sold for $450m despite being valued at $363m. (see http://www.grantland.com/story/_/id/6874079/psychic-benefits-nba-lockout) Malcolm Gladwell argues that there is “mark up” value in being a club owner – value that is not captured by simple profit/loss statements.

    Gladwell also argues that owners may still make a profit, even when teams lose money. Bruce Ratner originally bought the Nets for $300m then later sold 80% of it to Prokhorov for $200m, for at least a $40m loss. However, Ratner was never truly interested in the Nets as a team. His main purpose was to use the team to convince the state of New York to allow him to purchase the Atlantic Yards land, both voluntarily and involuntarily, via eminent domain. Once the Atlantic Yards land purchase was approved, he no longer needed the Nets. In fact, the Barclay’s Center Arena is the real key, which is expected to generate $30m in profit (10% annual rate of return). This is not even considering the value of the surrounding real estate (see http://www.grantland.com/story/_/id/7021031/the-nets-nba-economics)

    The simple fact is that many owners can afford to lose money during a lockout because most depend on other businesses for their primary income. Dan Gilbert, the owner of the Cavs, also owns Quicken Loans, in addition to the Quicken Loans Arena (where the Cavs play). Tom Gores (Pistons), has a hedge fund. Paul Allen? Mark Cuban? You get the picture.

    Unfortunately, the players are at a severe disadvantage. While some may have invested enough to live comfortably in case of an extended lockout, many have not. As the lockout drags on, the players’ resolve will likely worsen. Those with enough foresight may play in foreign leagues but there are not enough roster spots (or money) to support most NBA stars at the level they are used to.

    In the end, it really is about smart billionaires vs. athletic millionaires. Guess who I’m betting on?

  36. JD, my understanding is that *some* owners lose money.

    43% of BRI, if I understand it correctly, is not split with how you operate your payroll and business in mind.

    It’s probably either split evenly or split in such a way that big markets get most out of it…

  37. look up what a “Gymnasium” was back in Ancient Greece.

    these guys who “own” these teams are not doing anything for other people’s benefit. owning a team is a prime LUXURY for a massively successful man. he has to be jumped in by the rest of the clubs, he can’t join without league approval.

    right now, the squeeze is on in every sector. banks have tightened up their purse strings. people are told by their president to expect to get by with less, that everyone will need to accept less(although those with more seem to be prepared to accept much more in this time).

    basketball players may make a heck of a lot of money, but they’re still workers and not owners. right now, the owners are shoving the players’ heads into the toilet. soon, they will shove them in the trash bin.

    i’ve watched the game turn wwe. i’ve seen the signs in some of the dress codes and the punitive punishments for losing one’s temper or fighting when no one is even hurt. i’ve witnessed the terrible refereeing that is supported by the league and the requirement that players be as clean as disney’s concept of employee, so i’m not surprised at this further disrespect to the game, the players and the rest of the commoners involved.

    this money issue is bogus. so is the idea that the owners want to negotiate. the owners want to dictate. i can understand why, but i can’t accept their lack of self control and disregard for their duty to the cities that they represent.

    these sports franchises are a public trust and trust is being violated.

  38. I know some will probably think I’m off my rocker but here goes….

    NBA teams belong to the communities in which they play.
    Arenas funded with tax-payer money, income generated by ticket sales, etc.

    Without the community, there is no team.

    Typically, NBA owners buy teams as a vanity purchase, i.e they’ve already made millions (billions?) in other businesses.
    Purchasing a team is a like buying any other luxury item and shouldn’t be viewed as a true business venture in my opinion.
    In fact, I believe that sports teams in general should be run as non-profit organizations with any profits being returned back to the community in the forum of contributions to local charities.

    I realize that’s a radical idea but think about it.
    The NBA requires players to donate their time to local charities and many players have charities of their own and/or participate in others.
    Why shouldn’t the NBA require team owners to do similarly?

    Owning a team is a privilege and should be viewed as an opportunity to give something back to the community.

    Just my tuppence ;)

  39. 7s,
    Your problem is that you are trying to view all this in some logical sort of pattern. We humans don’t think that way. Our emotions get in the way much of the time – often fortunately, in my opinion.

