Salary Cap Chat With Larry Coon 8/10/11
Larry Coon the noted author of the CBAFAQ, will answer your Salary Cap and Collective Bargaining Agreement questions. Larry will answers your questions about the Salary Cap, NBA trades and the upcoming CBA talks.
Is one reason the owners are playing hardball is because of how successful NFL owners were?
Larry Coon:
Welcome to the chat, everyone! It’s Day 41 of the lockout.
Cole,. the NBA owners would have played hardball no matter what the NFL owners did. The NFL makes a ton of money, and it was just a matter of determining how to split their enormous revenues. The NBA is losing money, and the owners see the need for a complete overhaul of the financial system.
Underpinning this dispute are philosophical differences over how much money the NBA is losing, and how the system should be fixed. The NBA owners have known all along that they were going to have to play hardball.
Why is it called revenue sharing when it is more of a consumption tax? And why didn’t the media call the NBA out it when they first introduced the term?
Larry Coon:
It really isn’t a consumption tax. The details of the owners’ plan are not public yet (and I don’t think they’ve even finalized them), but the system would entail teams paying or receiving money based on local revenue. That’s revenue sharing.
If we’re going to be pedantic about terminology, I had much more of a problem with the 1999 CBA when the "$1 million exception" allowed teams to pay $1.6 million.
Who says no in this proposed trade? Channing frye for Udonis Haslem, Joel Anthony and James Jones. UD/Nash pick n pop would b sick and a lineup of Wade-LeBron-Miller-Bosh-Frye would probably be the best 5 in the league
Larry Coon:
I agree with the idea of the Heat trying to consolidate multiple players into fewer, more talented players, but I don’t think Frye is good enough or meets their needs.
How much would Kenyon Martin get in the old CBA this year, and do you think he would make a good backup for Lamarcus Aldridge?
Larry Coon:
He’s a player whos now slightly above average at best, but would still want to be paid like a star. He’d make nowhere near the $16.5 million he got last season from the Nuggets, but would likely find a team that would pay above the mid level.
I think he’d be well suited for a role like you suggest.
Does the Blazer front office deserve more credit? Even with Brandon Roys contract, and Greg Oden troubles, Forbes still named them the 7th most cost efficient team (cost per wins)
Larry Coon:
Oden’s injuries didn’t hurt them that badly in the pocketbook since he was on his rookie contact. Likewise, Roy was hampered by injuries but only made $13.6 million last season.
Rich Cho did a good job nabbing Gerald Wallace & Raymond Felton, but of course, he’s gone now. I don’t expect their cost per win ratio to stay this low next season.
Will it take a lost season for the NBAPA to understand the current system doesn’t work? I understand no one says no to the money, but no way should role players, and third fiddles be making what they do, but they are the voting power.
Larry Coon:
Thanks Mr. Stern. Talk to you again next week.
Any pulse on moving the nineteen year old minimum? Previously David Stern looked like he was going to push it to twenty years old but now some feel it may be removed all together.
Larry Coon:
It’s not on their radar right now, simply because they have bigger fish to fry. Once they come to terms on the revenue split they can start haggling over ancillary issues like this one.
I think this is an issue the owners care more about than the players, so it might be something the players give the league in order to get something else in the negotiation. I expect the age limit to rise in the final agreement.
i always thought when a union and a corporation neogotiated there was give and take like i want lower salaries but we’ll give a bigger percentage of play off money in return seem to me the owners want want want but give up nothing
Larry Coon:
Thanks Mr. Hunter. Talk to you again next week.
If a team signs a player to a contract that contains a signing bonus, then trades the player, would his new team settle up with his old team (as they would for advance salary payments)? Is the settle-up language anywhere in the CBA?
Larry Coon:
No, with a couple exceptions. The idea is just that — it’s a SIGNING bonus. It’s not advanced salary.
The first exception is with sign-and-trade contracts. If there’s a signing bonus, then the receving team can pay it, not the signing team.
The other exception is with salary that IS advanced. Let’s say a player is paid $10 million in a given season, of which $5 million is paid on August 1. If the player is traded part-way through the season, then the receiving team owes the sending team a pro-rated portion of the advanced salary. The same thing goes for loans to the player — the new team has to buy the loan from the old team.
If all of these players really do go overseas, is it reall that big of a deal to the owners? Or is it being overrated? Thanks!
Larry Coon:
It’s not that big a deal for the owners. In fact, it may HELP the owners.
