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NBA Collective Bargaining for Dummies: Are the Players or Owners Right?

Shehan Jeyarajah@shehanjeyarajahCorrespondent IJune 29, 2011

SAN ANTONIO - JUNE 21:  (L-R) Billy Hunter, President of the NBA Players Association, looks on as NBA commissioner David Stern speaks at a press conference announcing that the NBA and the NBA Players Association have agreed in principal on a new 6-year Collective Bargining Agreement (CBA) prior to Game 6 of the NBA Finals between the Detroit Pistons and the San Antonio Spurs on June 21, 2005 at SBC Center in San Antonio, Texas.  NOTE TO USER: User expressly acknowledges and agrees that, by downloading and/or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Brian Bahr/Getty Images)
Brian Bahr/Getty Images

NBA Collective Bargaining: Are the players or owners right in the CBA debate?

As we know, the deadline to come up with a new Collective Bargaining Agreement is rapidly approaching. As of right now, it's unlikely that something gets worked out before then. The players and owners have both released their ideas for the new agreement, so which one makes more sense?

SALARIES

The most important part of any CBA negotiation is of course the salaries, and that's what the largest part of the dispute is over.

The owners have thrown out the idea of having a flat two billion dollars given to the players in the first year with rough estimates reaching the current player share of 2.17 billion after about ten years.

Out of the approximately four billion that the league makes, the players want to keep numbers about 55/45. In most professional sports leagues, the numbers are around 57/43. (Just a note, the numbers are largely irrelevant in baseball due to the lack of a salary cap or maximum salaries: the market defines the numbers.)

Take a look at this chart compiled by Doug Thonus of the Chicago Now: Bulls Confidential blog:

The Owners Plan

Year

BRI

Players

Owners

Players %

Owners %

1

$4,280,000,000

$2,000,000,000

$2,280,000,000

46.73%

53.27%

2

$4,451,200,000

$2,020,000,000

$2,431,200,000

45.38%

54.62%

3

$4,629,248,000

$2,040,200,000

$2,589,048,000

44.07%

55.93%

4

$4,814,417,920

$2,060,602,000

$2,753,815,920

42.80%

57.20%

5

$5,006,994,637

$2,081,208,020

$2,925,786,617

41.57%

58.43%

6

$5,207,274,422

$2,102,020,100

$3,105,254,322

40.37%

59.63%

7

$5,415,565,399

$2,123,040,301

$3,292,525,098

39.20%

60.80%

8

$5,632,188,015

$2,144,270,704

$3,487,917,311

38.07%

61.93%

9

$5,857,475,536

$2,165,713,411

$3,691,762,124

36.97%

63.03%

10

$6,091,774,557

$2,187,370,545

$3,904,404,012

35.91%

64.09%

Total

$51,386,138,486

$20,924,425,082

$30,461,713,404

40.72%

59.28%

Old Way (57%)

 

$29,290,098,937

$22,096,039,549

   

Difference

 

($8,365,673,855)

$8,365,673,855

    

This chart assumes 4% Basketball Related Income (BRI) growth per year, which has been typical of operations year to year. It also uses 1% increases in the players’ share per year which is based off NBPA predictions of not reaching the current 2.17 billion figures for ten years.

As you can see, the NBA owners are looking to absolutely pillage the players compared to other leagues, taking a 60/40 split over the course of the deal and a 64/36 split in the final year, an absolute abomination compared to any other American sports league. To put this into perspective, the league will project out to about 42% growth. Using extremely raw numbers that I calculated myself, salaries and the salary cap will have actually gone down about 7% compared to where they are now.

NEW ORLEANS, LA - APRIL 28:  (L-R) Willie Green #33, Chris Paul #3 and Jarrett Jack #2 of the New Orleans Hornets react on the bench during a 98-80 loss against the Los Angeles Lakers in Game Six of the Western Conference Quarterfinals in the 2011 NBA Pla
Ronald Martinez/Getty Images

What the owners claim is that overall, franchises need an extra ten million dollars each in order to recoup losses, or three billion over the ten years. However the owners claim also gives $18 million in guaranteed profits every year, and owning an NBA team is not intended to be a moneymaking endeavor but a hobby or prestige builder.

