Latest on the lockout...???

http://www.nytimes.com/2011/11/04/sports/basketball/nba-talks-to-resume-saturday.html?_r=1&pagewanted=2

The last paragraph sort of befuddles me...

Hunter took a more strident stance.

“My position,” he said, “is I don’t think there should ever be a circumstance where owners make the same or more than the players.”

So if I own a something/anything and people "work" for me, they should make more than I do?

I'm gessing but with that in mind gonna hsve to watch a lot of College Hoops!

beat

I don't agree with the players' position completely, but I do understand it. One key thing is that they've lost the PR war on this 50/50 split. I'd say most people here know that they're talking about the so-called "basketball-related income," or BRI, that's being split. But in many people's minds, it's morphed into a discussion about total revenue, but that's not the case.

BRI includes certain revenue sources while excluding others and allowing owners to deduct certain expenses off the top. In the previous collective bargaining agreement, the percentage split of BRI was tilted toward the players at 57/43. They're talking now about reducing that to anywhere from 50/50 to 52.5/47.5.

However, as a share of total revenue, the players will take in less than 50 percent. Here's an excerpt from a recent letter from union rep Billy Hunter to the players.

Remember that BRI does not reflect the total revenues generated by the NBA. The NBA is allowed to take hundreds of millions in "expense credits" before sharing any revenue with the players ($543m in 2010-11). Given this, under the NBA's proposal, the players would receive only 44% of total revenue generated by the league. By comparison, we received 50% of total revenue under the previous CBA, and our 53/47 proposal would reduce the player share to 46.4% of total revenues.

Hunter's not exactly an unbiased source, but those are the numbers I was able to locate. My point is that, whatever the actual numbers, discussing the split in terms of total revenues, where the players will be taking less than 50%, makes the players' position sound more reasonable.

Owners complain that they need a larger share of the BRI because the BRI setup makes them assume expenses that both sides benefit from. If, for example, a team boosts spending on marketing to increase attendance, the marketing costs come out of the owners' BRI share, but they have to split the increased attendance revenue with the players.

From the players' point of view, owners use all sorts of accounting tricks to claim they're losing money and count debt service payments and unreasonable costs as expenses. What's to prevent an owner from overleveraging themselves, borrowing hundreds of millions of dollars to finance their purchase of a team, and then saying that all the interest on that debt is an expense that players should help pay for? Or providing extravagent salaries and perks to themselves and their relatives and cronies and claiming that players need to take less so the owners can afford to continue doing that?

One point of comparison is the NFL. In their previous CBA, they used something similar to the BRI model where owners exempted certain expenses before splitting the remaining pie with the players. In the agreement they signed this summer, however, they split the total revenue. One source I found said the players get between 47% and 48.5% of total revenue. In the previous deal, players got 59.6% after the owners deducted $1 billion in expenses, which translated to around 52% of total revenues.

From a PR perspective, if NBA players would start saying that they're bargaining for 46% of total revenue instead of 52% of BRI, they'd sound a lot more sympathetic. Considering they're holding the line on some issues and giving back big-time on a lot of others, I can understand that the players want to stop the bleeding and not just give the owners everything they want.

Again, I don't agree with their position completely, but I do understand it.

Outside

Just my quick rambling and semi-coherent thought on this whole thing...

Both beat and Outside make good points. The posture from the players union that they should get a bigger slice of the pie is mind blowingly ignorant. The debate over how to slice the pie and what to call revenue derived from basketball operations versus overall revenue stream is murky at best because all revenue scales back to the total cost of operating the franchise.

I think in it's most simplistic terms the whole situation boils down to this;

The owners need to have the new agreement they propose to protect themselves from themselves.

If we need to assess blame let's ask; did the owners cause this situation? Yes. They've been too generous in past revenue split agreements, overpaid player contracts and in many cases, including Boston, purchased franchises for unreasonable prices when they were at all-time high valuations.

On the other hand the players are getting what the market appears to support for a specialized and short-term skill that people are willing to pay the high going rate to see. If someone wants to pay me $6mm per year to throw a ball through a hoop you bet I'm taking it.

It comes back to the ability to stay afloat and pay those salaries. Many franchises simply seem to be having difficulty generating the ever increasing revenue needed. Because these franchises are not public companies (although Boston did once issue stock) our understanding of the books is limited. From what we do see, however, margins in several cities, such as Milwaukee, look to be dangerously thin.

Several of us here have or do operate businesses. The expenses are far deeper than most who do not have that background realize. A lot of reports flying back and forth talk about what amounts to gross revenue, not net income. Set aside for a moment the idea of any division between overall income and income derived from basketball operations; it's all franchise revenue. Expenses and revenues cannot be divided as cleanly as the players union would like. Operating costs can be sky-high in these franchises and you have to allow for overhead items before counting player salaries such as staff salaries, income taxes, sales tax, workers comp, state mandated disability, health insurance, unemployment insurance, medical insurance, rents/mortgages, depreciation, utilities, debt service on hundreds of operational and facility items, sinking funds for equipment purchase and replacement...shall I go on? Now throw in 20 or so coaches and players the majority of whom are drawing well into 7 figures and the miscellaneous costs that go with that and you start to get the picture. A good amount of what is termed basketball related income very likely has to go to support fixed operational overhead. It's not hard to imagine more than half.