There aren’t many jobs overseas for NBA players, and the available jobs don’t pay anything near what the players can make in the NBA. Many players will be left out, and the ones that do go overseas see it as more of a stopgap.
The owners are helped because it makes it more of a system of "haves" and "have-nots." If the owners are looking to drive a wedge between the players, then this is a great wedge issue.
What happens if a player under contract with a European team (such as Ersan Ilyasova) rejects to join his NBA team when the lock-out ends?
Larry Coon:
Any player under an NBA contract has to return to the NBA immediately once the lockout ends. This is a condition under which these players are able to obtain a FIBA Letter of Clearance which allows them to play overseas. Ilyasova’s overseas contract would become null & void when the lockout ends.
If you were the Head of the Player’s Union what would you do? I think it is silly for them to hold out and get beat up next year… why not take the hit this year and get one more year of pay?
Larry Coon:
It’s a tricky calculus. The longer they last & negotiate, the better the deal they can secure for themselves, but the more salary they lose from missed games. If they lose money this year but make up for it over the course of a better deal, then holding out was worth it.
We all know that you’re really Dustin Hoffman.
Larry Coon:
Thanks Mr. Beatty. Talk to you again next week.
Can’t the owners and players agree on a temporary CBA? Just for the sake of having a season. The max contract would be 1 year or until the new CBA is formed. And the money is based on the old CBA.
Larry Coon:
Because the owners saw the old system as broken and would rather lose a season than play another year under a broken system. The owners had the opportunity to extend the CBA for another year, and they opted out. The players offered to play another year while they continued to negotiate, and the owners said no.
Do you see Chris Paul forcing a trade a la Melo? And if so, do you think New York has what it takes to complete their Trio Grande (nickname courtesy Alan Hahn)?
Larry Coon:
I think it’s possible CP3 will want out, but for now Dell Demps is doing everything he can to build a competitive team and keep him in New Orleans.
I’m not sure how New York could complete such a trade. They pretty much blew their wad in the Melo trade. What could they offer the Hornets that would get a deal done?
Once a new CBA is finalized, do players under nba contracts who have signed overseas have to return to work, or can they choose to nullify their nba contracts?
Larry Coon:
Have to return to work.
The owners are complaining that they are losing money. But the Pistons, Sixers and the Hawks have change ownership during the lockout. What do you make of this, is this some sort of negotiation ploy by the owners and what does the NBPA think of this.
Larry Coon:
Even the players association agrees that the league is really losing money. They differ on the scale of the losses. The league says 22 teams are losing money, and the combined losses are $300 million. The players assocation says 7-9 teams are really struggling, and the losses are closer to $100 million. The difference comes from whether you include or exclude certain categories of expenses. The league considers any interest on debt associated with franchise acquistion to be money that’s going out the door, and therefore a part of their aggregate losses. The players say that only operational losses count, and that excpenses related to acquisition costs are the owners’ sole responsibilty.
The fact that franchises have changed hands simply means that the new owners see the teams as a good investment. Maybe they expect the system to be fixed in the next agreement, and it’s worth suffering through the lockout to get there. Maybe they expect revenues to explode over the next decade. Maybe it’s a little of both.
Won’t owners still have expenses to pay if there is no season? Everyone says the owners would be better of without a season, but all expenses don’t just disappear.
Larry Coon:
Well, SOME owners might benefit. If you’re a team like the Lakers that turns a profit every year, then not having a season hurts you.
For the teams that are losing money, you have to look at the net effect. They’re not paying their players, so there’s 57% savings right there. No travel costs, either — jet charters, hotels, busses, etc. A lot of their big expenses are eliminated.
But some expenses aren’t eliminated — teams still owe on debt, facilities, etc.
Some costs are mitigated — many teams have laid off staff, or have "lockout language" in staff contracts where the team pays less while the lockout is ongoing.
Overall, some teams could be better off not playing the season than playing it, but I don’t know that for sure.
I’m just going to cut to the chase: What are the current chances that they’re will be an 2011 – 2012 NBA season?
Larry Coon:
I think there’s very little chance they’ll solve it by mid-September, which is the deadline for playing a full 82-game season.
I think it will go until mid-January, which will be the deadline for canceling the season entirely. I think it’s a coin flip as to whether they’ll be able to salvage a partial season at the last minute, like they did in 1999.
is contraction a realistic possibility at this point? Obviously having fewer low revenue (unprofitable) teams in existence leaves a bigger slice of league wide revenues for the remaining teams in a rev sharing scenario.
