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NBA Lockout Q&A: PBT explains it all (well, almost)

Jun 30, 2011, 8:37 PM EDT

To match Interview NBA/STERN Reuters

Welcome to the NBA lockout. Pull up a chair, make yourself comfortable, you’re going to be here a while. If we’re all lucky it will be for just the summer, but it could be longer. Much longer.

I understand you all have questions about how we got here, where we are at and what is next. We don’t have all the answers, but let’s try to answer those questions as best we can.

Why is the league locking out now, after a season when ratings, attendance and interest in the league are at the highest levels in decades?

July 1 is when the Collective Bargaining Agreement (CBA) between the owners and the players union runs out. It was not so much they chose right now as this was the time the old deal was up and a new one needed to be hammered out. Both sides have known for years that this would be a tough negotiations — that the owners were going to look for big changes to the system — and both sides have anticipated for a couple years a lockout would come now.

That it came on the heels of a fantastic season for the league was a coincidence, but it may be the one thing that saves next season. Both sides understand the need to get a deal done that does not cost games next season or all that newfound momentum will be lost and it will take years and years just to get back to this point.

What are the two sides disagreeing over?

Everything. Much like the negotiations at the end of the Vietnam War, I’m not sure the two sides could agree on the shape of the table they should sit down at to negotiate.

But as always the big issue is money. Specifically how to divide up the money that comes into the league. That money is called “basketball related income” (BRI). That is the money from ticket sales, national television contracts, local television deals, luxury boxes, concessions, jersey sales — basically everything tied to basketball.

Currently the players get 57 percent of the gross BRI — 57 cents on every dollar that comes into the league goes to the players in salary. The owners want to change that number dramatically, their proposal would have the players in the low 40s percent wise in a decade. The players have agreed to go down to about 54 percent in their proposals.

In that gap is hundreds of millions of dollars per season. The two sides are nowhere near close – they can’t even agree on how to define BRI (the owners want to start taking a number of expenses out of it so it is more net than gross that is divided between them).

What are the owners proposing?

The owners want a radical change in the system. They want to put in a “flex cap” of $62 million per team. For some perspective, the Dallas Mavericks payroll last season was $86.2 million (the team with the lowest payroll was Sacramento at about $44 million). Teams could not exceed that $62 million number except to sign their own free agents, and even then teams could not exceed a second figure that would not be more than a few million higher.

What David Stern will gladly tell you is that this number guarantees the players about $2 billion a year in salary, which is not much below the $2.17 billion they made last year. The difference is the owners want to lock that figure in for a decade — even as revenues rise for the league the salary cap would remain flat. All that additional revenue goes to the owners.

The owners also want to reduce the length of contracts by two years when handed out (from five to three for signing a free agent, for example), so they don’t end up stuck with terrible choices and bad deals as long. (Yes, the owners want the CBA to protect them from themselves.)

What is the owners’ sales pitch?

For fans, they are selling parity. This season the Lakers spent more than $90 million on salary, with the luxury tax they spent more than $110 million. And as a franchise they will still turn a profit. Smaller market teams have a hard time competing with teams willing to spend like that. What this harder salary cap would do is put teams on a more even playing field financially.

Now will parity work in the NBA as a practical matter or in marketing manner like it does in the NFL? That’s a harder sell. The best times for the NBA were when Michael Jordan’s Bulls dominated the league, or when Magic and Bird ran the show. Parity has never sold the same in the NBA like it has for the NFL.

What do the players say about the owners’ plan?

What would you say if your boss asked you to take a pay cut then told you they expect record growth for the company in the next decade but you’d see none of the rewards? Yes, NBA players are very well paid, but they also realize that they are the product that drives the league and they should see money from any growth in the league’s business.

What do the players propose?

The players are essentially playing goalie in these negotiations — they want to keep the system pretty much the way it is now. They like the “soft cap” which allows teams to spend well over the cap to keep their own free agents and has a host of other exceptions (a mid-level exception, a veterans exception, and more).

The players have proposed a reduction in the percent of BRI they get down to 54 percent, which would be a give back of about $100 million per season. They say that is their percentage of the losses they admit some owners are suffering. But aside that they want even more flexibility for teams to make trades (not as restricted by matching salaries) and other steps to increase player movement.

What about revenue sharing?

This is the players’ other big push — they want the owners of big market teams to share much more revenue with smaller market teams. They also point to the NFL where about 70 percent of league revenue is shared; where in the case of the NBA it’s about 25 percent. (That is primarily because the NFL has much larger national television deals.)

For example, the Lakers new local television deal that kicks in for the fall of 2012 will pay the team upwards of $150 million a year, the Sacramento Kings made about $11 million last season on their local television deal. None of that revenue is shared right now, the players say it should be and they want to know the numbers.