    Our country has a bias for the individual ‘gunslinger’ going out and battling the big, bad world. This accounts for much of our bias for capitalism and individual responsibility only for ourselves.

    However, we also have a history of cooperation with our neighbors – this is necessary to form successful communities. This discipline – and it is a discipline – has been deteriorating in our natural culture for some time and this discipline is really what you are drawing on to attempt to get owners to act in the overall community interest, as well as their own.

    In our current state, all I can say is good luck with that.

  40. I wish all the players just called it quits and bolted to overseas leagues right now.

    Problem is that the players act as if they have no other viable option and thus are getting exploited by the owners.

    Sure, fans and all, but they should do some more PR work, gauge the timing and bolt en masse to oversea leagues, a la Deron.

  41. I just got back from perusing Kurt’s ProBasketball site and, while they have a lot of interesting short stories, most of the bloggers there really don’t have the depth or basketball perspective of the ones on this site. I will continue to go there occasionally, but this is where I come – and will come – to read really thoughtful and more complete posts; from the writers to the bloggers.

    Thanks people!

  42. Incidentally, it seems to me that the key issue is not the BRI%, but a hard salary cap (at least, a very painful soft cap). It’s easy to criticize owners for overpaying their talent. However, they might be stuck in a “prisoner’s dilemma.”

    Imagine if 2 criminals commit a major crime and are arrested and separately interrogated by the police. The police offer each man the same deal: if they both remain silent, they will be convicted of a minor offense and imprisoned for 6 months. If one confesses but the other doesn’t, the rat will go free immediately but the silent one gets 10 years. If both confess, they will each get 20 years.

    The owners are stuck in this dilemma. They’re afraid that if they let one of their stars leave, they’ll be unable to sign a replacement and be left with nothing. As a result, the salaries quickly escalate out of control as they try to outbid each other. The old CBA doesn’t penalize owners enough for exceeding the cap. If a hard cap was in place, there would be much less incentive to overpay. Superstars would still get supersalaries but the mid-tier guys would be paid more reasonably (e.g. Joe Johnson, Lamar Odom). This would also theoretically make more money available to sign low-tier players.

    As an aside, I strongly believe that pro sports teams do NOT belong to communities. Stadiums are often partially funded by taxpayers – this is money that could have gone towards other public services such as education, welfare, healthcare, etc. However, many studies have shown that building a stadium does NOT significantly increase the local economy. Hotel workers make slightly more but restaurant/bar workers end up losing a few hundred dollars/year. The only people who make more are – not surprisingly – the athletes. Stadium owners often benefit from special property tax benefits. Also, stadium revenue is not used to repay taxpayers.

    Imagine if an ordinary businessman wanted to purchase a piece of land. He demands that:
    1) taxpayers pay part of the mortgage.
    2) the community reduce his taxes
    3) the local economy would suffer
    4) and that any profits would not be shared.

    Does this really sound like a community asset?

  43. @CraigW, I don’t see my viewpoint as a “problem”. What I mean is that there is an emotional and financial connection with teams within the community that doesn’t exist with say, the local McDonalds.

    I’m not so naive as to think it would ever happen. The point is that owners *should* view their *property* differently. That doesn’t mean they will.

    I actually wrote out a salary plan that included a hard cap (yes, I think it’s necessary) and set salaries for each roster spot as opposed to salaries being negotiated and why I thought that was the best way to go for everyone involved.
    I posted it on my blog if anyone is interested.
    (Not sure what the rules are for posting links.)
    The numbers are simplistic and would have to be adjusted by people a lot smarter than me but the principle behind the idea is one that makes sense to me.
    (And yes, I tend to think logically ;) )

  44. Just read all the comments that have accrued since last night and want to say with all sincerity, readers rock here.

    Numbers is numbers and I think it’s become pretty obvious that there’s a group of owners who are very willing (and its probably their preference) to lose a season. If they can’t estabish a highly favorable new financial model, they’ll simply devalue their teams, firesale them, and write off the losses.