What about revenue? Can we really catagorize what comes from what? Yes we know that we can count ticket sales and we can tally concession income. But does the team run it's facility just on income from clearly defined sources? It doesn't appear so. Dollars from one source overlap and comingle with another. Money from basketball generated revenue seems to be needed to carry costs in several areas. I think eventually both sides have to look at total income and what is needed to keep a franchise viable.

That players think they should have any claim on an even split or more of revenue, no matter how it's segmented, defies rational thinking and common business sense.

They've gotten fat to this point, but it's time to slim down or there will simply be fewer franchises and fewer roster spots. By taking a cut in overall revenue share, regardless of how we account for it's source, the multi-million dollar contract the players save may be their own.

Regards

I was in high tech sales and sales management for close to 25 years. It was a generally accepted truism of successful organizations that the top salesman makes more than the CEO. That might not work for all companies in all industries, but it's not the worst idea. Salespeople rely heavily on commission, which is performance based. Assuming they're not allowed to sell things at a below-acceptable profit margin, the company excels when they do their job superbly.

In sales-speak, a comp plan like this has "blue sky". It means that you can really advance yourself and your family in giant steps by having 1 or more great years. I've seen salesmen work themselves up into a lather for that. Take away the "blue sky" and they won't. After all, why kill yourself for a little more? I remember, at one company I was a salesman at, I barely slept for almost 3 months due to the bonus incentives (aka "sales spiffs") they were offering during that time. I don't remember the exact numbers, but I made something like $75k in 3 months (I did that by sucking everything in my pipeline from 6 months out up into that 3 month window). Sure, I sucked left hind teat (that's an animal husbandry reference, Rosalie) for the next 3 months, but it was still worth it in the end. I had a great year, made a ton of money, and the company reported amazing sales for the quarter and the stock shot up. A win-win.

My point is that paying the top draws to the league more than the owners is not a totally alien notion, unfounded in other realities and industries. It is, in fact, a technique that not only allows the cream to rise to the top, it spurs it.

The pipewrench in this is that the players' contracts are paid whether they have good years, great years or injured years. A 5 year contract is a 5 year contract is a 5 year contract. Unlike sales, which can be traced directly to an individual salesman, how would one know whether people come to see KG, PP or RA? Jersey sales? Poppycock. And how about Mr. Glue, Rondo? Rondo isn't a scorer, but he's a facilitator. How much does one compensate a facilitator vs the deliverer who benefited from his facilitation? A rebounder or defender vs a scorer? Was KG, in his prime, worth more than Kevin Durant? Why, Durant is a much better scorer? Certainly, both of those players WERE/ARE the franchises (KG in Minny, KD now in OKC). Without them, the franchise and the owners wither and die on the vine. Why shouldn't they make more than the owner then, since the owners aren't the ones putting the butts in the seats?

The owners are their own worst enemies. They complain about player contracts, but who is offering them? How much is Chris Bosh making, and why? What does it say that many players, GOOD players, are their most valuable (to owners) in their last contract year? It says, to me, that the contracts in general are overpriced and being able to get out of one soon has value (to the owners) above its monetary value and the value attributable to the player's playing ability and contributions on the court.

A bit of a rant here, but I'm a fan of performance-based compensation. Not 100% commission, but some. Pay a rebounder by the rebound and watch him turn into Dennis Rodman. One must be careful with this, though. You don't want to see Rondo chucking up shot after shot just because there's more money in scoring than there is in anything else.

bob

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Bob,

I think you hit a key point here. From my view anyway, you totally nailed it.

Salesmen are often the highest paid members of their organization. They do it by the effort they put in year in and year out. Slack off and down goes the pay. They do it on incentive and they don't get to share in net corporate income on top of it all (not outside of the limited parameters of a bona-fide employee profit-sharing plan anyway). Sometimes base pay may be raised as a reward, but ownership, especially in a private enterprise, rarely divies up net income with the sales force in anything beyond what is earned on the commission and bonus grid. The sales reps don't get to say "I'm paid X and I'll take half of your net and stick it in my retirement plan too". NBA players pretty much do just that.

In professional sports, a good year or two and we negotiate for a huge contract. All too often performance declines from there.

There are incentive bonuses that are common in some sports, most notably baseball. I would be all for compensating players on a yearly performance basis.

Unfortunately, in equal parts thanks to precedence and the strong unions in most sports, that isn't ever going to happen.

Too long ago the owners caved in to the notion of paying over future years for past performance. Everyone say it with me; past performance is not an indicator of future returns.

The owners are their own worst enemy and that's why we're at the point of no pro hoop being played. Now the owners need to get back to a more workable business model and, of course, the players don't want the party to end. Can't blame 'em; they're already hooked on the pablum and the owners have been the ones spoon feeding it to the players. Shame on the owners for ever starting something that can't be maintained.

In my opinion here's the main element the owners should never have gotten away from...

If I'm the owner and I'm paying my player/employee an incredibly high salary regardless of present performance, there is no way on God's green earth I'm cutting him in on the lions share of my net operating income. Especially when it's my capital investment that allows the seven-foot toothpick to play here in the first place and he doesn't have any skin in the game.

I am with you on performance based compensation. As a business owner, and in my particular line of work, I live on it. I wish guards and forwards did as well.

Regards

Great discussion, everyone. The original stimulus for the Player's Association was to encourage fairer pay scales for players. But, in practice, compensation careened way out of control so that, instead of incentive-based compensation, the operative process is leverage-based compensation.