The NBPA wants to have a five year deal where they give up a flat $100 million off of what they would have originally made with the 57% share. Their chart would look like this:

The Players Plan

Year

BRI

Players

Owners

   

1

$4,280,000,000

$2,339,600,000.00

$1,940,400,000.00

54.66%

45.34%

2

$4,451,200,000

$2,437,184,000.00

$2,014,016,000.00

54.75%

45.25%

3

$4,629,248,000

$2,538,671,360.00

$2,090,576,640.00

54.84%

45.16%

4

$4,814,417,920

$2,644,218,214.40

$2,170,199,705.60

54.92%

45.08%

5

$5,006,994,637

$2,753,986,942.98

$2,253,007,693.82

55.00%

45.00%

Total

$23,181,860,557

$12,713,660,517

$10,468,200,039

54.84%

45.16%

Old Way (57%)

 

$13,213,660,517.38

$9,968,200,039.42

   

Difference

 

($500,000,000)

$500,000,000

   

This chart is based off the same BRI as the other chart but using the players getting 57% of the BRI minus a flat $100 million.

What the players are proposing to cover the major losses instead is increased revenue sharing between the owners, and this makes a lot more sense. The gap between the big and small markets is reminiscent of the wealth gap in America, and with similar results. The solution for the owners is to take the remaining money from the players instead of from the wealthier owners, and that doesn’t make sense.

Teams like Chicago, Boston, Los Angeles and New York are hugely profitable despite the economic downturn. The teams that suffer are teams like New Orleans since they play in a smaller market. If money was taken from the New Yorks of the world and distributed to encourage a fair playing field, the woes of many of the smaller markets would be solved. However this is an unlikely solution because owners like Jerry Buss and Jerry Reinsdorf from LA and Chicago respectively would not willingly agree to give up the massive profits they make every year.

MIAMI, FL - JUNE 12:  DeShawn Stevenson #92 of the Dallas Mavericks looks on against LeBron James #6 of the Miami Heat in Game Six of the 2011 NBA Finals at American Airlines Arena on June 12, 2011 in Miami, Florida. NOTE TO USER: User expressly acknowled
Ronald Martinez/Getty Images

If I ran the league, I would go with the players on this one. The players are the face of the league and are the real money makers. It’s unfair to take away from the players to finance the overspending of the owners. I would also take a hard look at what’s causing the owners to need to spend so much on outside costs.  

SALARY CAP AND EXCEPTIONS

As things stand right now, the salary cap is what is called a soft cap. What this means is that a team can go over the salary cap for certain reasons by using exceptions. The exceptions currently in place right now are the Mid-Level Exception, the Bi-Annual Exception, Larry Bird Exception (also called Bird Rights) and other surrounding Bird Rights, the Minimum Salary Exception, the Rookie Salary Exception, the Disabled Player Exception and the Trade Exception.

The owners want what’s called a “Flex-Cap,” which is what is used in the NHL. A flex cap is a cap that can be exceeded like a soft cap, but that has a binding upper bound. In this scenario, the luxury tax would be eliminated. For example, if the salary cap is $60 million, the upper bound could be a number like $70 million. In that case, if the Miami Heat have $60 million on their books already, and they need to resign LeBron James, they can only offer him up to $10 million because they cannot cross the upper bound. If they wanted to sign a player like Dwight Howard, they would still need to get under the salary cap of $60 million just like how it is now.

ORLANDO, FL - JANUARY 24:  Gilbert Arenas #1 of the Orlando Magic looks at the scoreboard during the game against the Detroit Pistons at Amway Arena on January 24, 2011 in Orlando, Florida.  NOTE TO USER: User expressly acknowledges and agrees that, by do
Sam Greenwood/Getty Images

The players want to continue to use the same soft cap that’s in place with the current exceptions and restrictions. They are open to limiting the MLE to only four years instead of five if the teams add a second MLE.