    With Paul Allen squarely on the hawks’ side, I don’t see a resolution. He’s simply too rich, too powerful.

  45. Calvin H.: Spot on, in my opinion. These disgusting contracts come from the fear (and ultimately knowledge) that your player WILL be gone if you don’t overpay, because some other owner WILL overpay. Then your team suffers.

  46. I’m getting tired of all these talks…

    At least I found a pretty cool website that made my day… itsmyplay.com it’s for all basketball related people, GD1!

  47. Hi all,

    Just came by to say hi…nothing else to say really…The comments here are pretty high level, nice to read.

    But the truth is that….(should I say it? And ruin all the talk about NBA, CBA, BRI?)

    Guys, the players are screwed. They have ZERO leverage on this talk. It’s like “take it or leave it”. What do you think they’ll do? Strike? As soon as Fisher says “We’re done dealing with the team owners”, half of the players will decertify and get whatever the owners are offering. Period. Might as well get whatever they’re offering now.

    I’m 100% on the players side, but we have to understand that the owners are about to KILL the game of basketball as we know it. It’s over. Done. Or you play under my rules or bust. And the players have nothing to use as a shield or weapon…nothing. Yes, I like Kobe, Wade, Durant, etc…but they can’t create a league on their own. The average players will prefer to play the NBA league, even paying less…

    It’s over. They killed it. Stern and his team owners. They had it all along. Long time ago. We just didn’t see it coming…

    I’ll forever remember this amazing combination of teams and players I was fortunate enough to see. Great years. Dr Buss, Magic, Kareem, Worthy, Kobe, etc…just awesome…

    But the small owners are in a bigger number, and they’re tired of Buss, Cuban, etc…Now it’s their time, and they planned quite well….Again, we just didn’t see it coming.

  48. #47, it’s crazy to think that we are there.

    here in Los Angeles, there is no football team. i’ll always remember west, wilt, kareem, silk, worthy, magic, shaq, kobe, gasol and all the others even if there’s no more nba, and i’ll live on, just like i did when the dodgers and the rams died.

    it’s too bad for the younger ones who have no great memories.

  49. Perhaps the players should form their own league. These owners are simply too greedy. If they were really ‘loosing” money, because of the players’ salary, then they can do what Clippers have always been doing; just water down your roster by give away your high-pay and talented players. They are fighting and crying about the current CBA only because there is too much money in this league, and these greedy owners want a bigger share.

    I don’t know if I can ever appreciate NBA games as before. I love the game of basketball, but maybe it’s time to invest my emotion on college teams and other sports. Too bad these owners are so full of themselves that they forgot it is the fans determine the worth of their teams.

  50. There is basketball all over the world. How about us fans starting to follow teams outside the U.S.

    We could come back when some enterprising owners and players form up a new league and start a North American franchise of some other league.

  51. This is a quality thread, like usual from FB&G. I am mid- age and I do remember the Rams, Raiders, the good days of the Dodgers (I went downtown in 1988 for the parade), and of course the great Laker teams. We will live on, like I did when all of those other teams left a void in Los Angeles with their demise or exit from the city. I am sad when I see cancelled basketball games on my web home page. I am realizing that the season may be in jeopardy of being cancelled, that reality has finally hit me.

  52. Last August 26, I finally realized why the NBA owners contract leverage over the players is illusory: competition.

    Even at current pay scales, some American midrange salary players had already bolted to Europe–and players like Juan Carlos Navarro (the MVP on the 2011 Euroleague champions from Spain) came to the NBA and returned home disappointed.

    Every starting member of the 2011 Euroleague champion Spanish team was or had played in the NBA–and the team as constituted would clearly do damage if they were an NBA team this year.

    NBA offers of 10% less salary would clearly make offers from international teams more competitive even as international basketball is becoming more competitive.

    Then, of course, there were the communities in the United States that had lost their professional basketball franchises to teams that sometimes moved South to a smaller fanbase.

