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Next Up: NBA Lockout

Bob Whalon Written by Bob Whalon, Monday June 13 2011
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Now that the NBA Finals are over and Karma has given LeBron James the swift kick in the butt that he deserved, it looks like the league will be closing down for the foreseeable future.  Yes, just like the NFL, it seems inevitable that the NBA will impose a lockout on the players when the current Collective Bargaining Agreement (CBA) runs out on June 30.  And just like the NFL, the entire dispute is about money. 


The league and the players union have been meeting regularly, but commissioner David Stern made it clear recently that the two sides are "very far apart".

So how did it get to this point?  

Unlike the NFL, where the owners are simply looking to make more money from their $9 billion golden goose, owners in the NBA are actually losing money under the current system.  

The NBA brings in about $5 billion in revenue, but is projecting league-wide loses of about $300 million under the current CBA that was ratified in 2005.  The owners are seeking a hard salary cap that would replace the current soft cap that allows teams to exceed the limit under certain circumstances.  The players, of course, oppose a hard salary cap.

The players union followed the lead of their NFL brethren by filing an unfair labor practices lawsuit against the NBA with the National Labor Relations Board at the end of May.  The suit claims that the owners are not negotiating in good faith and have failed to provide suitable proof that teams are losing money under the current system.

This is seen as nothing more than a negotiating ploy by the union to get the owners to negotiate with the players instead of locking them out.  Unfortunately for the players, legal experts believe that the owners have a solid case in the courts because they have provided audited financial statements and tax returns to prove that more than half of the teams are losing money.

That means a lockout is coming to the NBA.

"I know that both sides will make their best offers before the lockout, because if they don't, then there's going to be a lockout that would be destructive to our business from the owners' perspective and the players' perspective," Stern said during the NBA Finals.

"Costs have risen much faster than revenues over the course of this [current] deal," deputy commissioner Adam Silver said.  "At the same time, non-player costs are growing at a much higher percentage, and the built-in increases of our contracts are much higher than inflation and the growth of our business.  For example, the three key players on the Heat (James, Dwyane Wade and Chris Bosh) all have 10.5 percent per year increases built into their deals for next year, at a point when revenues in our business are growing somewhere around 3 percent.  It's a broken system."

The owners want a reduction in player salary cost of about $750 million annually, while the players argue that the owners can solve their problems under the current CBA with expanded revenue sharing.  With that being the case, it sounds like Stern was right to characterize the two sides as being "very far apart".

The owners' latest proposal included a $45 million hard cap.  The problem with that is that the Heat have $46 million committed to just James, Wade and Bosh next season.  Does that mean that the team would have to be broken up?  Well yes, but not right away.

The owners offered to phase in the hard cap over a two-year period, but the union viewed that as not much of an offer since it would still result in across the board salary cuts.

The players currently receive 57 percent of basketball related income after certain expenses are deducted.  The owners want more expenses deducted and so far are not interested in the players' offer to negotiate a reduction in their share of revenues.

"There needs to be a very significant restructuring in order for the owners to have a sustainable investment here, hopefully approaching $5 billion of revenue," Stern said.  "So incremental stuff isn't going to do the deal."

Players union executive director Billy Hunter seemed to agree with Stern.  "I think maybe it's going to be a difficult struggle," he said of getting a new CBA.

Hunter and players' union president Derek Fisher believe that the owners want a system that guarantees each team millions in profits.  "We don't necessarily feel that it's the employees' responsibility to guarantee that," Fisher said.

So what does all of this mean?  

It means that at 11:59 on June 30, the NBA will lockout its players.  Nothing can stop that now unless the players cave into the owners demands.  I don't see that happening at this point, but just like the NFL players, eventually the players will cave in when they start losing paychecks and the owners will get most of what they want.

All of this seems so unnecessary.  The NFL and its players can't agree on how to share $9 billion and the NBA and its players can't agree on how to share $5 billion.  That doesn't make sense to the average sports fan who is struggling financially in this economy.

The worst part for the NBA is that the league has seen a bump in its popularity this season as these Finals have earned the highest ratings in seven years.  It seems that rooting against a team like the Heat is just as popular as rooting for your favorite team.  But if the league imposes a lockout, it may lose some or all of the fan interest that this past season generated.

Under the owners proposal with a hard cap, teams like the Heat probably won't be possible anymore.  While that might be a good thing for the competitive balance of a league that has only had eight different champions in the last 27 years, before the Dallas Mavericks won this year, it might not be the best thing for the TV ratings.

The fans showed the NBA that it was interested in the play on the court this season.  Unfortunately, the owners and the players can't seem to play nice off the court.  How sad.  

The clock is ticking to 11:59 on June 30.

 


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