My own preference would be for a plan something like the following:

1. Make all contracts for one year only.

2. Set compensation for each season at a base salary plus performance bonus (to be awarded after the playoffs).

3. Bonus amount to be set by an independent arbiter, with the team and player allowed to have inputs/make presentations/whatever so that all pertinent factors would be considered by the arbiter. An option would be to require owners to reveal financial records privately to the arbiter so the team's financial status could be considered but the players and agents would keep their grubby hands out of that area. (In how many U.S. companies are employees allowed to play a role in setting the percentage of their employers' revenues—from whatever source—the employees are allowed to split?)

4. Retain free agency, but limit the year-to-year increase in base salary to a certain percentage regardless of which team is involved (to dissuade players from team hopping). The player's existing team and any potential new suitors would both be confronted with the same ceiling in the salary offering for the coming season. (Perhaps the percentage maximum by which the salary could increase annually could escalate with tenure of the player in the league.)

5. Make the bonus provision for a given season applicable ONLY if the player has continued to play for the same team for which he played the previous season (to dissuade players from team-hopping). If a player jumps to a new team, no bonus for him that season (and perhaps the next season as well).

6. In addition to the aforementioned compensation, teams would be required to fund a catastrophic insurance policy to protect the player in case of serious injury, with insurance proceeds to go directly to the player. Teams could protect themselves similarly at their own option.

I'm sure all the owners, players and agents would jump at the opportunity to function under such equitable and realistic conditions. And pigs can fly. But it surely would be fun to return to those thrilling days of yesteryear, when players' emphasis was on maximum performance each year, fans of a team could get to identify with favorite players for extended periods of time, and the game wasn't teaching kids the advantages of greed.

Sam

NYCelt wrote:Bob,

I think you hit a key point here. From my view anyway, you totally nailed it.

Salesmen are often the highest paid members of their organization. They do it by the effort they put in year in and year out. Slack off and down goes the pay. They do it on incentive and they don't get to share in net corporate income on top of it all (not outside of the limited parameters of a bona-fide employee profit-sharing plan anyway). Sometimes base pay may be raised as a reward, but ownership, especially in a private enterprise, rarely divies up net income with the sales force in anything beyond what is earned on the commission and bonus grid. The sales reps don't get to say "I'm paid X and I'll take half of your net and stick it in my retirement plan too". NBA players pretty much do just that.

In professional sports, a good year or two and we negotiate for a huge contract. All too often performance declines from there.

There are incentive bonuses that are common in some sports, most notably baseball. I would be all for compensating players on a yearly performance basis.

Unfortunately, in equal parts thanks to precedence and the strong unions in most sports, that isn't ever going to happen.

Too long ago the owners caved in to the notion of paying over future years for past performance. Everyone say it with me; past performance is not an indicator of future returns.

The owners are their own worst enemy and that's why we're at the point of no pro hoop being played. Now the owners need to get back to a more workable business model and, of course, the players don't want the party to end. Can't blame 'em; they're already hooked on the pablum and the owners have been the ones spoon feeding it to the players. Shame on the owners for ever starting something that can't be maintained.

In my opinion here's the main element the owners should never have gotten away from...

If I'm the owner and I'm paying my player/employee an incredibly high salary regardless of present performance, there is no way on God's green earth I'm cutting him in on the lions share of my net operating income. Especially when it's my capital investment that allows the seven-foot toothpick to play here in the first place and he doesn't have any skin in the game.

I am with you on performance based compensation. As a business owner, and in my particular line of work, I live on it. I wish guards and forwards did as well.

Regards

NYCelt,

I think we here are doing a good job at nibbling away at this problem. A little bit of me, a healthy dose of you, a broadening of perspective by Outside and some structure by Sam and we're more than halfway home.

As far as owners not giving a piece of their net operating income, that actually happens quite a bit in business too. It's called "profit sharing plans" and the sales rep share in that just like other employees and that's on top of their established commission plan. After all, you not only want your sales rep to sell, you want them to negotiate like the Devil for your soul in order to maintain as good a profit margin as they can get. Getting twice the sales @ half the margin is good for them, if they get paid on sales, but not so great for the company and the owner's ability to give raises/bonuses to non-commissioned employees (not to mention expansion, new hires and acquisition of additional capital equipment). Higher sales @ a higher margin is healthier overall. That happens when they get a piece of the net operating income. Once again, it encourages efficiency since efficiency goes to the bottom line and if you share in the bottom line then it's of interest to you. It sorta makes every employee a part-owner. The bottom line is the bottom line and you want to incent ALL employees in such a way that it is always in their best interests to enhance the bottom line. Comp plans that conflict with that are not helpful. There must be carrot and stick. You can't just always say "if you don't work hard and smart I'll lay you off". You also have to show them "blue sky" and, IMO, that includes employees like bookkeepers, secretaries and everybody else who contributes to efficiency, and therefore, profit. Of course, the biggest beneficiaries of the "blue sky" of a profit-sharing plan are the owners themselves. Well structured, profit sharing plans should be viewed as profit-making plans, since your entire team becomes zealots about maximizing profit and not just about "doing their job".

In basketball, how to do this? Well, paying "by the win" would help, but I doubt players will go for that since there are too many other factors out of their control (e.g. quality of coaching staff, willingness of owners to "get the talent" to win, competitiveness of their conference). Divvying up BRI is one way, but we're stuck quibbling over who gets the end pieces of the loaf.