As a fan of a big market team, I don’t like the idea of limiting the ability to resign your own players. As a fan of parity, I would like the idea of a flex cap. Ultimately I want teams to be able to sign their own players up to any amount. If a player like Derrick Rose or Russell Westbrook left town for the simple reason that their team didn’t have the ability to resign them, the league would lose popularity very quickly. Other than that, I could see the exceptions being reduced to Bird Rights to sign your own players, Rookie Exceptions to sign your picks, and maybe a single Mid-Level Exception so you aren’t deadlocked.

CONTRACT LENGTH AND OTHER ISSUES

The owners blame lengthy contracts like Gilbert Arenas and Rashard Lewis for limiting flexibility and for losses. They believe that shortening the length of contracts will help to ease the burden on the owners when they sign guys to long deals. I think this could be a good idea. You see especially in baseball that signing guys to ten year contracts, no matter how good the player is, just doesn’t work out for the long term. This could also give the players an opportunity to earn multiple big dollar contracts in their prime.

ATLANTA, GA - APRIL 28:  J.J. Redick #7 of the Orlando Magic reacts after missing a game-tying three-point basket in the final seconds against the Atlanta Hawks during Game Six of the Eastern Conference Quarterfinals in the 2011 NBA Playoffs at Philips Ar
Kevin C. Cox/Getty Images

The owners have thrown out the idea of unguaranteed contracts, and I just want to shoot down that idea right now. Let the players work with what they signed for.

The owners want to sign an agreement for ten years and the players want the new agreement to be only five years. I tend to side with the players on this one, and it’s because the negotiations of new TV contracts is in five years and it would be unfair to use these rules to try and distribute those.

In terms of the one and done rule, I would actually give the players a choice like baseball. If they want to be drafted into the NBA immediately, they should get that right. However if they go to college, they should have to stay two years minimum. It’s unfair to college basketball fans that guys take a tour of duty without really being there. If a player decides to play for a college team, they should develop as part of a team instead of biding their time.

One point brought up by the players is that teams don’t want to sign Restricted Free Agents because it ties up their money for a week. You saw that happen last year with Chicago when they signed J.J Redick to an offer sheet that was eventually matched by Orlando. In the interest of keeping options open, the current team of a RFA should only have 24 hours to match. This would encourage teams to try and sign RFAs.

DALLAS, TX - JUNE 16:  Dirk Nowitzki of the Dallas Mavericks gets emotional after the Dallas Mavericks Victory Parade at American Airlines Center on June 16, 2011 in Dallas, Texas.  (Photo by Ronald Martinez/Getty Images)
Ronald Martinez/Getty Images

THE BOTTOM LINE

My perfect CBA would include a 53/47 split for the players in BRI, a soft cap like we have now, four year maximum contracts, guaranteed contracts, and a single exception that can be used to acquire a serviceable player.

On most of these issues, you have to side with the players. They are the ones people pay big money to go see, and they should not be penalized for owners mismanaging their teams. Like the Chicago Now article notes, how are hockey teams able to make a profit on $40 million of covered expenses and basketball can’t make a profit on $76 million? Perhaps the owners also need to reexamine where their money is going within the organization.

In the end, it’s not worth taking it away from the players. The owners are nothing without the players but the players could draw crowds without the owners. Trying to get the players to falter with a lockout would only make the owners more unpopular. However in the end, give me basketball and I’ll be a good fan.

Shehan Jeyarajah is a Bleacher Report Featured Columnist for the Chicago Bulls.

You can also find his work in the new publication: Chicago Sports Authority: The Mag. Subscribe to The Mag here or visit our website here.  

Follow him on Twitter @shehanjeyarajah for article releases, contact, and commentary. 

Sources:

http://sports.espn.go.com/nba/news/story?page=labor-110629

http://members.cox.net/lmcoon/salarycap.htm#Q8

http://www.chicagonow.com/blogs/chicago-bulls-confidential/2011/06/so-the-owners-really-are-trying-to-destroy-the-players.html

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