The owners are talking about revenue sharing amongst themselves, but they say it is not part of the CBA negotiations and the players do not have a seat at that table.

So is the NBA lockout like the NFL lockout?

No. Not at all… well, in one key way yes.

But not in the details. The bottom line is the NFL is a league that is still making gobs and gobs of money, it’s just that the owners are not making as much as they used to so they are locked out. But at the end of the day, that argument truly is about how to divide the profits.

The NBA has lost money for several years in a row, and even though the players dispute the owners figures they do not dispute the losses overall. The losses this past season as a league were around $300 million according to Stern. And that is the key difference between the two lockouts — the NBA has far more serious issues to deal with, real revenue and expenditure issues to deal with.  Because of that the two sides are farther apart than they ever were in the NFL. A few minor issues are the same but the big issues are different in the two lockouts.

So how are the NBA and NFL lockouts alike?

The arc of how the problems will be solved.

The NFL has been locked out for more than 100 days but only now are we starting to see some real progress towards a deal, in time to save this season. (How much progress depends on who you ask.) The bottom line is this — in any negotiations, from teachers unions to longshoremen to sports leagues, nothing actually gets done until there is pressure on one or both sides to compromise. In the NFL, with the owners seeing the threat of lost games and the players fearing lost paychecks, the negotiations are getting serious.

It will be the same with the NBA. With the start of the lockout, the two sides will move farther apart. They have both known this lockout is coming for years — there have been proposals on the table since the 2010 All-Star Game in Dallas — and they have dug in their heels. Don’t be shocked if the owners start talking about going back to their original proposal of a $45 million hard salary cap.

But as we move into the second half of August and September, when the threat of lost games starts to become more real, then we will see movement and the two sides start to negotiate in earnest.

Then we will see the resolve of the two sides.

How and when does this end?

The when is unpredictable. I want to believe there will be a full season next year. But there are hardline owners — smaller market owners who leveraged themselves in recent years to buy these teams and who need a change in the business model — who are willing to lose some or all of a season to reshape the financial landscape of the NBA.

The players are going to come out of these negotiations with less money then when they went in (even under their own plans), the question is how far back will they go and how hard are the owners as a group willing to push for a deal they want? We’ll start to get a feel for that in August and September.

If we get to mid to late September and the two sides are nowhere near a deal like they are now, then my friends we may not see the NBA for a long while.

  1. decaturstaley75 - Jun 30, 2011 at 9:37 PM

    I would think another big difference would be the existence of other viable professional leagues for the players to play in during a lockout. There are plenty of professional leagues around the world, and there should be opportunities for the big stars to organize their own exhibition games as well. There are guys all around the world earning a living playing basketball. They are not earning NBA money, but it is still a source of revenue. How much could Nowitski make playing professionally in Europe?

    • purdueman - Jul 1, 2011 at 8:04 AM

      The problem with NBA players playing in Europe is that if you sign a contract to play over there you are fully committed to that team for a full calendar year. So while it’s certainly a viable option for guys who mostly ride the pine in the NBA, it’s way too big of a risk for any starters to take.

  2. purdueman - Jun 30, 2011 at 10:43 PM

    I sure could use a year off from all the hype surrounding Le Bum and the self-anointed “Big 3”, and it looks like we’re going to get it! :-)

    Why will there likely be at a minimum a very short NBA regular season next year? Consider the owners latest proposals, based on 22 team reportedly losing lots of money:

    * A 10% across the board revenue sharing reduction;
    * Elimination of the “Larry Bird” rule;
    * Contracts limited to only 3 years in length… maximum;
    * The ability for teams to “franchise tag” one player every year (even the same player), to prevent a recurrence of the shameful “The Decision”;
    * A hard salary cap of $66M (meaning that the current luxury tax goes away and teams have to shed players to get under the hard salary cap. Due to back end loaded deals, that means that the Heat wouldn’t likely be able to retain their “Big 3”); and
    * The elimination of “sign and trade” deals.

    Think that the greedy union is likely to agree to ANY of that? Think again… as in the 2013 NBA season because I agree with Sir Charles Barkley that the 2012 season is likely down the old tubes, as the NBA owners take a hard line and follow the successful NHL’s latest CBA lead.

  3. purdueman - Jun 30, 2011 at 10:50 PM

    Another good thing that would come out of the complete loss of the 2012 NBA season due to a lockout would be that big mouthed Kobe and the rest of the mostly over 30 Lakers would grow another year older and the self-anointed “Big 3” in Miami would lose one year off their contracts without pay.

    After players like fat, lazy Eddie “Sloth” Curry makes a complete farce out of receiving a big long term guaranteed contract, can any of you blame the owners for demanding the same rights that NFL owners have, which is to buy out a guys contract when he can’t make his teams cut?