I think Sam, as usual, has done a pretty good job of putting the words to music. Shorter contracts will tie them more closely to performance. I also think Outside's emphasis on what is and is not included in BRI is significant. After all, there's money coming in that the players do not share in and there's money coming in the owners do not share in. Why not use an net income based model, where certain expenses are excluded (or arbitrarily set; e.g. Jerry Buss owns the Staples Center. He, therefore, pays rent to himself and can generate income by renting out the Staples on all other open dates (not to mention, to Donald Sterling of the Clips)? Maybe owners like him and/or that have received tax exemptions from their city/county have to pony up more money in order to normalize against other franchises?). Would the players be willing to cede their ownership of income for jersey and sneaker sales and endorsements? Wanna see KG's head explode? Mention that to him.

The true measure of silliness here can be seen in the fact that, by cancelling games through New Years, whatever each side had to gain by holding out, has been wiped out by the loss of wages/income/BRI/etc. At this point, they're fighting just to fight.

Stupid is as stupid does and nobody's looking like Nobel Prize nominees right now. I understand the franchisees and the players being at odds, but Mr. Potato Head surrendered his position as an honest broker from Day 1.

bob

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bobheckler wrote:[At this point, they're fighting just to fight.

Bob, you're absolutely correct. I don't think this is going to end soon or end well. Each side is fractured, but the hardliners on each side are a big enough bloc that they're driving the negotiating positions. Now that they've given all they think they should give and there's still a gulf between the two sides, no one wants to give any more because they don't want to look weak. So they're making a stand and saying they're willing to lose a season over it.

From what I've been following, Yahoo Sports seems to have better information than ESPN, si.com, or the wire services. Looking at today's column by Adrian Wojnarowski (http://sports.yahoo.com/nba/news;_ylt=Ako6v1_p.B9RxSXZULGCz0S8vLYF?slug=aw-wojnarowski_nba_labor_talks_110511), other than the doomsday tone, one incident stuck out to me:

After reports that Charlotte Bobcats owner Michael Jordan had become one of the most vocal of hardline owners, union officials were anxious for him to speak up in Saturday night’s meeting. Union officials, just as they wanted to do back at the last labor meeting that Jordan attended on All-Star weekend, were determined to throw back at Jordan many of his old anti-ownership screeds from the 1990s.

As one official said, “He never opened his mouth, not once.”

So the union was waiting for Jordan to say something, anything, so that they could pounce and call him a hypocrite. The thing is, in the grand scheme of the negotiating process, that's petty and not helpful toward getting an agreement. It shows me that this has gotten personal. It shows me that, like Bob said, they're fighting just to fight. It does not bode well.

What kills me is that, right here in our little forum, we have people who are passionate about the NBA, understand the complexities of what the owners and players are negotiating, understand the positions each side has taken and the ramifications of those positions on the financial health of the league, and could come up with a fair agreement. Sadly, the people doing the actual negotiating do not have those qualifications.

Outside

Outside,

At least three major differences exist between the negotiators and members of this forum. (1) We don't have vested financial interests, (2) we don't have egos inflated by dint of our being celebrities, and (3) unfortunately, what we (the fans) think doesn't matter anyway.

I recently accessed the original goals of the Player's Association back when it was basically founded by Bob Cousy. They include a larger playoff pool, getting some back pay for Baltimore players, and the institution of pension benefits. Conspicuously absent was any provision for improving the salary structure. And the only financial provision that would immediately affect then-current players rather than players of the past involved the playoff pool.

For the most part, the objectives involved better work conditions such as not being required to report more than 30 days prior the the opening of the season, one playing rule change, being paid in 10 installments rather than 12, a per diem of something like $5 a day, etc. In other words, those guys weren't motivated primarily by personal financial greed but by a sense of fairness involving players of the past as well as themselves.

I guess that was the greatest generation in more ways than one.

Sam

Here's a piece in the New York Times about something I'm in favor of -- players having a piece of ownership so that the player/owner relationship becomes less adversarial and more like a partnership.

http://www.nytimes.com/2011/11/07/sports/basketball/nba-needs-a-drastically-different-model.html?_r=1&src=recg

As the writer says, it's not likely to happen this time, but it could be the future direction. I hope so. Not that a partnership guarantees harmony, but I've got to think it makes for a more constructive relationship than what we're seeing now.

Outside

Stern: ‘Rational thing’ for union is to take deal

By BRIAN MAHONEY, AP Basketball Writer


NEW YORK (AP)—NBA players are facing a Wednesday afternoon deadline to accept the league’s current proposal or face a harsher one that calls for rolling back their salaries, and Commissioner David Stern said Monday “the only rational thing to do is for us to make that deal.”

“We think that there’s a great offer on the table and what we told the players is it’s getting late, the only rational thing to do is for us to make that deal because given what’s going on in our business and our industry, it’ll get worse from there,” Stern said during an interview on ESPN.

That proposal calls for players to receive anywhere between 49 and 51 percent of basketball-related income, though players argue it would be nearly impossible for them to get anywhere above 50. Stern said the next one will call for a 53-47 split in the owners’ favor, along with essentially a hard salary cap.

The article continues from there and can be found at; http://sports.yahoo.com/nba/news?slug=ap-nbalabor


The owners are attempting a strong tactical move here but some of them have their own vulnerabilities. If the players stick with the union and ignore the deadline the owners are going to have to try another strong move like cancelling the season. It appears the majority of the players can't afford to lose a season so the owners hope then would be that a hardline stance makes the players pressure the union to cave.