    I got to brainstorming and made a credible list of 16 locations that could, as a group, compete quite well with all but the highest market teams in the NBA. So, here’s the 16 team list I came up with:

    West Coast North Conference

    Anaheim
    San Jose
    Seattle
    Vancouver

    West Coast South Conference

    San Diego
    Mexico City
    Tucson
    Las Vegas

    Heartland Conference

    Kansas City
    Baltimore
    Chicago
    Windsor

    East Conference

    Montreal
    Buffalo
    New Jersey
    Tampa

    More than half of the cities I brainstormed either already had a professional franchise, or had an NBA franchise at some time in the past.

    It’s easy to expand this list to 20 teams, bringing back more former ABA locations (like the Kentucky Colonels), or reduce it to as few as 8, but as suggested ay 16, it makes some geographic and competitive rivalries inevitable.

    Now just think. If I was brainstorming this way last August, what were the agents and entrepreneurs thinking about?

    Fifteen per cent of the current NBA players have already signed contracts to play overseas; another fifteen per cent are ready; and as many as 50% total might “go international” this year.

  53. ^ Knickers, I won’t pretend to understand what you wrote up there but LOL.

    Since we’re all talking about this, I believe you guys deserve this link: http://www.grantland.com/story/_/id/6874079/psychic-benefits-nba-lockout

    I will put in my 2 cents in a bit.

  54. drrayeye,
    Nice comment. If we fans are willing to lower our sights a little, we can envision some real competition to the greedy NBA owners and even some of the greedy NBA players, depending on your viewpoint. This doesn’t have to be where the new league would eventually go – as a properly run league would eventually drive most of the NBA franchises out of business and could then increase its quality of play until it was on par with what we are used to.

    All we fans have to do is think like entrepreneurs and look farther into the future. Can we do it? I don’t really think so, but it is sure worth a try.

  55. #47: Maybe “killing the game of basketball as we know it” isn’t such a bad thing. The Lakers’ success was largely bought by Jerry Buss. The Lakers regularly exceed the salary cap. Last year, the Lakers spent $91m despite a $56m cap ($70m luxury tax level), which translates to an excess of 56%. In other words, the Lakers spent 1.5x more than the cap.

    Of the 7 teams that exceeded the luxury tax level at the start of the season, only 2 did not make the playoffs: the Jazz and Rockets. Both teams “lost” their superstars last year, probably accounting for their failure. 71% of luxury tax teams made the playoffs compared to 48% of non-tax paying teams.

    Granted, exceeding the cap does not guarantee a championship, but it does correlate strongly with regular season success. A recent study comparing the NBA, NFL, and MLB examined the relationship between team salaries and regular season records. The NFL was the most “fair,” meaning that the amount spent had the least effect on the record. Guess which league was the least “fair”? The NBA.

    Death of the current system would not necessarily be a bad thing. Imagine a league where money played a minimal role in team success; one where every team had a realistic shot at the playoffs and the championship. If the league became more competitive, we might not make the playoffs every year anymore. I think that’s a good thing.

  56. DS: The SI article examined teams that won 55+ games/season, but teams don’t need to be so good to make the playoffs. In many cases, finishing at 0.500 is good enough for spot 12-16.

    The Sactown article examined the top 8 teams, or 2nd round winners. Again, a limited set. In fact, even the Heat with the 3rd lowest payroll among those 8 teams was basically at the salary cap ($54.4m). This also states how ineffective the current salary cap system is.

    My argument is that money plays a disproportionate role in determining the REGULAR season outcome – not whether or not a team is “good.” If money buys regular season wins, rich teams have a better chance of making the playoffs. Once you make the playoffs, though, all bets are off. Then it becomes a matter of talent, strategy, injuries, and luck.

  57. I honestly dont care what the deal ends up being or who “wins.” I just want it worked out so we have a shortened season which I believe will give the Lakers a big advantage given their age.
    if pressed I do think the owners are being unreasonable but they can because they hold the cards. its unfortunate that the owners are intent on getting everything they want no matter the consequences.

