Archives For Lockout News

Raising The Floor

Darius Soriano —  October 4, 2011

Competitive balance is the new buzzword of the lockout. It’s so important, it’s become a sticking point in the CBA negotiations. The owners want to limit team by team spending in order to preserve it. Whether through a hard cap or through a luxury tax system so punitive to curb spending, the thought is that if the highest spenders have a ceiling low enough to reduce league wide payrolls, competitive balance will be improved.

Thus the argument is laid out that if you simply put a system in place that makes teams like the Lakers, Mavericks, and Knicks spend less, the overall health of the league will improve.

But what of the teams that live at the other end of that spectrum? What of the teams that willfully spend as little as possible? Few people seem to discuss them very much when talking about the health of the league. At Sactown Royalty, Tom Ziller (in a larger – and very good – post about the correlation between spending and winning) makes the following point about teams that live near the spending floor in relation to teams that are willing to dish out more money on player contracts:

Teams that are rebuilding are going to mimic the Kings and spend as little as possible. Teams that can compete for the playoffs or a title will spend as much as they can. There will be teams spending as much as legally possible — to Hell with reasonable, look at how much Mark Cuban has spent over the past decade — and teams saving every dime in terms of future flexibility. There will be a substantial salary spread as large as is possible under salary floors and caps.

Under the recently expired CBA, the spending floor was 75% of the salary cap. This past season, the Kings actually found themselves below that threshhold and faced the prospect having to add players or pay the players they had more in order to get above the spending floor. The fact that the Kings reached such lows on the payroll level was a big story, especially within the context of their owners financial issues and the desire to move the team to Anaheim. But from a competitive balance standpoint, this story got little traction.

Tangent now to the NFL who in their most recent CBA agreement this past summer raised their salary floor to 90% of the salary cap. In past agreements that number was 84% but by raising it, they’ve essentially ensured that low spending teams will have to spend on par with every other franchise. Some of this was likely in response to the NFL’s uncapped year in which there was no spending floor and several teams greatly reduced spending, but I believe it’s more in response to claims that some teams habitually spend close to the mininum possible in order to maximize profits with little incentive to improve the team. (Note, this mindset doesn’t have to be limited to teams with little chance of winning. If you’re a contender that’s below the cap – as the Eagles and Patriots have historically been – you can still limit spending under the assumption that your team is good enough to win without further payroll commitments.)

Will the NBA take note? If competitive balance is going to be the canned phrase tossed around by ownership for the desire to harden the salary cap and limit spending, I hope they’re looking at the other end of the spectrum too.

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As an aside, I don’t believe spending more will necessarily lead to greater success on the court. Teams like the Lakers and Mavs don’t win more because they spend more, they win more because they’ve spent more on players that actually make a difference. The Isiah Thomas Knicks are the prime example of this. As I’ve said many times before, there are only a handful of truly great players that deserve max contracts yet many players have them; spending more isn’t always smart.

Not to mention some of the best players in the league, at least as of last season, were on their original rookie contracts that paid them pennies in comparison to their actual value. You think Kevin Durant and Derrick Rose are worth what they made last year? The presense of rookie scale deals and a cap on individual salaries means that market value will always be a relative term in compared to what players actually earn.

All that said, if spending – and it’s relationship to competitive balance – is going to take center stage in these negotiations I hope the other side of this story is reported as well. Because as teams cry poor and lament their inability to compete based solely on the fact that other teams spend through the roof, I’m hoping that the league recognizes that it can do something about that disparity in spending that has little to do with lowering the ceiling on the high payroll teams.

Sharing The Revenue Pie

Darius Soriano —  October 3, 2011

As the Collective Bargaining talks continue today, one of the ongoing topics of discussion is how to make teams profitable for the greater health of the league. This subject isn’t without controversy as there are many angles to view this from…

Is owning an NBA team a business or something entirely different? What of the other ways owners make money on their afiliation with their NBA team? Owners can talk endlessly about what they believe is fair to them, but what about what’s fair to those fans that invest in their teams?

There are no easy answers here. But if we’re truly going to discuss how to make an NBA team profitable, it seems the logical place to start is revenue sharing.