A possible backfire for some owners is that most of them do not have ownership of their arenas and are also vulnerable if there is no season since they can't use the empty arena dates for other revenue generating events.

It will be interesting to see who blinks first.

It would be more entertaining, however, to actually have NBA basketball.


Note: This topic goes well, by the way, along with the thread MD started about union decertification and beat discusses this deadline in his thread "Stern Talk". Beat also posts a link to a video with a discussion covering Stern's address on this issue.


Regards

50-50 may not be enough for some owners:

Sources have told ESPN.com that the union's executive committee is scheduled to meet with the 30 player representatives in New York on Tuesday and a source said earlier that the union appears split on the deal. The executive committee, the source said, is staunchly against voting to approve the deal, while the player reps may also be divided.

However, a source said later Monday that the owners on the call fear that the player reps will push to approve the deal with the clock ticking.

Stern was not on Monday's call, but the sources said that up to 11 owners took part, including Charlotte's Michael Jordan, Portland's Paul Allen and Milwaukee's Herb Kohl.

"There are at least 15 owners who are praying that the players say no,'' one source said, "because then they'll get the deal they want.''

It seems that the smaller market teams don't think 50-50 is enough to allow their teams to make a profit. While most number crunchers agree that the 50-50 split, with some better contract management, will get the league to the break even point, that "break even" point is actually for the league, it is an average.

The bigger market teams will always have that extra bit and will be the perferred destination for the biggest free agents, but the smaller market teams will still have to struggle, even with expanded revenue sharing.

League officials said they lost $300 million last season, when players were guaranteed 57 percent of BRI. Stern said the league believes it can profit at 50-50 with expanded revenue sharing among its teams, though owners believe some teams would still lose money with a 50-50 split.

If the plan currently being refused by the players STILL leaves some teams bleeding money, what does that say about these players? And Stern? He better get his side in line or it just makes his latest "ultimatum" look rediculous.

One source said if the players accept the 50/50 offer, it will not be easy for Stern to get it approved by his owners.

"There are a large number of owners against (the 50/50 deal), but I think we have enough to get it passed,'' the source said.

http://espn.go.com/nba/story/_/id/7205428/nba-lockout-some-nba-owners-express-displeasure-david-stern-50-50-offer-sources-say

gyso,

Reading that makes me wonder if contraction is looming in the near-term regardless of what the final settlement is. Unless, that is, something outrageously unexpected and unlikely is agreed upon in the owners favor.

Regards

NYCelt, I think you bring up a good point about contraction. Assuming that the information is correct in the article gyso references (a big "if") and some teams would still lose money operationally with a 50/50 split of BRI, then something is structurally wrong with the NBA being in those cities.

I still think contraction is a long shot:

-- Owners of those franchises would want to cash out, not just walk away, and the remaining owners would have to come up with that cash. The Maloofs are not going to close up shop without a big, fat check.

-- Lawsuits galore. It would be a circular firing squad of plaintiffs and defendants, with the lawyers making money selling everyone guns and ammo.

-- Sponsors and business partners might be leery about doing business with the surviving small market franchises, making those franchises less financially stable.

-- Owners of surviving small- and middle-market teams would likely see their franchise valuations take a significant hit. A big reason many of these owners got into the league was increased equity in their franchises, and some of them could find themselves in a negative equity or even "under water" position, and it could take a long, long time for those values to recover. That would not be a happy scenario for those owners.

-- I think David Stern is concerned about his legacy, and I doubt presiding over league contraction on his way out the door as commissioner is the legacy he wants.

Having said all that, contraction could make sense if the targeted franchises are in deep financial doo doo and can't realistically survive with a 50/50 BRI split. In that situation, the values of those franchises plummet, the buyouts of those owners plummet, and contraction begins to make financial sense because the surviving franchises can do better if they don't have to structure the league just to keep franchises in the least viable markets afloat.

In my mind, the best argument for contraction is that if you can't make it work with a 50/50 split of BRI, you shouldn't be in the league. Personally, I wouldn't mind contracting Michael Jordan out of the league. Oh, the irony.

Outside

Outside,

That would be ironic!

Another possibility beyond contraction could be a few LA Dodgers scenarios without the divorce and expensive ex-wife. Not a good thought.

Consolidation rather than outright contraction is another theory that is completely unlikely but just shows there are always ideas floating about. Who knows, maybe some owners might even come up with a productive plan some day. OK...stop laughing...they might get a clue eventually.

My personal guess is you will just continue to see pressure on smaller market teams to move or sell and move, as has always happened in each major sports league.

Regards

Outside,

You hit on the many reasons I think there won't be any contraction, or in your words, "a long shot" at best.

The two key phrases (IMO) in this lockout is "BMI split" and "expanded revenue sharing".

At a 50-50 BMI split, the league claims it will make up most of the $300 mil loss, based on last year's numbers. Each BMI "point" equals about $20 mil, so the difference between 57-43 and 50-50 is 14 BMI points. Basic math shows us that 14 x 20 = $280 mil., almost the targeted number; $300 mil.

So with the 50-50 BMI split and some better money management (less bad contracts?), the league as a whole can make a profit.

That's where the expanded revenue sharing comes in. This endevor is aimed at spreading the money across the league in a way that lessens the gap between the haves and the have-nots.

Some of the new sal cap rules are based on the handfull of teams that continually go over the luxury tax limit (LTL?). The further a team goes over the LTL, the higher the percent of penalty becomes. Instead of the old straight 1 for 1 tax, the new tax would increase incrementally, the further a team goes above the LTL, the higher the tax rate, up to a 3 for 1 tax.

