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Thursday
Nov172011

Rogue of the Week: Union/Players Who Are Now Losing Money No Matter What

Is anyone in the union's inner circle looking straight at the facts?NBA labor negotiations over the last two months have not been promising. Each side has made concessions here and there (though the players have been willing to give up a lot more than the owners), but overall there is the sense that neither side was that close to a deal they wanted to make. My thinking, as an impartial observer, was that the NBA and NBPA would keep at it, just as they did in 1998, eventually reaching a deal and salvaging the season. Yet after Monday’s news that the NBPA had rejected the league’s latest “final offer,” ushering in what David Stern called a “nuclear winter,” the chances for any basketball in 2011-12 seem extremely slim.

The owners carry the lion’s share of the blame—it’s becoming increasingly clear that they haven’t been negotiating in good faith—but if the season is cancelled, the players will have a burden to bear as well. And that burden is this: they’ll have to live with knowing they could have prevented a missed season by agreeing to the league’s 50-50 proposal, a deal that will probably be pretty similar to what they ultimately get. A 50-50 BRI split was the main point in the league’s proposal, which also included limiting contracts to four years (five for Bird players) and lowering annual salary raises for players. Is this fair for the players? No. But the players are beyond the point of rejecting proposals because they’re unfair. With the season in legitimate jeopardy, Billy Hunter has to look at the lost income from this season and realize that it’s better to get a bad deal and a 2011-12 season than a good deal and no season at all. The players should have accepted the league’s latest proposal, and here’s why.

First, the facts:

-The league made $3.8 billion in revenue for the 2010-11 season.

-David Stern announced that all games through December 15 have been cancelled—that’s 26% of the regular season.

-Assuming that the league’s revenue would have stayed consistent for 2011-12, and assuming 20% of the revenue was generated from the playoffs (there are far less games in the playoffs, but tickets cost more, and more merchandise is sold), the lockout has cost the NBA $760 million so far ($760 million = 1/5 of $3.8 billion). Under the league’s 50-50 proposal, the players would have received $380 million had the first half of the season been played.

-The players’ last offer was a 52.5/47.5 split. Under that system, for an entire season, they would receive $95 million more than they’d get with a 50-50 split.

-Over a six-year period (the earliest opt-out in the owners’ most recent offer), that difference would amount to $570 million. If the entire 2011-12 season is lost, the players would forfeit $1.9 billion under the owners’ latest proposal.

See where I’m going with this? Isn’t it better to agree to a deal and get some money from the 2011-12 season than to wait an indefinite amount of time for a slightly better deal? I know that BRI isn’t the only issue on the table here, but what leverage is Billy Hunter planning on using to get a deal done? Suing the league could take years, and the players and owners will probably reach a settlement by then anyway (at which point, the players would drop the suits). Apart from that, the owners are in control. If they don’t want to have a season, there won’t be a season. And guess what? Unlike the players, the owners have plenty of other revenue streams to keep their pockets fat during the lockout.

Make no mistake; I side with the players in this argument (though they are hardly guilt-free). The issue is, when one side decides it doesn’t want to negotiate, there’s not much you can do to get them to change their mind. The owners have the leverage—a missed season just doesn’t matter as much to them in the long run. Jerry Buss has owned the Lakers for 32 years, whereas a rookie like Isaiah Thomas (last pick in the 2011 Draft) might only be around for one or two. Buss can afford a missed season of revenue; Thomas can’t. That’s why Hunter has to swallow his pride and salvage the season (and the all-important revenue that comes with it).

The lockout’s already done a ton of damage to the league’s reputation, but a lost season could permanently damage the league. Just look at the NHL. The league’s first TV contract after the lockout was terrible—they got no rights fees from NBC, just a share in ad sales. No rights fees! Compare that to their next deal, where NBC/Versus paid almost $2 billion for the rights through 2021. I’ll admit, the NBA is more firmly entrenched in the U.S. than the NHL, but it’s not even close to the NFL, where a lockout would have created riots in the streets. The NBA has replacement goods in NCAA basketball and hockey. The NFL is one-of-a-kind.

I feel truly sorry for Billy Hunter. David Stern put him in a no-win situation—either make huge concessions from the last CBA (due largely to the owners’ incompetence) or lose the season. There’s no good solution for Hunter. And though accepting a 50-50 deal undermines his negotiating for the last couple months, so what? For better or worse, Hunter has to represent the best interests of all players, not just the select few who deserve to get paid fair value and won’t. By rejecting the offer, Hunter’s taking a huge gamble—that whatever deal he ultimately agrees to will be worth losing $380 million (and potentially a lot more).

 

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Reader Comments (2)

I wonder why the players don't just start their own league. They would obviously get some kind of television contract for it and finding places to play would be no problem. The main leverage the players have is that owners don't play basketball.

November 17, 2011 | Unregistered CommenterJG

I'm actually going to write an article about this very topic very soon.

November 17, 2011 | Registered CommenterZachariah Blott

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