Lockout of 2011: What Effects (If Any) Will There Be Long-Term

by Kevin L. Davis (@EsquireSports)

With the lockout finally over and an unusual NBA season is set to begin (which will start on Christmas Day for the first time in league history), I thought what better way to begin this journey than to examine the effects of the lock-out post-mortem.  Instead of focusing on which side “won,” I thought it would be better to discuss how the NBA as a whole won or lost in 3 key categories:  buzz among fans, financial impact, and competitive balance.

BUZZ AMONG FANS

After a season where ratings where at a record high, fans and analysts steamed for months with doom and gloom projections about the damage the lockout would cause to the league.  As the lockout consumed the entire summer and most of the fall, most seemed to believe that the NBA was inflicting a blow to itself that would cause long-term damage to its popularity, but looking at the positive response I’ve seen amongst fans it seems that they couldn’t have been more wrong.

This goodwill started on the early morning hours of November 26^th when David Stern and Billy Hunter (the leader of the NBPA) announced that a tentative agreement had been reached to end the lockout.  Within instants the outpour of response from the fans proved that any damage was already being forgiven.

Twitter (everyone’s favorite gauge of what’s “hot” nowadays) blew up with posts about the NBA returning and every new station in the country brimmed with excitement about the impending return of the NBA.  For all the disgust fans had of millionaires and billionaires bickering about money, they could not deny their excitement to see their favorite NBA players hoop it up for real.

FIANANCIAL IMPACT

Heading into this lockout the league claimed losses of $300+ mil in the last 3 seasons.  For all the sites who disputed the numbers and the talk about what percentage of BRI the players should give up it almost was forgotten how poorly the league was performing as a whole financially.

While neither the Players nor the Owners ended up happy with the financial split as it was agreed to, it seems clear that establishing a band where the Players share is reduced from 57% to a band varying between 49 and 51% helps remedy this problem.  Assuming the league were to bring in the exact same revenue as earned in 2010-11 this new system would save Owners somewhere between $229 million and $305 million.  This one change seems enough to take a business that has been operating deeply in the red and give it a chance to be profitable.

COMPETITIVE BALANCE

Although the Owners were not successful in getting all the changes they wanted, the new Collective Bargaining Agreement will bring forth several additions that will achieve a more balanced payroll among the NBA teams.  The hope is that these changes will help improve the chances of a team to compete no matter the size of its market.  Will it work?  My prediction is that it definitely will.

The league did greatly improve the revenue sharing system as well as make key changes to the floor and ceiling that teams will spend.  They did this by first increasing the minimum a team must spend from 75% of the cap up to a percentage that once fully implemented will be 90%.  This new floor means that teams will be forced to spend about $9 mil more than the currently imposed minimum (up to $52.2 mil from about $43.5 mil).  A de facto salary ceiling was also created by overhauling the penalty when a team exceeds the luxury tax (currently $70.3 mil in payroll).  Starting in 2013-14 the new more punitive luxury tax will tax teams at an elevated rate instead of at a dollar for dollar as the old rule did.  

While these changes mean that unless an Owner decides he will not be deterred by these steep taxes, the days of big spending teams having roughly double the payroll of small market teams are over.  However the question is how big of a difference will this make?  It has been proven time and time again that in the NBA you don’t win without a star, and next to nothing was done to help small market teams keep their stars. 

While many perceive this is a negative I for one see this as a positive.  While the attention Chris Paul and Dwight Howard are getting must annoy their fan-base it keeps people talking about the NBA.  As seen with the LeBron and Carmelo mini-dramas over the last few years, the energy that produces is good for business.

CONCLUSION

I think it’s fair to say that the NBA as a whole was a big winner in all 3 categories.  Seeing that we only lost 16 games and there will be games on the first major basketball holiday (Christmas) my gut says any ill feelings still lingering in fans will be forgiven. 

Although things got ugly at several points during the lockout, all I can say to both sides is great job getting it done.

My Proposal for Labor Peace in the NBA

by Kevin L. Davis (@EsquireSports)

As the labor debacle wages on, the debate as to whose right and whose wrong is over.  Now if we want to have a season that starts on time both sides are going to have to make major concessions and compromises.

Here goes my proposal as to what should happen so both sides can come away feeling like they achieved key victories, while also making the league more financially stable.

Hard Cap or Soft Cap

This is the key issue right now.  Billy Hunter has called taking a hard cap a "blood issue" that he claims he is willing to lose a season instead of taking, and some owners feel just as strongly that one should be imposed.

I would keep the soft cap in place but would make it a lot "harder."  How you ask - easy by eliminating most of the exceptions that allow Teams already over the cap to bring in players from other Teams (including the MLE) and lengthen the amount of time needed to attain Bird rights. 

This way teams would be limited to go over the cap to sign minimum salaried players or to re-sign their own guys (if they have been under contract long enough to have Bird Rights).

Players Share of Revenue

Currently the Players are entitled to receive 57% of league revenues.  Seeing that everyone agrees many teams are losing money, that percentage is completely too high to ensure the financial health of the league.

Therefore this percentage must be decreased drastically.  I would have the Players decrease their share from 57% to right at 50%.  That is a big sacrifice by the Players, but its worth it if they can keep the soft cap system in place. 

Length of Contracts

The current CBA which allows contracts to be a maximum of 5 to 6 years is too advantageous to the Players.  Period.  In this market where most people can and are being fired on the whim, it is unrealistic to expect NBA contracts to remain as they are where for the most part they are fully guaranteed and extend so far into the future.

I would recommend having Players sacrifice here to shorten max length of contracts to 4 years if going to a new team and 5 years if re-signing.

