Informative article on NBA CBA Looming Lock-out

For those of us not so informed about the upcoming labor negotiations, implications, etc. for the NBA at the end of the season, this is a great article. A lot to digest, but very helpful from all angles. Very well written for someone like myself.

http://sports.espn.go.com/nba/columns/story?columnist=coon_larry&page=lockout-100922

I know we are focused on the upcoming season and coming away with a championship. This might be a nice sidebar (while somewhat negative), waning dog days of summer discussion to get us away from the most recent Scal diversion/online intervention we've all been through. Also, I'm not trying to rain on the upcoming season parade by any stretch, just found this article very helpful and informative.

Can anyone further explain why there is revenue sharing? Is this something like a counter by the owners to the power that the players union has as a group to take from the rich and give to the poor in the league, keeping the owners/franchises bonded together by not losing teams, or am I missing the point? In other words, what does RS accomplish?

Also, I 'd like to know what the board's thoughts are on success or failure to reach an agreement by the deadline, given both sides and the representatives invovled.

I also know on our home page there already is a dormant CBA thread meant more for education purposes and if the moderators deem it best to put this in there, I'm cool with that.

I'm sure I'll have more Q's come to mind as the discussion moves on, but I'll interject as those come up.

My knowledge of all the current workings and all the moving chess pieces is very limited, so for those who are more informed, please forgive me in advance if I ask dumb questions for clarification. One of the coolest college classes I ever took was @ UNC-CH in summer school, History of U.S. Labor, but that was many years ago.

Are you refering to the revenue sharing between teams?

After my original post, I think I determined what RS is. RS is just the agreed upon revenue (payroll) percentage, 57% currently, that the owners "share" with the players, correct? (Which is a very nice share, I might add) I initially had this confused with the luxury tax which is, in essence, taking from the rich and giving to the poor for going over the cap. I get the crux of the current issue on this in that the revenue % is gross, not net. The owners think they are getting the shaft in that their expenses for them come out of there 43% share. The players get all the gravy without being accountable for the expenses associated with that revenue. Of course the players like the current gross revenue feature because it's gross. Net means less to them. This all gets into Accounting 101, the differences between the IS and BS and matching revenues with associated expenses. Quite a mess!

I also determined at the end of that article is Larry Coon's FAQ on CBA, which has just about everything you could ever imagine on CBA. That should get me up to speed.

Problem with using net would be "what is included in the net". The owners could very well blow up some costs funneling money to themselves on the expense of the players. I would say using the gross is the way to go.

There is also revenue sharing between the well off and not so well off teams. The luxury tax is one of the contributors to that. To get to be a part of the revenue sharing the team supposedly has to pass some checks that the league or whatever does to make sure that the franchise is ran well. Also no team supposedly received more than 5m from that so it is not really big money but still not insignificant.

In general it is in the interest of all teams/league that all teams are competitive and also that teams do not just dissolve.

It is a very interesting kind of product to deliver that asks for very special considerations when it comes to the sports teams. In general business you would be happy to have the product that is the absolute best with no competition. In sports that does not really work, you are dependent on your "competition" doing well

Also, if the players are going to share (some) expenses, why not ask for some part ownership to boot, because that's what an owner does, takes the good with the bad?

Sounds like the owners backed themselves into the corner on this one. League must have been doing well the last time CBA agreement was put in place. Now when times are "tough", they want to cry uncle.

Later in the above article, it mentions one of the nuclear options/threats the player's union has is decertification. Wouldn't salaries necessarily drop to a competitive wage since unions are designed to limit labor supply? We'd get a flood of less than great talent on the floor. (Of course some of us argue there already is less than great talent on the floor and contraction is in order.) Doesn't seem like the players would want that either, (not to mention the ensuing antitrust court battle costs) so it really doesn't sound like the players are going to have an out this time around. They also lose all their pension, benefits, etc and must now go out and negotiate on their own.

Granted the NBAPA is a very unique union in the highly specialized skill area of sports. First of all it only has 400+ current members. And these laborers are paid a ridiculous sum which we the public is willing to pay and support. Most of your regular unions are 1,000's to 100,000's strong. And their wage, while above the competitve wage doesn't hold a candle to the NBA going wage.

Regarding revenue sharing, the whole idea is give teams in smaller markets the opportunity to be financially viable and competitive. Teams in large markets have much larger revenue streams due to ticket prices, local media deals, advertising and naming rights. (They also have higher expenses.)

Another advantage large markets have is that many players want a large market to get more money from separate marketing deals. An NBA player gets a lot more from being a spokesperson for a major company in New York than, say, a car dealership in Oklahoma City. Many players also prefer large markets because there's more entertainment, more to do.

Without revenue sharing, teams in large markets dominate because they have a disproportionately larger revenue to pay player salaries, and they can overpay for free agents and still make money. The example that comes to mind for me is major league baseball, where the Yankees can have a $206 million payroll and still make tons of money, while 22 of the 30 MLB franchises have payroll under $100 million.

In the NBA, there isn't such a drastic grouping of the haves and the have-nots, but the overall spread is still significant. Player payrolls in 2010 (not including luxury tax) went from the Lakers at $94 million to the Timberwolves at $37 million.

Some teams buck the trends. The Knicks and Clippers have shown that large-market advantages can be negated by poor decisions, and the Spurs and Magic have shown that small-market teams can compete for championships. But they are the exceptions.

I found the following at http://bleacherreport.com/articles/231404-is-another-nba-lockout-inevitable. (The article is an interesting read that I'd recommend.)

Take a look at the eight teams who have won the last 31 championships and where they rank in terms of television market size, according to RabbitEars.info:

* Los Angeles (2)
* Chicago (3)
* Philadelphia (5)
* Boston (8 )
* Miami (9)
* Detroit (10)
* Houston (11)
* San Antonio (28)

San Antonio is the exception to the rule—the lone team from outside the top-11 in size. It should come as no surprise that those teams who benefit from increased market size would be more likely to retain their own players and pursue free agents.

The NBA is generally better served when large-market teams do well due to increased interest by larger fan bases and better TV ratings in the playoffs, but it needs small-market teams to be financially viable and at least have the opportunity to be competitive. From my perspective as an NBA fan, I want to see relative parity of opportunity, which means small-market teams having the same opportunity to compete.

There is obviously more to achieving relative parity than revenue sharing, but it's a big piece of the puzzle. Under the current agreement, the biggest chunk of revenue sharing comes from the luxury tax, which is not a consistent or large enough source of revenue to achieve parity of opportunity.

The sports league that has the greatest revenue sharing is the NFL. Here is a comparison of revenue sharing between sports (http://jonesonthenba.com/2009/03/nbas-real-economic-problem-lack-of.html):

In the NFL, the home team splits the gate 60-40 with the the away team. In the NBA, the home teams keep everything. In the NFL 70%-75% of team revenue comes from revenue sharing. In the NBA it is only 20%-25%. In the MLB 35% of each teams local media revenues (TV, Radio, etc.) are put into a pot and redistributed. There is no such agreement in the NBA. In the NBA $49 million was redistributed for revenue sharing (via the lux tax and the escrow system) in 2008, while the MLB redistributed $300 million in 2005.

Revenue sharing is far from the only issue facing the league, but I sure hope it gets addressed as part of the CBA negotiations. I think there's a good chance there will be a lockout because the complexity and significance of the issues to be resolved are enormous, and there are too many parties with a vested interest in keeping the status quo.

Outside

Great post Outside

You outlined very well why revenue sharing is something good and probably positive for the big teams.