Recent reports state that David Stern and the owners plan to triple and, eventually, quadruple their revenue sharing in a new model. The plan is ambitious to say the least. But, with such an agressive plan, come questions about its viability. Chris Broussard says that owners whose pockets will be dug in the deepest aren’t necessarily keen on the idea of having their coffers raided to prop up those that can’t do so for themselves:

The divide centers around the large-market owners’ refusal to share their local television revenue. For instance, while Lakers’ owner Jerry Buss is willing to share national TV revenue, he wants the money made from his 20-year, $3 billion deal with Time Warner all to himself, according to sources.

That said, it is pretty clear that some teams need this assistance. Over at Sactown Royalty, Tom Ziller states openly that the Kings would be a team in the line with their hands out:

The Sacramento Kings rate in the bottom 10 market sizes in the NBA, and if you looked at local revenue, they could be bottom five most seasons. As the Nexus Report outlined, there’s a small corporate base here, a relatively small TV market and a struggling economy that’s worse than most comparable metro areas. The one bonus is that there’s no competition: Sacramento has no other major league teams to compete with the Kings, though we all know crazy Niners, Giants, A’s and Raiders fans who make the trek into the Bay Area on a regular basis.  The Kings would definitely be a receiver … but how many other teams would join them? Are the Kings in line to take in $20 million a year when revenue sharing fills out in a few years? More? Less? Every bit helps, but the mechanism by which it moves matters greatly. Until we see that, it’s hard to say whether it will put the Kings on anything like an even playing field with the other three teams in California. Let’s hope it does.

The implication of that last sentence gives me pause. Don’t get me wrong, I’d love a more competitive league and wish for strong competition from and between all teams (yes, even Boston). But, building that ability to compete on the backs of only those owners that can afford to financially contribute doesn’t address issues related to the lack of viable, superstar level talent around the league. Nor does it account for the lack of capable front office men that navigate complex path of team building better than their peers. These are factors that greatly influence a team’s success on the court.

Meanwhile, it’s not even clear who should be doling out these large stacks of cash. Sure, the Lakers have been identified as a team that could share as much as $50 million a season and the Knicks would chip in $30 million. Since they’re two of the highest revenue producing teams, this makes sense (though trying to dig in my pockets for that much – even if I could afford it – might lead to fisticuffs). But who else is on that list and how is it determined?

From where I sit, the most logical way to share the revenue pie is that all teams contribute a set percentage of their revenue into a gigantic pot. This pot would then be distributed amongst all teams equally. Strangely, this rarely gets mentioned even though really smart people (like Kevin Arnovitz with an assist from Bob Costas) have been saying it for months (if not years if you go back to Costas’ argument that was suggested for MLB’s revenue sharing issues).

To these eyes, the only way to actually share revenue amongst teams is for all teams to participate in the giving and receiving. Altruism is a nice idea but as we’ve been reminded nearly every 15 seconds by owners like Robert Sarver and Dan Gilbert, the NBA is a business and should be run like one. With that in mind, I find it strange that they’d be willing to take handouts (especially large ones) while not contributing anything to the process other than running their franchise(s) incompetently and then bringing a large duffle bag to shovel cash into to further aid in the profitability of their sub-standard teams.

Mind you, this argument isn’t made to protect Dr. Buss’ bank account or to ensure that the next time he goes all in with pocket fours and suffers a bad beat on the river he can cover his losses. I’m not trying to spend his money now just as I’m not trying to spend it in the off-season when that shiny new player is on the open market.

That said, I’m a firm believer in the overall health of the league; that success in the NBA matters only because other NBA teams are on the other side of the wins that the team I root for stacks up. Dr. Buss should be asked (and willing) to share the revenue he makes on his team as he has no ability to generate revenue without other teams to compete against in the league that his team is a member of. But asking him to give while others will only take breeds bad blood and has the feel of dressing up financial woes as the lack of competitive balance when the two topics aren’t as firmly tied together as we’re being told.

Turkey.

China.

Italy.

Kobe Bryant has been courted by the world during the NBA’s labor unrest and the latest offer from Italian Club Virtus Bologna is a doozy:

Kobe Bryant has been offered a $6.7 million, one-season contract to play for the Italian team Virtus Bologna, appealing to his childhood memories of growing up in the country…Virtus has given Bryant four contract options, stretching from the one-year deal to two-month and one-month options, and a per-game deal that would come out to $739,640 per home game.