That would allow most teams to get to even or perhaps make a profit at 50-50 BMI split. The owners (some of them? most of them?) supposedly could live with this scenario, which makes me think that their numbers cannot be trusted as totally accurate.

If the players decide to wait out and not sign, the owners will further up the ante and propose a more favorable (in their minds) BMI split. A BMI split of 53-47 would result in an extra 6 points, or $120 mil for the owners to share. The owners would also force the players to accept more restrictions on player salaries as well as player movement.

The players must see the writing on the wall, but the agents seem to be driving the bus. The players don't seem so united and the owners appear to be lining up by market size. It is all so very confusing while the final answer is oh so simple:

Find a way to split $4 billion so that ALL teams make a profit while providing the players with salaries that still would be beyond their wildest dreams growing up.

gyso

gyso wrote:Outside,

You hit on the many reasons I think there won't be any contraction, or in your words, "a long shot" at best.

The two key phrases (IMO) in this lockout is "BMI split" and "expanded revenue sharing".

At a 50-50 BMI split, the league claims it will make up most of the $300 mil loss, based on last year's numbers. Each BMI "point" equals about $20 mil, so the difference between 57-43 and 50-50 is 14 BMI points. Basic math shows us that 14 x 20 = $280 mil., almost the targeted number; $300 mil.

So with the 50-50 BMI split and some better money management (less bad contracts?), the league as a whole can make a profit.

That's where the expanded revenue sharing comes in. This endevor is aimed at spreading the money across the league in a way that lessens the gap between the haves and the have-nots.

Some of the new sal cap rules are based on the handfull of teams that continually go over the luxury tax limit (LTL?). The further a team goes over the LTL, the higher the percent of penalty becomes. Instead of the old straight 1 for 1 tax, the new tax would increase incrementally, the further a team goes above the LTL, the higher the tax rate, up to a 3 for 1 tax.

That would allow most teams to get to even or perhaps make a profit at 50-50 BMI split. The owners (some of them? most of them?) supposedly could live with this scenario, which makes me think that their numbers cannot be trusted as totally accurate.

If the players decide to wait out and not sign, the owners will further up the ante and propose a more favorable (in their minds) BMI split. A BMI split of 53-47 would result in an extra 6 points, or $120 mil for the owners to share. The owners would also force the players to accept more restrictions on player salaries as well as player movement.

The players must see the writing on the wall, but the agents seem to be driving the bus. The players don't seem so united and the owners appear to be lining up by market size. It is all so very confusing while the final answer is oh so simple:

Find a way to split $4 billion so that ALL teams make a profit while providing the players with salaries that still would be beyond their wildest dreams growing up.

gyso

gyso,

Is there a new term we need to learn, or did you just get a physical? BMI usually stands for Body Mass Index and is a calculation of how much fat you're walking around with.

bob

.

Bob,

I wouldn't mind splitting my BMI in half. I ride the bike 4-5 times a week and don't seem to get anywhere, literally and figuratively. Which I guess is like the CBA negotiations.

Gyso is right about one thing in particular that hasn't gotten a lot of attention -- revenue sharing. It's really an ownership issue that is built into the CBA, and it's a critical factor in making small-market teams viable.

Outside

Outside wrote:Bob,

I wouldn't mind splitting my BMI in half. I ride the bike 4-5 times a week and don't seem to get anywhere, literally and figuratively. Which I guess is like the CBA negotiations.

Gyso is right about one thing in particular that hasn't gotten a lot of attention -- revenue sharing. It's really an ownership issue that is built into the CBA, and it's a critical factor in making small-market teams viable.

Outside

outside,

Isn't that something the owners have to work out amongst themselves? The players aren't involved in that and, if that's true and that's holding us up, then the owners inability or unwillingness to tackle this issue early on is the problem.

bob

.

Bob,

I found a couple of good articles about revenue sharing in the NBA.

Want to Repair the NBA? Start With Revenue Sharing.

Why NFL-Style Revenue Sharing Won't Work in the NBA

From the Forbes article:

Currently, the only revenue sharing in the NBA calls for all 30 teams to split national television revenue, as is the case in the other three major professional sports leagues, and sharing of luxury tax proceeds, a shallow pool.

Both MLB and the NFL’s revenue sharing plans are more extensive. Major League Baseball’s revenue sharing plan requires sharing of local revenue...

The revenue sharing pool for the NBA following the 2009-2010 season was projected to be around $60 million, with 10-15 teams sharing the pool. MLB, on the other hand, moved around $404 million following its 2010 season. In fact, leaked financials last summer showed recipient teams in MLB earning as much as $47 million each in 2008. Meanwhile, teams receiving the maximum in the NBA following the 2008-2009 season received only $6 million each.

From the other article:

Football teams split about 75% of all league revenue, which is the main reason teams like the Green Bay Packers are able to compete with large-market revenue-generating monsters like the Jets, Giants, Cowboys, Redskins and Patriots. Of course, the NFL plays just 16 games in a season, and all of those games are broadcast by national networks like CBS, NBC and ESPN. The bulk of the league's revenue comes from those national deals. Major League Baseball and NBA teams play a lot more games: 162 in baseball, 82 in basketball. The best teams in the league might appear on national television a dozen or so times; the worst teams might not make an appearance at all. The bulk of those leagues' games are carried by local broadcast partners... the YES Networks and MSGs and regional Fox Sports channels and NESNs of the world. And that's also where the bulk of the money is generated...

