No Labor Deal – First Two Weeks in Jeopardy
Labor talks did not go well in New York on Tuesday between the NBA and the Players Association.
According to Derek Fisher, president of the union, “Today was not the day for us to get this done.”
No further talks are scheduled and while they will certainly resume, look for the remainder of the preseason to be canceled. It would seem inevitable that the start of the season would be pushed back as well.
Fisher told assembled media that the players were willing to offer 53% of Basketball Related Income (BRI) as the players’ share, down from 57% in the past agreement.
In simplistic numbers, if the league generates $4 billion in BRI, the players under the old deal would get $2.28 billion in total.
At 53%, that number would shrink to $2.12 billion, a give-back of $160 million in the first year of the deal. With 4% projected annual growth, the players would be willfully giving back even more in total each year.
NBPA Executive Director Billy Hunter noted that the owners were talking an even split of 50% but that BRI would be reduced by additional expenses that would result in truth to a 47% share for the players.
From the union perspective, the owners are seeking a $400 million giveback in total (in year one) at 47% while the players were only willing to go as far as 53%.
While unsaid, the union might be willing to go as low as 52% or even lower but the owners seem determined to hold out for a more favorable deal . . . even if that means losing games.
“I think they tried to make a deal,” said Hunter, “On their terms.”
Additionally, the players are steadfast that they won’t agree to any deal that sets a hard cap on what an individual team can spend.
A number of owners are looking to curb spending as a means to provide competitive balance between the big market teams like the Los Angeles Lakers and the smaller ones, like the Milwaukee Bucks.
The BRI split in effect is a hard cap collectively but the players have called any variation of a hard cap as a “blood issue.”
Hunter said on Tuesday that a hard cap is “off the table.”
The gap is truly the revenue split, which is what the lockout has been about from the start.
In the long run, the owners have deeper pockets. Once players start losing paychecks in mid-November, the stakes may change.
In the meantime, the NBPA will look to see if they have a favorable ruling from the NLRB regarding their claim the owners aren’t bargaining in good faith.
Given the owners claim that they’re losing $300 million a year, the odds don’t seem high that the NLRB will overturn the lockout, although technically that’s a possibility.
The bigger strategy move from the player side is decertification, a move many high-profile agents have favored from the beginning of this process.
While Hunter to this point has discounted the idea, he acknowledged that it’s, “Something we have to give some thought to.”
Such a move is considered a nuclear option, one the league has filed a preemptive suit to try and prevent. While that issue has yet to be addressed in court, it’s doubtful the NBA would be able to successfully block decertification.
The league would in turn argue that all existing contracts would be null and void.
Individual players would in turn sue the league under anti-trust law.
If the labor dispute goes down this path, the odds of any 2011/12 NBA Season drop dramatically.
The league might prevail in the courts but equally they’d also be exposed to major penalties if they ended up on the wrong side of a decision.
Of course once a ruling comes down, the losing party is going to appeal which is just adding time to what would be a seemingly never-ending clock.
Commissioner David Stern spoke after Fisher and Hunter on Tuesday, noting the owners had indeed moved off of a hard cap. They also agreed not to roll back existing contracts and reduced the length of the agreement from 10 years to seven (player opt-out).
Stern confirmed the notion (not an official offer) of a 50/50 split (although the union’s interpretation based on league deductions was actually a 53/47 split favoring the owners).
If a deal cannot be reached by Monday, Stern noted, “We are now looking down the barrel of the first two weeks of the season.”
The remaining two weeks of the preseason will not be played, which is not in and of itself a loss of major significance.
Said NBA Deputy Commissioner Adam Silver, “The losses will be enormous” if the league is forced to cancel the first two weeks of the regular season.
Based on the league’s perspective of an even 50% split, the players would be giving up $280 million in the first year, about $20 million less than the $300 million the league has claimed to be losing per season.
On the surface, it’s a $120 million gap (in year one) but Hunter’s stated inclusion of $300 million in write-offs to BRI skew the numbers favorably to the owners.
The NBPA perceptually did not receive an offer at 50% but then Stern denied Hunter’s claim of additional expenses coming off the top of BRI.
Naturally both sides are not seeing eye-to-eye.
The prospect of a deal by Monday seems a stretch, even Stern had to admit, “It doesn’t look good.”
UPDATE: The owners’ discussion of a 50% split was reportedly based on the current BRI formula. Hunter has, in previous interviews, spoken of sizable write-offs the league makes on BRI which gave the players a lower true percentage than 57%.
If that’s Hunter’s perspective and the players were already getting a 53% share after deductions, then the drop would be from 53% to 47% . . . not all the way from 57%.
If the owners were truthfully offering a 50% share less the same deduction (say roughly $300 million), the players would be going from $2.1 billion under the old deal to $1.85 billion or about $259 million back from the players.
In other words it’s either 53% to 47% from Hunter’s view or 57% to 50% from Stern’s, but either way it’s in the six to seven point range . . . not a full 10.