NBA PM: Lockout!
The players union and the league didn’t agree on a new collective bargaining deal during a three-hour negotiating session in New York City on Thursday. The union reportedly offered a new proposal, which was immediately rejected by the owners, who then told the players association representatives that the lockout would begin at 12:01 AM EST.
The players’ proposal was in response to the latest offer from the owners, which Spurs center Matt Bonner told Jeff McDonald of The San Antonio Express-News “is worse than hockey’s [collective bargaining agreement], which is considered to be the worst collective bargaining deal in sports history.”
That offer guaranteed the players a minimum of $2 billion per year in basketball related income for the duration of the 10-year agreement and that, a union official told McDonald, represents a cut of over $7 billion compared with the current CBA.
{AUTHOR_BOX}What Does ‘Amortizing’ Mean?
HOOPSWORLD contributor Larry Coon asked a very interesting question over at ESPN.com: Is the NBA really losing money?
The answer is at the heart of the collective bargaining debate. The league insists that all but eight teams are losing $370 million per season collectively and the only way to fix the problem is by going from a soft salary cap to a $45 million hard cap while reducing current salaries along the way.
Meanwhile, players association executive director Billy Hunter contends that the NBA’s figures are tainted by “interest and depreciation,” and that if you omit those factors, the bottom 22 teams are only running a $120 million operating loss.
Coon goes on to explain that what Hunter is describing is common in all business.
Certain debts, the kind which ownership groups incur when buying a team, are supposedly being mixed in with operational expenses to paint a bleaker financial picture. The only way to verify that accusation is to look at the financial statements of teams that have recently been sold. Fortunately for Coon, two such statements have been leaked to the press (Hornets from 2008-2009 and Nets from 2005-2006).
Coon writes that the Hornets would have been in the black from an operational standpoint in 2005-2006, but were encumbered with debt associated with the move to New Orleans, Hurricane Katrina and the league’s $30 million relocation fee. Making matters worse, the franchise apparently gave then-owner George Shinn’s company a low-interest $35 million loan while borrowing $100 million at a higher rate. The players, understandably, see this is as unfair. Under normal circumstances (meaning a period of time without a historic natural disaster or a rash of poor financial decisions), the team could have been making a profit from an operational standpoint.
The Nets’ books don’t help the owners position either. A portion of the $361 million Brooklyn Basketball LLC paid for the Nets back in 2004 is amortized in the team’s operating expenses. As Coon puts it, “$41.5 million of the Nets’ $49 million operating loss in 2005, and $40.2 million of its $57.4 million in 2006 is… part of the purchase price for the team, being expensed each year.”
To be fair, this sort of thing isn’t certifiably deceitful. It’s an accounting practice that illustrates the cost of buying something intertwined with the regular operating expenses. The issue is, “What does this have to do with the players?”
Well, the players association suggested the owners can offset losses through increased revenue sharing—a suggestion commissioner David Stern sees as being insufficient.
“Revenue sharing doesn’t solve the problem if there are losses because you can’t revenue share your way to a profit as a league,” Stern said, as quoted by Coon.
While the commissioner is undoubtedly right in that regard, the league may not, in fact, be losing significant money operationally. If the examples Coon used are not unique, but common, the NBA could be padding its day to day losses in an effort to leverage a better deal from the players association. And if the basketball related income the players generate is greater than the operational expenses associated with running the league, then the owners should have nothing to complain about. After all, the buying and selling of teams is their business—not the players’.
As Coon so eloquently puts it, “Unless the players can share in the profit when a team is sold, they don’t want to be burdened with the costs associated with buying the team in the first place.”
Keep in mind, the models used are slightly old and only represent two of the seven franchise sales under the current CBA, so there is still plenty of doubt about whether the league is or is not losing money.
So if at any time during the lockout you feel like the owners and players are talking about two different sets of finances, you can thank Larry Coon for helping us understand why.
Hunter Taking a Pay Cut? Nah
Yahoo! Sports NBA writer Adrian Wojnarowski wrote that veteran forward Shane Battier asked if Hunter would be willing to take a $1 salary for the length of the lockout, just as NFL Union head DeMaurice Smith had done.
Well, to no one’s surprise, Hunter reportedly wasn’t eager to answer the question, according to Wojnarowski’s sources, and later refused to answer the same question when Wojnarowski posed it personally on Wednesday.
According to Wojnarowski, a number of union board members didn’t take too kindly to Battier’s question while several others thought the question had some merit. After all, if Hunter doesn’t feel the same financial pinch that the players do, what is his motivation to end the lockout with any haste?
One Eastern Conference player sounded as though there is some dissent within the union.
“Billy isn’t afraid to embarrass you in front of other players, if he doesn’t like your line of questioning,” he said. “He’s done a good job of keeping us informed and fighting Stern, but I don’t need to be lectured by the guy. I’m allowed to ask a question.”
Chandler to Become Free Agent?
The Mavericks have apparently had “minimal conversation,” with free-agent-to-be center Tyson Chandler, according to ESPN.com’s Marc Stein who spoke with “sources,” and now the defensive stopper will hit the open market.
Chandler was obviously the starting center for the NBA champions, so he should garner some decent offers on the free agent market, but Dallas is being cautious because of the uncertain fiscal landscape. The new salary cap promises to be far more restrictive, so the team is wise to sit, wait and see just how much money they can afford to offer.
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