Are we trying to create a system that ensures a level playing field and competitive balance? (Something that, in my opinion, has never really existed in the NBA?) Or are we attempting to create a system where 30 businessmen are guaranteed an annual profit?

Want a good example of what "guaranteed profits" in sports gets you? The best example would be the Los Angeles Clippers. Donald Sterling's team, by virtue of their big-market location and cushy arena lease, have been printing money for years and printing playoff tickets much less frequently. The Kansas City Royals are another great example; that franchise is legendary for taking money out of baseball's revenue-sharing system and using it to line the pockets of the ownership group.

So the key factors here are that the NBA shares a relatively small amount of revenue, and competitive balance and financial stability throughout the league will require sharing local TV revenue generated by the individual teams. Unfortunately, I haven't heard anything about that. Instead, the owners are trying to increase the revenue sharing pool by increasing the luxury tax penalties on big-market teams. The problem is that if the luxury tax is too punitive, big-market teams will choose to lower their player payrolls, thereby reducing the revenue sharing pool. And all that is being negotiated in the CBA, and as far as I know, they're not addressing the need to share local media revenue.

From the players' perspective, an aspect of revenue sharing that definitely belongs in the CBA is a requirement that teams use the majority of shared revenue for player salaries, not just to enrich themselves (think Donald Sterling).

Anyway, the owners are screaming about not making money and an imbalance against small-market teams, but they're shoe-horning it into the CBA instead of directly addressing the major factor in the imbalance -- local TV revenue.

Think they'll resolve this by 5 p.m. today?

Outside

bobheckler wrote:

gyso wrote:Outside,

You hit on the many reasons I think there won't be any contraction, or in your words, "a long shot" at best.

The two key phrases (IMO) in this lockout is "BMI split" and "expanded revenue sharing".

At a 50-50 BMI split, the league claims it will make up most of the $300 mil loss, based on last year's numbers. Each BMI "point" equals about $20 mil, so the difference between 57-43 and 50-50 is 14 BMI points. Basic math shows us that 14 x 20 = $280 mil., almost the targeted number; $300 mil.

So with the 50-50 BMI split and some better money management (less bad contracts?), the league as a whole can make a profit.

That's where the expanded revenue sharing comes in. This endevor is aimed at spreading the money across the league in a way that lessens the gap between the haves and the have-nots.

Some of the new sal cap rules are based on the handfull of teams that continually go over the luxury tax limit (LTL?). The further a team goes over the LTL, the higher the percent of penalty becomes. Instead of the old straight 1 for 1 tax, the new tax would increase incrementally, the further a team goes above the LTL, the higher the tax rate, up to a 3 for 1 tax.

That would allow most teams to get to even or perhaps make a profit at 50-50 BMI split. The owners (some of them? most of them?) supposedly could live with this scenario, which makes me think that their numbers cannot be trusted as totally accurate.

If the players decide to wait out and not sign, the owners will further up the ante and propose a more favorable (in their minds) BMI split. A BMI split of 53-47 would result in an extra 6 points, or $120 mil for the owners to share. The owners would also force the players to accept more restrictions on player salaries as well as player movement.

The players must see the writing on the wall, but the agents seem to be driving the bus. The players don't seem so united and the owners appear to be lining up by market size. It is all so very confusing while the final answer is oh so simple:

Find a way to split $4 billion so that ALL teams make a profit while providing the players with salaries that still would be beyond their wildest dreams growing up.

gyso

gyso,

Is there a new term we need to learn, or did you just get a physical? BMI usually stands for Body Mass Index and is a calculation of how much fat you're walking around with.

bob

.

bob,

I did just get a physical (LOL) The letters are BRI.

Outside wrote:Bob,

I wouldn't mind splitting my BMI in half. I ride the bike 4-5 times a week and don't seem to get anywhere, literally and figuratively. Which I guess is like the CBA negotiations.

Gyso is right about one thing in particular that hasn't gotten a lot of attention -- revenue sharing. It's really an ownership issue that is built into the CBA, and it's a critical factor in making small-market teams viable.

Outside

Outside,

I walk 4 miles each day and don't seem to get anywhere as well!!

Gyso:

What's your take on the final shake down? What do you think will be the bottom line as to how or if the power teams will be kept in check by rules of the new agreement? In you opinion, will we have an equitable agreement that allows for the chance of real parody? Or will it be a deal that disquises business as usual with only 4 or 5 teams having a real shot at a title year in and year out with the medium & small market franchises falling by the wayside?


MD!

MDCelticsFan wrote:Gyso:

What's your take on the final shake down? What do you think will be the bottom line as to how or if the power teams will be kept in check by rules of the new agreement? In you opinion, will we have an equitable agreement that allows for the chance of real parody? Or will it be a deal that disquises business as usual with only 4 or 5 teams having a real shot at a title year in and year out with the medium & small market franchises falling by the wayside?


MD!

MD,

This is what it is about:

“The competitive issues are independent of the economic issues. Our goal is to have a system in which all 30 teams are competing for championships and if well managed, they have an opportunity to break even or make a profit,” Deputy Commissioner Adam Silver said. “So we don’t see the ability to break even or make a profit as a trade-off for the ability to field a competitive team. So all those issues are still in play.”