  4. anythingbutyanks - Jun 30, 2011 at 11:25 PM

    I actually have no problem with the proposed cap, but I do think that it should come at the expense of the max contract guys and not the guys at the bottom of the league in pay. Max contract players can almost always expect to generate a lot more money from endorsement deals than from their actual contracts anyway, which is money the 8, 9, 10 and so forth guys on a team will never sniff. Cap max contracts at 10M plus 10% per annum as long as a player stays with the same team, and limit all teams to 3 max contracts, no exceptions. This would keep teams from accumulating all-star lineups, too, as more players would have to go to small market teams to get their 10M (rather than what the Lakers and Celts have going now, with 4 or 5 players who make that much money each).
    Whatever they do, they need to get it done soon, as I can’t see what league would suffer more from a lockout right now than the NBA.

  5. randysavage4ever - Jun 30, 2011 at 11:30 PM

    we wont miss any games, when November rolls around we’ll be playing…

    • purdueman - Jul 1, 2011 at 12:10 AM

      LOL! That’s what all the NHL players said last lockout they had too!!!

  6. thetooloftools - Jul 1, 2011 at 12:05 AM

    It’s official !

  7. jollyjoker2 - Jul 1, 2011 at 12:38 AM

    50% for players , 5% for stadiums and buyouts of pathetic franchises and 45% to the owners. Right now, 57% for the players is way too high. Whoever signed that was nuts to begin with. Also, they need to contract by 2-3 teams so their is real high glamor competition on teams so people don’t have to watch a bunch of stiffs for 72 games. The revenue sharing could be based on % and market size.
    I think the players are gonna find out the hardway the owners are not gonna move. Too many owners are losing money on a subpar product. I mean, who wants to pay 50 bucks for a ticket and munchies only to need to watch the last 2 minutes of the game. At least stern was able to stop the high schoolers from going direct to the NBA for a little while. I mean, some of those kids had no fan following and very little talent, then its no wonder that people kind of felt the benches were college ball. Not even Kobe matured until he was at least 23-25 years old in the league.

  8. mrcowpatty - Jul 1, 2011 at 1:34 AM

    When I’m tired and want to fall asleep. I turn on a NBA game or tune to the NBA channel.

    • mytthor - Jul 1, 2011 at 2:24 AM

      or, apparently, log on to an NBA website and leave a comment. You know, because you don’t like the NBA.

      • almzor - Jul 1, 2011 at 7:40 PM

        Hey! I always spend my free time investigating things I don’t care about!!

    • purdueman - Jul 2, 2011 at 6:54 AM

      Great idea! When I can’t get to sleep, I pop a DVD in of Le Bum’s greatest plays in 4th quarters of important games! Zzzzzzzzz-zzzzzzzzzzzzz

      • mytthor - Jul 2, 2011 at 1:34 PM

        I don’t think you understand the metaphor. Your plan would only work if that DVD were long and repetetive. So like he’d have to be just scoring time after time in those situations. Otherwise the DVD’s would be over in a minute and you wouldn’t have a chance to fall asleep. But don’t worry, even though you screwed up the joke, I still understood what you meant because you did this super clever thing where you replaced LeBron’s name with a derogatory word, “Bum.” This brilliant juxtaposition managed to get your point across. It’s an excellent idea; where’d you get it?

      • purdueman - Jul 2, 2011 at 1:51 PM

        No, I didn’t “screw up the joke”, but I did get you (and I’m sure several others), to pause long enough to stop and think about it (which was the entire point).

        Le Bum of course totally disappears in fourth quarters of big games, and the only thing faster than a speeding bullet is the speed with which he gets rid of the hot potato (otherwise know as the ball), when it’s thrown in his direction in the 4th quarter of big games.

        Hence one can become mesmerized and fall into first a deep trance and then into a deep (if not eternal if one’s not careful), sleep while staring at the dvd while seeking to find any trace of Le Bum on such a video!

  9. florida727 - Jul 1, 2011 at 8:03 AM

    I just have a difficult time being sympathetic to the players on this. They assume none of the risk of running a business. All they do is play a game. They already get paid millions for doing so. And most of them are qualified to do nothing more than flip burgers or ask ‘paper or plastic’ outside their ability to play. In today’s economy, they should be grateful they’re earning such incomes. Then again, if you look up “greed” in the dictionary, you will find a picture of the owners with a description that reads, “example of”. Do the words “in the best interest of the FANS” ever enter the discussions? Doubt it. Long live college basketball…

  10. purdueman - Jul 2, 2011 at 12:35 AM

    florida… interesting stat. I heard on ESPN radio a few weeks ago that when you take ALL of the current players, coaches and managers together, they combined only have 38 college degrees TOTAL. I’m sure that the number in the NBA is likely half or less of that. Pro athletes ain’t the sharpest tools in the drawer!

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