Effect of Buy-outs/Amnesty Provision

As I mentioned earlier the previous CBA counts all money paid to a bought out player on a team's salary cap for all the remaining years left on the deal.  This means if a Player whose under a 2 year contract for $12 million is bought out for $10 million, then the team takes a $5 mil cap hit for the next 2 seasons.  Because of this in the current system once a relationship sours between a Player and the Team, the only options the Team has are to:

1) keep him and hope things get better,

2) trade him for peanuts,

3) send the Player home and pay him his full salary, or

4) buy the Player out but still have him count fully against your teams cap. 

This level of job stability is basically unknown in America, and with this labor dispute occurring during the current political climate it does not bode well for the Players.  With that in mind, I suggest a system where if a Player is bought out the Team can distribute the money given to the Players over the next 10 cap years (thus lessening the cap hit).  This would give the team more ability to part with troubled players, while still giving the Player the money he is entitled too. 

If that idea doesn't sound good to you I propose in the alternative an expanded Amnesty provision.  In my proposal every 2 years Teams would be able to buy out a Player and he not count for salary cap purposes. 

Revenue-sharing

Here's another of the major issues that must be resolved to end this labor dispute.  Many teams are suffering and because of that this system must be expanded to give teams in smaller markets an infusion of cash. 

While its unclear if the Owners have relented on their demands to be allowed to determine revenue sharing amongst themselves, its clear the whole system of revenue sharing must be expanded. Currently certain items of revenue including that from local TV deals are not included in revenue. I would remove those restrictions and include all moneys earned through operation of the franchise used to calculate revenue.

Conclusion

All the posturing and hard-lining was nice but it is time to get down to business if we want the season to not be interfered with because of this labor non-sense.  At the end of the day we are all fans first and therefore missing games this season would be a huge black-eye for the league.

As I've said all along, although its clear that talent-wise the league is in a great place, there is no guarantee the fans will come back if games are missed.

Little Known Fact - The inter-relation Between Hard Cap and Guaranteed Contracts

by Kevin L. Davis (@EsquireSports)

I read a great article from Henry Abbott a few days back that really explains why the NBA Players are so opposed to accepting the hard cap and its impact on guaranteed deals that I had never considered. It was weird because I always here people commenting on Players guaranteed contracts and saw fans writing about how Players in the NBA are spoiled by their collective bargaining agreement (CBA) that I always assumed the provision promising guaranteed contracts was in the CBA. The truth of the matter is its not.

Abbott explained that there is nothing in the CBA that guarantees the Players guaranteed contracts. They just get them because the current market (which includes a soft cap that allows teams to exceed the cap level) allows teams to be more free with their money, and because of that the vast majority of Players are under guaranteed contracts. The Players position is that if teams were to switch and have a hard cap it would also likely mean the end of guaranteed long-term deals for middle and lower tier players; as teams would lock up their stars forever and then annually fill in their roster around the stars. This is why Billy Hunter has the Players claiming that they are willing to lose the season instead of going for that.

My Critique of Excellent David Stern Interview Conducted by Bill Simmons

by Kevin L. Davis (@EsquireSports)

Hello Sportsfans.  Not sure if you all are aware but prior to the weekend David Stern made an appearance on the BS report giving Bill Simmons a rare interview that spanned a little more  than an hour.  If you've not listened to it for yourself, you should definitely check that out >>>>> http://espn.go.com/espnradio/play?id=6856992.

Although I must admit that my views have been slanted toward the players I decided prior to listening to the interview that I would stay open-minded.  Although at times I felt that Stern was condescending and arrogant, and even felt that at times he seemed a little angry and Simmons for bringing up points that didn't paint him or the owners in the brightest light I think for the most part Stern set out to accomplish what he intended to accomplish - to explain to the common fan what the importance of the issues at stake in this CBA and to illustrate the size of the schism that exists between the Players and the Owners, and to present a united front among his contingent of Owners.

Stern accomplished both of these objectives masterfully by calling the NBA Players the "worlds highest paid union" he shows just how well compensated the NBA players are, and by following that up by stating the amount of money being lost by the league annually.  In these shaky economic times, very few fans will have pity on millionaire Players whose lavish salaries are causing their business to be unprofitable.  He also did a good job in arguing why revenue sharing should be kept out of these negotiations and should instead be determined at a later date once Players and Owners have determined the revenue split, as attempting to do that in these negotiations very well could cause a split amongst his Owners.

However this interview also pointed out some of Stern's weaknesses, as condescending, insecure, and quick to anger when he's being challenged.  His continued statements that the players will come around when the offer is explained to them does that (insinuating their too stupid to understand whats going on themselves) and again even more blatantly when Stern snapped at Simmons that he's "been doing this for 40 years, which is much longer than Billy Hunter has" (which seems irrelevant to me when he admits to having lost the last 3 negotiations that he had against Hunter) seems the best illustration of that.  With all do respect Mr. Stern we all know the league has  grown by leaps and bounds under your leadership, you don't have to be so touchy about not feeling as if you got your due.

All in all though this interview shed great insight on where things currently stand in this labor dispute.  In order to get things going the Players simply must realize that will receive a smaller share of the revenues.  Now we just have to find middle ground where both the Players and the Owners will be satisfied.

I still think the offer reportedly made by the Owners which would allow the Owners to be the sole recipients of the first $900 mil in revenues, and then to split remaining revenues 50/50 goes too far, but at least that forms a basis to start.  Additionally middle ground must be reached on revenue sharing.  Personally I still believe that it should be apart of these negotiations, however I do agree that the revenue split must be determined first before the league can figure out an effective way to split those revenues.