Did he say, "independent"? I would have thought "interdependent" is the better word. A better economic system will bring out better competition. *shrugs*

Anyway, the days of having owners that were willing to take a financial bath for their ego's sake may be OVA!

The hard part:

Those issues largely relate to the spending rules for teams over the luxury tax threshold. The NBA has sought to ban or reduce their ability to use the midlevel exception or participate in sign-and-trade deals, as well as impose a more punitive tax that players fear would deter teams from spending so much that it would act like a hard salary cap.

A key here (imo) is the "more punitive tax". If a team wants to go over the luxury tax and gets taxed 2-1 or 3-1, there will be more money added to the already under-sized revenue sharing pool that Outside mentioned earlier in this thread. It may take more than just this money source for the NBA's pool to approach the size of MLB's revenue sharing pool.

I keep going back to the Forbes article that Outside posted, plus his own comments, and then come back and type some more on this post. There is some good stuff there. I agree with his comments that the owners will have to share some of their local TV money to really get a fair revenue sharing system. That, however, isn't on the table at this time, as far as I can see.

Other than BRI (not BMI!!), we keep hearing about the "system issues". These issues are the nuts and bolts of the CBA. These are about the many exceptions and how the owners want to limit their use; the MLE, the Bird, the early Bird, sign and trades, etc. The owners want to take some of the exceptions away from the big spenders, in order to limit the advantage that deep pockets brings. The owners also want to lower the raise percentages. Instead of 8 or 10% raises each year, the owners want to limit raises to a more pedestrian 3 or 5%. The result of all this may be to not only lower salaries, but to also limit "star" player movement. Teams may not be able to fit three stars into the salary cap plus have all the exceptions available to fill out a proper team. You know how hard it was for the Celtics to add quality players in the years after the big 3 were assembled, even with full use of the exceptions. Imagine that your only way to add new players to a three-star team is with vet-minimum contract guys? Yuck!

So, every team can only afford two stars each (1 and 3/4 average) without going into deep luxury tax spending. This evens things up quickly and both Toronto and the Cavs soon go on to win championships.

Actually, I don't have a clue how this will all turn out. Each team's financial situation is so different. Some have nice local TV networks, most don't. Some have control of their stadium and the "refreshments". Other teams rent the space and get no cut in the food and drink. Some get the tax payers to pay for the stadium (or we'll leave!!) and some have to pay for their own. It has to be very hard to create a system that is fair for all.

I just wish the fans had a seat at the table!!

Oh, yeah, here is the link:

http://sports.yahoo.com/nba/news;_ylt=ArkGa.dgKqMrro8Ln_06M_A5nYcB?slug=ap-nbalabor

Here are Bill Russell's comments about the negotiation. It would be great if both parties would actually pay attention to what he says.

http://ken-berger.blogs.cbssports.com/mcc/blogs/entry/11838893/33221128

Hall of Famer Bill Russell said a solution to the NBA lockout is being jeopardized by hard-liners on both sides, and urged the parties to put aside their differences and reach a compromise “they can live with.”

“As a very interested bystander, I just hope they get a deal,” Russell told CBSSports.com in a phone interview. “And it will not come from the hard-liners on either side. I think they all know that. I have this theory that hard-liners are like true believers. And true believers think that any compromise is a retreat. And moving forward, that doesn’t cut it.”

Russell’s words carry weight – and not just because he is the most decorated champion in NBA history. The former Celtics’ star was among a group of 20 All-Stars who threatened to boycott the 1964 All-Star Game in Boston unless the NBA recognized the newly formed players’ union.

“Basically I was one of those guys that helped get the players’ association started,” Russell said. “And they've done wonderful things. I knew David Stern before he was commissioner, when he was associate attorney for the NBA. And if I remember correctly, he said, ‘I do not consider the players' association my adversaries. They're my business partners.’

“That's where, a lot of the things that David has done -- and I’ve known him up close -- have been beneficial for both sides,” Russell said.

Russell, 77, winner of 11 NBA titles, wanted to speak with CBSSports.com after he learned of union attorney Jeffrey Kessler’s comments in which he referred to NBA players being treated like “plantation workers.” Kessler, who made the comments to the Washington Post Monday night, apologized to several outlets Wednesday.

“I think that's an invalid accusation,” Russell said. “I think the whole deal is not about black and white. It's about money, OK? I don’t see any signs of being greedy. It's a typical negotiation and that's all it is. And there are a couple of reasons it's difficult, because there's hard-liners on both sides.

“But to me, the name-calling or vilifying the other side is a non-issue,” Russell said. “All that is is a distraction -- a distraction from the task at hand, which is reaching an agreement that neither side will probably be completely happy with. But that's the art of compromise.”

Russell said both sides “have their points,” but he views the key stumbling blocks as owners as trying to “protect themselves from the owners” and a battle between “the small-market teams and the big-market teams.”

“The players want their fair share of the business and the small-market owners don't want to keep losing money,” Russell said.

Russell said he hasn’t kept up with the details of the negotiation, but cautioned both sides that there’s “more to the agreement than just money.”

“I told Billy Hunter a few years ago: Bargain as hard as you can and make a deal,’” Russell said. “I really like and respect David Stern, and I really like and respect Billy Hunter and Derek Fisher. My whole life I've had a love affair with the NBA, and we've had some tough negotiations over the years. But I don’t think we ever vilified the other side. We just had tough negotiations.”

I thanked Russell for his input, wished him well, and told him I hoped to see him soon – at a basketball game.

“I'd like to see a basketball game right now,” he said.