NBA Salary Cap Chat With Larry Coon 11/9/11

1. Pericles

   Hi Larry, with only the superstars having the leverage to pick where they want to trade (ie. Carmelo), why are the players (the rank and file)so set on wanting teams over the tax to be able to do sign and trade deals? Most of the players should be happy that the Lakers, Knicks, etc..won’t be able to just get 3-4 superstars and win almost every year…do you think they don’t see this, or do most guys actually think they’ll benefit, when really this would apply mostly to superstars? thanks…sorry for the long question

   • Larry Coon

     I think sign-and-trade and extend-and-trade are the bones the league will throw to the players, since so few of them occur. I think there were only two extend-and-trades in history — KG and Melo (of course, these two deals had a huge impact on the league).

     I think the players are standing up on principle here. They want to have the freedom of movement — even if that freedom results in stacking certain teams. But more important for them is the restrictions the league wants on things like the mid-level. Most players don’t see themselves taking advantage of things like the extend-and-trade. Most players DO see themselves as needing the mid-level sometime in their career.

2. Pericles

   I’d like to hear your personal opinion on where you stand on the 2 points that seem to be causing issues…tax teams using S&T, and MLE…as a Raptors fan, I think this would go a long way to evening the playing field for teams like us and at least make the superstars accept a lot less to play for super teams where they have no pressure on them individually

   • Larry Coon

     Those aren’t the only two points causing issues, but the disputed items have a central theme — in fact, it’s been the same theme through this entire dispute.

     The owners want strict spending limitations. They started off wanting a hard cap. That was a no-go for the players, so they tried to sneak a hard cap in under another form, calling it a “flex cap.” This was also a no-go for the players, who said it was still a hard cap. So they tried to use the luxury tax as a pseudo hard cap — making it so punitive that no team would want to exceed it. The players recognized that this made the luxury tax a hard cap in disguise, so the owners shifted one more time — to giving the tax more “teeth” by putting limits on the use of exceptions for taxpaying teams.

     So when you look at these remaining issues, think back to the central argument — tighter spending controls vs. players’ freedom of movement.

3. Pericles

   I know it’s a bit out there, but how likely is it that if the players de-certify, that they actually win the lawsuit? Who’s advising these guys, and is there a player that has stood out to you as someone who could lead the silent majority to force a vote and accept the current offer?

   • Larry Coon

     If the union decertifies, the league will be in a tough spot — they could open the doors in a total free market system, which they don’t want to (and won’t) do. They could impose a set of rules, but any such rules would be attacked in court as anticompetitive. Or they could continue the lockout, which would be attacked as a group boycott.

     But a verdict in a trial is a long way off, and I doubt the players would be able to hold out that long. This is why I wrote that the first skirmishes in the antitrust battle are the most important — the players would attack the antitrust exemption right away. If they get a summary judgement ending the exemption, the writing would be on the wall for the league.

     A decertification would likely also cinch a canceled season. The players would have additional leverage with a vote pending.

4. David Stern

   Derek Fisher said:

   “We’re open to discussions, open to negotiation. We’re open-minded about potential compromises on our number, but there are things in the system that are not up for discussion that we have to have in order to able to get this season going.”

   This is what bothers me about all the ultimatum talk the players say they receive from the owners. In my opinion the players have been doing the same with comments like the above and the whole ‘blood issue’ business.

   You cannot say the owners have not been negotiating in good faith when from the onset of negotiations you are telling the other party (owners) we are not willing to discuss this (hard/flex cap, guaranteed contracts) and then get upset when they are unwilling to move on that (BRI, exemptions and S&T for tax payers). What do you think Larry?

   (Great work throughout the lockout by the way!)

   • Larry Coon

     Yes. The only real “bad faith” claims come from the owners: 1) Overreaching; and 2) Trying to say it’s about competitive balance when it’s not.

     The players would be issuing a lot more ultimatums if they were legally able to do so. The only thing they can really threaten them with is decertification, and there are reasons they can’t use decertification as a threat. Even yesterday they were careful to point out that they hardly discussed decertification.

5. JT

   When Billy Hunter refers to $543 million in expense credits, is he talking about non-basketball-related-income or something else?

   • Larry Coon

     This has always been a nebulous assertion. People like to say the league takes $600 million off the top (or some such figure), but that’s not true. They also like to point out that the NBA counts a smaller percentage of things like arena signage and luxury suites, but that’s because those things are sold for the year, and not just for NBA games.

     The only concrete thing I’ve seen referenced is that the league wants to take money off the top for investments in new arenas. I don’t know whether this proposal has survived to today.

6. Bill

   Do you think a deal gets done today?

   • Larry Coon

     I’m hopeful, but I’m not very optimistic. The two sides are now close on the BRI split (the players say they’ll accept the owners’ proposal on the split) but still separated on the system issues. And those system differences aren’t easy to bridge, since they stem from fundamental, philosophical differences on the intent of the system.

     I can see the league being wiling to throw the players a bone or two, but it not being enough. The players will ask for more, and I think the owners will say, “If we give you that, then we need a lower revenue split.” After coming down from 57% to 54% to 53% to 51% and now to 50%, will the players move on the split one more time? There is a big mental hurdle at 50%. I think it’s easier to get them to go from 57% to 50% than it will be to get them to go from 50% to 49%.

     So we’re getting to the point that if they can’t bridge the gap on the system issues, and the owners won”t budge unless the players drop below 50%, then the players would just say “no” and decertify. I think this is the most likely outcome — but I’m certainly hopeful they find a way to get it done.

7. James B.

   Hi Larry,
   There are some websites like hoopslockoutlog.com that purport to calculate the amount of money that each player is losing in salary for the season. Are they even reasonably accurate?
   Thanks!