On the surface, this is a win-win for #24. He can go back to a country he enjoyed in his youth, follow in the footsteps of his father, further enhance his global brand, and make a nice piece of coin in the process. If the only considerations were how to maximize the money going into his bank account, the reports would probably read “Kobe signs in Italy” rather than detailing the terms of the offer.

But those aren’t the only considerations; there are downsides here. The ever prescient Kelly Dwyer brings up a few good points about why Kobe wouldn’t want to go – citing family, wear and tear on is body, and his loyalty and connection to the Lakers as strong pulls to simply remain stateside and get ready for an NBA season.

This is not an easy choice but, ultimately, I see Kobe staying home. Beyond the reasons Dwyer lists, I simply don’t envision Kobe agreeing to join a full fledged league where he’d be competing every night for a team with larger goals than just trotting him out to fill an arena (though that’s obviously a part of why overseas teams want NBA players). This isn’t an exhibition game in the Phillipines or a glorified pick up game in a local summer pro-am. These games count and Kobe, even some don’t want to admit it, understands the fabric of a team and how a season is a process that a group goes through together in building towards a common goal. I simply can’t see him jumping into the fray with another team if it’s not a real commitment to help them. He’s already made that commitment to the Lakers and he has unfinished business with them from last season.

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Speaking of next season, the question still remains when we’ll actually see games being played.

It turns out, a bit later than scheduled. The NBA has announced that the league has cancelled 43 pre-season games and postponed the start of training camps. Of those 43 games, 3 were Lakers games: October 9th vs Golden State (Fresno, Ca), October 12th vs. Atlanta (Ontario, Ca), and October 15th vs. Atlanta (at Staples).

Pre-season games being missed doesn’t really concern me (I thought this tweet summed up how I feel about it) but I do feel bad for fans in Fresno and Ontario that don’t often get the chance to see the team in person and now have one of those few opportunities squashed by the league.

As for the real season, there is still some hope that the games will start on time. Ken Berger, in his summary of Thursday’s meetings, reports that there has been some movement by the owners and those steps towards the middle are important towards finding a resolution:

…what happened here actually had the potential to be productive. For the first time since their initial proposal in January 2010 — when they offered a $45 million hard cap that would deliver the players well below 50 percent of BRI — the owners proposed a revised BRI split that was closer to, but still below what the players have indicated they would be willing to accept. In this impossibly slow negotiating dance, that qualifies as progress.

The owners’ number, one of the people familiar with the details said, represented a willingness to move off their most recent formal proposal to cap player salaries at $2 billion a year for the bulk of a 10-year proposal. So, do the math: Assuming 4 percent revenue growth next season to $3.95 billion, the owners’ $2 billion proposal represented roughly 50.5 percent of BRI for the players. If the players were willing to go down to, say, 53 percent with assurances that a soft cap would remain in place, that would be $2.094 billion — leaving the two sides only $94 million apart in the first year of the deal.

Given that the owners moved off their $2 billion to somewhere between that and the players’ number, we’re talking about perhaps as little as $75 million per year holding up the future of the NBA. That’s why, as one person familiar with the talks said Thursday, a deal is “there for the taking.”

When will each side be ready to take it? Not yet. Not Thursday, and maybe not next week, either. The drop-dead date to preserve the season intact — Oct. 13 or 14 — is still three weeks away.

Like any of you that visit this site to read up on the Lakers and the NBA in general, I’m tired of the lockout. Tired of the back and forth from both sides, from the divisive rhetoric, from the threat that games will be missed. Every additional day that passess without a resolution leads me to feeling more and more like a that balloon you got for your birthday that’s sitting in the corner of your bedroom – slowly sinking lower and lower.

However, as I’m losing steam, others are coming up with even smarter ideas on how to get a deal done. One such person is Tim Donahue of the Pacers blog 8 Points, 9 Seconds. Today, he’s put forth a great read on how to resolve resolve the NBA lockout via a template for a CBA agreement. The key to it all is that he’s finding a middle ground on the so called “blood issue” of a hard salary cap. As he explains:

The system will include both a soft cap – more accurately described as a “threshold” – and a hard cap. Structurally, it is similar to the “flex” cap system previously proposed by the owners, but it is not the same. The mechanics would be:

  • The “soft cap” or “threshold” would be set by reducing BRI by $100 million to cover benefits, then taking 47% of the remainder and dividing by 30 (or total number of teams). Teams may spend above the threshold using an exception system that will be largely the same as the previous system – with changes to be outlined below.
  • A hard cap – which no team will be allowed to exceed at any point during the season – will be established by reducing the BRI by $100 million, then taking 65% of the remainder and dividing by 30 (or total number of teams).
  • A salary “floor” will be established at 75% of the soft cap. Any team who fails to meet or exceed this baseline in payroll will be ineligible for participation in the supplemental revenue sharing program.*  (* This is assumed to be the new program, which is expected deal with currently unshared revenue streams. The team will still receive their share of the national revenues – including television – as they do now.)
  • The luxury tax will be abolished. It will be unnecessary with the hard cap, and it’s revenue sharing function will be replaced in any new revenue sharing program the league implements.

You should read the entire piece for background on why he chose the thresholds he did and for great charts that map out what the system would look like over the course of the agreement. It’s truly a well thought out solution that calls for both sides to compromise some of their core beliefs for the greater good of the league.

And really, that’s what all sides should be seeking here. After last Thursday’s ownership meetings, it was reported that optimism turned to frustration after a couple of the more hawkish owners made pleas to continue with their hardline bargaining. For me, at least, reports like this are most frustrating because they can be viewed as obstacles to progress and in opposition to compromise. And as we get closer to when training camps should be starting, the time to get a deal done dissapates away.

Since the lockout began I’ve been optimistic that the owners and players would reach an agreement in a timely manner and that the NBA season would start on time. I had a variety of reasons for thinking this but the main one is that both sides understand the importance of building on the momentum of the last several seasons in order to maximize the league’s popularity. There’s simply too much at stake for both sides to shun an agreement for the prospect of their hardline ideology becoming the status quo.

Yesterday, my beliefs seemingly took a hit as lockout doom and gloom took hold after the players and owners had a bargaining session that went absolutely nowhere. Our friends at Silver Screen & Roll summed up the mood around the talks quite well. Basically, the players seem to be inching towards a compromise and the owners continue to dig in their heels and pull on that rope to gain further leverage like a high stakes tug of war match.

However, that talk of doom and gloom is just that: talk. When you dig a bit deeper, look at the nature of this last meeting, and start to read between the lines what we saw yesterday should have been somewhat expected. Chris Sheridan sums up this position well:

…I am not the least bit surprised that everyone is emerging from the meeting in New York spewing doom and gloom. That is what always happens when the owners’ and players’ full bargaining committees get together. It is a total dog-and-pony show, and anyone who expected the sides to emerge today with a sense of optimism was fooling themselves. This dispute will get settled when there are a lot fewer people in the room. David Stern and Billy Hunter can reach a suitable middle ground by meeting by themselves for a couple hours, which was what happened back in 1999 when that lockout was settled.

Ken Berger of CBS also dives into the rhetoric from yesterday and isn’t convinced progress has stalled. In fact, he sees steps in the right direction:

Though no written proposals were formally exchanged, hidden amid all the rhetoric and doomsday prognosticating was something extraordinary for how lost it became: the NBA and its union are on the verge of solving the biggest dispute between them, as in how much money each side gets. It was still happy hour when Stern strolled out of the NBA offices, so someone should have been raising a glass for a toast. Neither side would say how far the players moved economically, but a person with knowledge of the negotiations said they expressed a willingness to move lower than the 54.3 percent of basketball-related income they last proposed on June 30 as a starting point in a six-year deal. Stern disputed the players’ contention that the owners haven’t made an economic move since the day before the lockout was imposed. Nobody outside the room knows how many millions the two sides shaved off the gap, but it hardly matters since everyone seemed willing to concede that they’ve at least dipped their toes on common ground when it comes to dollars.

Getting a handle on what’s really happening will always be difficult. No one doing the actual reporting is in the room during the talks and those that are emerge with handy quotes in front of cameras and voice recorders meant to spin their side’s positions in order to gain public support and/or portray the other side as unreasonable/unwilling to bargain in good faith. Even anonymous sources have agendas (not unlike what we see around the trade deadline) and, while I wouldn’t call anyone dishonest, I certainly believe that quotes fed to reporters are meant to serve multiple purposes beyond informing the public.

So, while I’m more pessimistic today at this time than I was yesterday, I’ve not yet abandoned hope. There’s a deal to be made and both sides continue to work towards it, even if progress is slow and hard line rhetoric knocks us off its scent.