NBA AM: Let’s Make A Labor Deal
Labor Meeting Today: The NBA and representatives for the NBA Players Association are scheduled to meet again today in New York for the first time since the NBA imposed it’s now month long Lockout of its players.
There have been no talks in between their last meetings in late June and while both sides continue to say they want to reach a deal, Players who have sat in on the meetings so far don’t believe the NBA wants to strike a compromise as much as they want to dictate terms of the next deal.
By now you are likely sick of hearing about the terms both sides are squabbling over, but the truth of the matter is a deal is there if both sides want to obtain it.
Players Association President Derek Fisher said last week that he was far more concerned with the function of a new system, than the actual split of revenues suggesting the Players would be open to a more equitable split, if the system that governs it was fair and open.
The NBA has taken the stance that crafting a system comes after arriving at a revenue split, and that whatever system is agreed upon has to rein in spending, guarantee profitability and solidify franchises that are hemorrhaging money.
Both sides exchanged proposals in June, with the NBA proposal all but freezing NBA wages for at least the next three years, but insuring that at least $2 billion would be spent on Players’ salaries and benefits.
The Players Association proposed a split similar to the deal that just expired that would have the Players share of revenue rising each year of the new deal starting with a 2011-2012 revenue split equal to $2.155 billion and ending at $2.521 billion in 2016-2017.
There is a deal to be had and it starts with an equitable share of revenue.
The NBA is said to have booked in some $4.1 billion in revenue last season, however under the terms of the now expired labor deal only $3.817 billion was shared with the Players.
Only certain percentages of things like proceeds from arena signage, arena naming rights and luxury suites are added to the revenue pool.
For complete list of what was included in the Basketball Related Revenue (BRI) calculation check out Larry Coon’s CBA Faq.
With $4.1 billion in gross revenues, the NBA and its owners were able to take some $283 million off the top before their split with the players. This was a huge sticking point with the NFL and its Players and the ultimate compromise was splitting all revenue and in the NBA, this might be a smart place to start.
Under the expired deal the Players receive 57% of the BRI pie, which is actually 50.6% of gross revenue, so for those arguing that it should be a 50/50 split, it basically was.
The compromise reached in the NFL was a 53/47 split between the owners and its players, with the Players receiving 47% of all revenues.
A similar deal in the NBA would yield a player share of a $4.1 billion pie being right at $1.92 billion, which in and of itself may not be enough of a reduction for the NBA owners, unless the players relent on the Owners request for salary rollbacks.
That’s where this gets tricky.
How do you remove $350 to $400 million from the NBA economy without significant cuts and rollbacks?
The NBA Players for years have contributed 8% of their paychecks to an Escrow System which up until this year they rarely saw returned because of how high salaries were in the NBA before last summer’s huge salary cap purge in advance for the Free Agent class of 2010.
For the bulk of the currently expired labor deal player contributed 8% in a giveback already. That giveback has been valued from anywhere from $125 million to $150 million per year.
If the Players agreed to a salary rollback equal to the same 8% they were already surrendering, and agreed to a 46% to 47% split of all revenue, the NBA gets its $300 to $350 million annual savings.
To achieve this kind of massive giveback, the Owners would have to relent on their hard salary cap stance and their desire to all but eliminate salary cap exceptions.
If those four topics can be agreed upon in a reasonable way, a labor deal would come very quickly as those are the core issues.
It’s unlikely this kind of movement happens from the labor meeting today, but with 61 days until NBA teams are scheduled to open training camp, some movement needs to occur soon and it’s good that both sides are trying to resume talks.
Let’s hope both sides use this next 61 days to craft a creative solution because the NBA may not survive a prolonged lockout and that’s going to impact the value of the numbers on the table.
No Kobe In Turkey?: Lakers’ guard Kobe Bryant is considered the prize catch of NBA players. Especially as international teams try and garner some exposure by signing or negotiating with top tier NBA stars.
Turkish team Besiktas ColaTurka made headlines when they landed a signed contract from New Jersey Nets star Deron Williams; however Bryant is the name they really wanted and they continue to say talks with Kobe are ongoing.