  58. “(As an aside, Silver and Holt also argued that the BRI split and the system changes they want aren’t connected at all. They say that one speaks to profitability and the other speaks to competitive balance. I don’t see this argument at all. The owners want a more restictive system that limits spending. They want a hard-ish salary cap – either through a punitive luxury tax or a straight forward NFL style cap. But any system that limits spending or caps it at a certain level then creates the ceiling in which expenses are maxed out. That ceiling then becomes the line that revenue needs to exceed in order to become profit. So, how can the owners say that the two aren’t linked when both are connected to profitability for the owners? Try as they might to frame the hard cap as a way to achieve competitive balance, I instead see another money grab by the owners. Why it’s not being framed this way is beyond me.)”

    This makes no sense. How can the hard cap cost players more money? If there’s a BRI cap of let’s say 50% under a hard cap or soft cap, they get 50% either way in the aggregate.

    Also, NBA salaries are a percentage of BRI. Any “hard cap” ceiling still has to satisfy the 50% BRI test. If revenue is too low, then salaries are automatically cut back. So it’s impossible for salaries to exceed revenues.

  59. #61. The hard cap doesn’t cost players more money. And I don’t believe I said that. My point was that a hard cap maxes out spending at a certain point which then creates the point at which profit is determined. That’s basic math and not arguable. So, again, I wonder why no one frames the pursuit of a hard cap as another way for the owners to secure money in their pockets (rather than this noble pursuit of competitive balance)?

    Your point does raise another issue, however. Salaries are essentially tied to the BRI split. So, owners do know – in advance – what their salary commitments to players will be for any given season. Yet, the teams claim losses each year and are looking to recoup those losses on the backs of the players through salary cuts (in the form of a BRI reduction on their side). My question (as was the question that JD Hasting and Shane brought up earlier in the comments) is how are the owners still losing so much money if their expenditures on salaries are essentially set at a fixed amount each year? Said another way, owners have X to spend on players each year and that is tied to revenue each team receives (BRI). Yet they’re still losing money…how is that possible? Are they spending more on players than they should? If so, that’s bad business, no? If they aren’t spending more on players than they should (which I don’t see how this could be the case considering they’re trying to make up losses by reducing spending on players – but let’s play along anyway) then what are they spending money on that forces losses? And if that can be indentified, why not try to cut spending in that area before reducing player salaries?

  60. Imagine the following scenario:
    1) You need to buy a car for work
    2) There is only 3 cars available this year
    3) You have 29 other neighbors who all need cars too
    4) Some neighbors are richer, some are poorer
    5) If you don’t get a car, you’ll lose your job
    6) You don’t really know how much salary you’ll actually make until the end of the year
    7) If you spend too much, you’ll get fined.

    Crazy, isn’t it? You can actually overpay for the car, spend more than you make, get fined, and lose your job, all at the same time! This is the situation many owners are in.

    It’s a vicious cycle – if you lose your star, you lose games. When you lose too many games, you lose fans and revenue. If you lose revenue, you suffer financial losses. The only way to save your team is by being incredibly lucky in the draft or overpaying for talent (see prisoner’s dilemma, earlier). If you take the second option, you still aren’t guaranteed wins and the cycle may continue with larger expenses.

    Realistically, only 8 of 30 teams make money. The recent $3 billion (yes, with a “B”), 20-year Lakers deal with Time-Warner helps illustrate why. Even if Kobe retires, Gasol gets deported, and Bynum breaks both knees, they’re guaranteed $150m a year! No wonder that the Lakers can afford to exceed the cap. Interestingly, none of this revenue is shared with the league.

    To improve its profit/loss, the league needs to re-define what is actual BRI. After all, the Lakers’ $3b contract wouldn’t have happened if they were in the Chinese league. The Lakers owe a lot to the league for its success (and vice versa). I believe that the league should be entitled to a large percentage of it. By increasing and redistributing league revenues, the league will be on better financial footing.

    Changing the BRI% is a backwards way of addressing the league’s financial problems. A low BRI% will give owners more money but it won’t address market inequalities.

    A hard cap prevents “nuclear escalation” of salaries and prevent teams from overspending. Players could no longer engineer their own trades simply because owners would not be able to pay them market rates! This would spread out talent more evenly, ensure competitiveness, and increase fan interest and revenues.