There are still three full months until the scheduled start of the next NBA preseason, but most experts believe that date will come and go without any basketball being played. In fact, many believe we might miss the first few months of the regular season, if not the entire NBA year! Why is there such pessimism? Because both negotiating parties are being unrealistic.
The NBA is a star driven league. Fans tune in to see the big names, big personalities, and heroic feats achieved by the game’s greatest players. Only the most hardcore of fans would effort to turn on the TV if Kobe Bryant, LeBron James, et al are not on the court. And even fewer fans would spend a hard earned paycheck on inflated tickets prices to see a starless game of basketball.
With the stars being the true attraction of the NBA, as they always have been, each top level player holds an almost immeasurableimpact on the financial fortunes of his team and league. And with that financial power comes political and negotiating power. That power most recently led to a 13 year run where the players held a significant advantage in terms of revenue percentage received, among other financial matters. This advantage was achieved despite a long lockout that cost the NBA nearly half of the 1998-99 season and nearly broke the players’ union.
But while the players have prospered – the average NBA salary rose from $3 million in 1999 to $5.765 million in 2009-2010, making NBA players the highest paid in all of team sports - many team owners claim to be losing large sums of cash. The league contends that 22 of 30 teams lost money last year, to the tune of over $300 million combined. However, union director Billy Hunter contends that those numbers are embellished at best.
Many of the teams who are said to be in the red claimed interest and amortization from the purchase of their franchise as well as a depreciation of “assets,” otherwise known as the players, in order to manipulate the books. While these are all legal maneuvers, and each owner has a right and even a responsibility to turn a profit large enough to cover his investment, the Union argues that the players shouldn’t be responsible for the mismanagement of ownership deals or other costs that fall outside the realm of operations.
But regardless of who you believe on the amount of money lost, the fact remains that some teams are losing money even with responsible and efficient management. The Portland Trail Blazers, for instance, are a team that has performed well on the court and at the box office, but despite those facts and a high fiscal responsibility they have struggled to break even in recent years. And this, the league says, is the fundamental problem with the current system. Teams in smaller markets cannot turn a profit no matter how efficiently or effectively they operate.
So the owners initially proposed a hard salary cap at $45 million, more than $13 million below the current soft cap which was, itself, obliterated by most teams last year. That strict limit would require an overall player salary reduction of more than $700 million dollars next year, or better than 1/3 of last season’s salary total. The league has since amended its offer to essentially freeze current salaries, thereby recouping the money as revenues rise over the length of a ten year deal, rather than taking such a big bite out immediately. The players, understandably, have scoffed at such an extreme number regardless of the way in which it is applied.
But the salary rollback isn’t the only demand from the owners. They have also proposed shorter contract lengths, non-guaranteed contracts, and an even higher age limit.
While a total salary reduction and tighter restrictions on individual and overall salary expenditures is reasonable, the owners have treated the bargaining table like Hiroshima, dropping bombs that devastate any chance at compromise.
At the end of the day, the deal will not get done until each side is willing to move to the middle. And that process could unfortunately be aided by dissension in the ranks of one side or the other. While the owners disagree amongst themselves on revenue sharing and the salary cap level, the players will struggle with how long to hold out as the more accomplished names would likely have more money banked to sustain the lack of continuing paychecks.
It is the nature of business that owners and employees each want as much as they can get, but when it’s millionaires fighting with billionaires the general public often finds it hard to relate. So for a league reaching new heights in popularity and revenues, one would hope that logic will win out, and the sides will each come with an attitude of real compromise to complete a deal before any irreversible damage is done.
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