“I haven’t spoken to Besiktas in weeks,” Bryant said while representing Turkish Airlines in Washington this weekend.
Some inside Kobe’s very private circle have hinted that there was zero chance Kobe would play games in Turkey despite his alliance with Turkish Airlines; instead his circle says China is far more appealing if Kobe decides to play.
“I’m just waiting for my phone to ring. Here it is,” said Bryant at his press conference yesterday. “I will play anywhere.”
“You probably know more about that than I do,” Bryant said. “… I’ve been touring. I get the Internet. I’m computer literate, so I can read on the Internet, and I read a lot of things and hear a lot of things. To be honest with you, that’s the first time I hear those things. So, I’ll let you decipher what that means, but a lot of that stuff is news to me.”
Bryant has three-years and some $83.5 million remaining on his deal with the Lakers. Playing abroad would put that contract in considerable jeopardy especially if he sustains a major injury playing for another team.
Kobe underwent Platelet Rich Plasma therapy at the end of the season on his troublesome knee and has told those in his circle that his knee feels great.
Kobe participated an showcase type exhibition game in the Philippines a few week ago and is said to have pocketed close to $400,000 for his week-long stay. According to those that were around him, say he was in mid-season form.
Make Me An Offer?: The most frequently asked question I get on this subject is “What’s the deal that gets it done look like?”
From the Players’ side this is harder to explain, because they want as much of the current system retained as possible, but from the Owners’ side something like the deal outlined below might get a deal to the middle of the table.
I’m calling this The 46/47 Proposal.
Currently the Players are getting roughly 50.6% of total NBA revenue (57% of BRI). They are also contributing 8% to the escrow system, valued at about $160 million this year.
My proposed deal would look like this:
Players and Owners agree to share all revenue 46/54, with the Players receiving 46% for the first six years of a ten-year labor deal. In year seven, the percentage moves up to 47% and remains there for the duration of the agreement.
The NBA would guarantee that at no time during the ten year span of the labor deal would total salaries and benefits drop below $2 billion.
The Players continue to contribute 8% of their checks to an Escrow fund, but this fund will be called The Rollback Fund, if growth of total revenue falls below 10% per year that money is refunded to the owners as a salary giveback.
If the NBA’s revenue grows more than expected or the economic environment swings radically, the Players benefit from it, in getting The Rollback Fund returned in any given season.
The Rollback provision is for the first five years of the agreement and then it reverts to the same system in place now, which is an escrow system to insure percentages are not exceeded.
System changes would be minor.
Max contracts would be based on 20%/25% of the salary cap, depending on time in the league.
The length of deals would be reduced to four years if a player stays with his existing team and three years if he leaves a team.
The Mid-Level exception would be split into two smaller exceptions valued at $3 million each and can be no longer than three years.
There would be three salary cap levels. The cap number; the cap ceiling and the Super tax number.
The agreed revenue share would yield an annual salary cap number, there would also be a computed salary ceiling and any dollar spent over that ceiling would be a taxed dollar at the rate of $2 for every dollar a team exceeds the ceiling.
For example: a $57 million salary cap, would have an exception ceiling of $67 million, meaning teams can go as much as $10 million over to retain their own players or use their exceptions. If they go over that figure they are taxed $2 dollars for every dollar over and no team can be over the ceiling for more than two consecutive seasons and no more than six times during the deal.
The cap gets harder, but is not an inflexible hard cap and costs are reined in, but there is the implied championship provision which means you can pay tax for up to two season to try and “go for it all” if you have the right kind of team and owner.
So here is how the math looks on paper:
All figures in Billions.
Under the 46/47 Proposal, the Owners save roughly $200 million per year versus the currently expired deal and over $2.64 billion over a ten year span.
Combined with more equitable and balanced revenue sharing the Owners should swing to profitability.
From the Player’s chair, they do not lose much in terms of revenue share, they continue to grow as the league grows and they have triggers the protect their interests should revenues jump radically.
How does your deal look? Drop your thoughts in the comments section below.
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