   • Larry Coon

     I haven’t looked at any of those websites. But it’s hard to say how much they’re losing with any degree of precision, because we don’t know how many games will be played this season, and we don’t know to what extent the lockout will depress revenues apart from the missed games.

     In general, you could say that since there are 170 days in a season, every day represents approximately 1/170 of missed salary. But the league will reschedule some of those missed games — there were rumors that they had a contingency plan for an 82-game season which started as late as December 1.

     So any estimate of how much salary the players are losing is at best an approximation.

8. James Talbert

   If the players make concessions on every single issue in this Cba, then why on earth would the owners not lock the players out every time the Cba runs out?

   • Larry Coon

     That’s one reason the players are holding strong, despite a continued lockout being a losing proposition for them (they lose more through canceled games than they stand to gain by holding out for a better deal). The current deal will feed into the next negotiations — if the current deal leaves off at 50%, then the next negotiation will start at 50%. And, as you say, the next negotiation will come with the expectation that the league can strong-arm the players.

     For the league, if they think they can gain more than they lose through a lockout than they will certainly try this again.

9. James Talbert

   Will all thirty franchises be able to w/stand a lost season? It seems to me that – if these teams are really losing so much money – some of them might declare chapter 11 if the season is cancelled. Or, are all thirty businesses so wealthy that they can just shut the doors for more than a year, sit dormant and not go bankrupt?

   • Larry Coon

     If there’s no season, then some will still have to pay enormous amounts of money, in the form of interest on debt, facilities, staff salaries, etc. I wouldn’t be surprised to see at least one team go under if just one season is missed.

10. Sean Mansfield

    With the system being changed supposedly to prevent bad contracts like Eddy Curry’s, do you think we’ll see less of those, or will poor front offices still make mistakes like that?

    • Larry Coon

      Of course they’ll still make mistakes — the new rules won’t make teams smarter, and there’s no way to predict with 100% certainty which players will get their big contract and then stop trying.

      They are doing something to lessen the blow. For instance, the stretch provision will let them spread out the salary cap impact of a dead contract.

11. shariq

    Is there mechanism through which owners can cut coaching and front office costs. Obviously there is no coaching union, but currently big markets drive up the cost of coaches, not to mention the cost of paying fired coaches and gm’s

    • Larry Coon

      The best coaches and GMs are always going to be able to utilize the law of supply and demand to their advantage — and there’s no salary cap for coaches and front office staff.

12. Lucas Herzog

    Don’t you think this lockout needs more participation of impact players like Kobe, Duncan, Wade and KG?

    • Larry Coon

      No. It needs participation from the guys who have been working on the issue for two years, have studied it in detail, have been in every meeting and negotiating session, and are more familiar with the issues than anyone else — including guys like Kobe, Duncan, Wade and KG.

      Second, most players are not “impact” players. To what extent do you think guys like Kobe, Duncan, Wade and KG represent the rank-and-file players — i.e., the majority of the voting union?

13. dyrese

    the players will get a deal today if stern removes limits on luxary tax and sign and trades is stern willing to deal at this point?

    • Larry Coon

      We’ll see. As I said, I think Stern puts it back on the players — saying if he concedes on the system, then players have to concede (more) on the split. The system and the split are intertwined, and that will continue to be true today.

14. Mike

    Hey Larry, do you know why team’s [rising] prices aren’t even a factor in this CBA discussion? Especially from the union’s side? From league’s financial point of view every change of ownership creates huge losses [via RDA] and zero revenues [even though previous owner could have earned hundreds of millions]. AFAIK every change of ownership in the NBA has to be approved by them… so why not create a 10-25% tax from every such transfer and put it into the BRI or even directly to player’s part of the pie? Thanks!

    • Larry Coon

      I think it’s huge, but it’s also an argument in principle that simply doesn’t matter any more. It’s now about leverage, not principle.

      But yes — since teams finance a portion of their acquisition costs, they are paying interest on this acquisition-related debt. The interest on that debt is counted with the league’s losses, so the league is, in effect, asking the players to help pay for part of the rising franchise costs.

      To make it worse, if the league is successful in reducing salaries (which they are), then that will help increase franchise values, which will increase purchase prices, which will increase acquisition-related debt, which will increase interest payments, which will increase the league’s losses.

15. Mencius

    Isn’t the avg NBA career only 4 years, and isn’t missing 1 entire year truly ruinous for the vast majority of players. If I were anything but a superstar, I’d want to take the deal on the table. This is money they can NEVER make back if they lose a year.

    • Larry Coon

      Yep. I think the average career is closer to 4.8 years, but you’re correct. Also — the relevant number isn’t really career length, it’s REMAINING career length. For example, a guy like KG has a much-longer-than-average career, but he won’t be around for the length of the new CBA.

      On a strict financial basis, the players are losing money through the lockout — money they’ll never get back. If you’re a guy barely in the league — one that will be in the league two or three years at the minimum salary, then you’re facing the loss of a SIGNIFICANT percentage of your career earnings.

      But this dispute is about more than that. For the players, it’s also about principle. It’s about the NEXT agreement, and the one after that. And it’s about the players to come.

16. Kenan

    If a deal is made today, when will the first game of the season be?

    • Larry Coon

      Last question today — it takes about 30 days from shaking hands on an agreement to starting the season. If they agreed today, opening night would be around December 9.

17. Amare

    Many players, especially Wade, keep saying things like: “you hear things from the media, things about us not negotiating and we are selfish. But that isn’t it. You don’t get the whole side of the story.” . . . and then he NEVER says what the other side is. Any thoughts on what he is referring to, or he just not equipped to talk to the media?

    • Larry Coon

      Maybe confirmation bias. It’s easy to pay attention to what confirms your beliefs and ignore what doesn’t. Human nature.