Larry Coon:
I don’t think it’ll be an immediate issue, but as the revenue sharing system is implemented there will be increasing pressure on the poorer-earning teams to perform. I think relocation will be the first option, but contraction remains a possibility.
Italian fans are more interested in lockout stuff than Danilo, Andrea & Marco… Anyway: Ben Gordon & now Gortat out of Eurobasket due to problems with insurances. Is this The Issue with NBAers under contract signing elsewhere? Thanx
Larry Coon:
Any NBA player who signs overseas during the lockout is taking a risk. If he has a devastating injury, then his NBA team may be able to void his contract. It’s prudent for these players to protect themselves by acquiiring an insurance contract, and I can understand players not wanting to sign if they can’t get insurance.
It is awfully quiet on the labor front. Am I too naive to think that there is talking behind the scenes not known to the public? I just can’t believe that nothing is going on.
Larry Coon:
The next item on the agenda is the players’ NLRB complaint. They’ll wait to see what happens with that.
What is your favorite 90s teams that didn’t win it all because of MJ?
Larry Coon:
Stockton & Malone deserved at least one.
Why are the non-salary expenses so much higher than in other major sports (the NHL is presumably profitable despite a lower revenue base, roughly equal player expenses as % of revs, and similar schedule and arena requirements)?
Larry Coon:
They really aren’t much different. I think all four major leagues pay their players in the same 50-60 percent range. But I think some of the leagues take more expenses off the top. For the NBA, it’s the non-salary expenses that are killing them.
yo whats ups i know we have the biggest market in basketball but im curious about the middle class can you give me a list of nba market in order and last question can a small market like orlando become larger? and how?
Larry Coon:
Market size is a factor of the population of the metropolitan area in which the team plays. I don’t have that info off hand, but you could easily get it from Wilipedia — look up the sizes of the tevision markets.
The answer for how Orlando can become a larger market should be obvious — they need more people.
Assuming the NBPA decertifies and player contracts are voided, how does this help the Owners in the long run? Wouldn’t teams risk losing star players or having to pay above-average NBA players more than their market value in a completely open market?
Larry Coon:
Personally I see it as a somewhat empty threat. If decertification is the players’ nuclear option, then voiding all the contracts is the owners’. They’d benefit from losing contracts from overpaid players, but lose from making free agents out of their star players.
The lawyers I’ve talked to are extremely skeptical of the league’s legal strategy. They don’t think the league would be able to void the players’ contracts even if the union did decertify. They expect the players’ lawsuit to be thrown out in short order.
Would it be legal for every player to give a percent of their salaries to a dedicated fund, so during lockouts they can just give money to every player monthly during lockouts?
Larry Coon:
There’s nothing illegal about creating a war chest, as far as I’m aware. In fact, that’s what I suggested they should do with the $26 million supplemental check the league has to give the players to make the 57 percent guarantee.
In a system like that, you have to assume this money will go from the richer players (i.e., guys like Kobe Bryant would otherwise be entitled to a greater share of this money) to the poorer players (who don’t have a personal nestegg and need access to these funds) or draft rookies (who haven’t earned anything in the league yet).
But guys like Kobe would have to realize that if this war chest allows the players as a group to hold out longer, and therefore get a better deal, then they stand to benefit. The owners’ strategy is to break the union — the longer the players are able to withstand that, the better for them.
If the owners are eventually gonna cave.on the hard cap like you say why would they lose a whole season just to get more bri essentially? I hope so bad they seriously dont lose a season
Larry Coon:
The revenue split is the most important issue. A hard cap is ancillary.
Let’s say the revenue split is still 57/43, but there’s a hard cap. Call it $50 million, just to pick a number at random. The players’ total payroll would be $1.5 billion, or around $1.65 billion including benefits. If revenues are $3.8 billion, then the players are guaranteed about $2.2 billion. If they are only paid $1.65 billion due to the hard cap, they’d still owe the players about $500 million in order to make the guarantee.The same thing happened in the 2010-11 season, when the owners had to cut the players a check for $26 million to bring their earnings up to the guaranteed 57 percent.
In other words, the hard cap didn’t buy the owners anything.
Once they get the revenue split down to a level where the league as a whole is able to make money, THEN they can talk about mechanisms to control spending so that salaries come out close to the guaranteed amount and there’s more of a level playing field. That’s where a hard cap, or at least a harder cap, comes into play.
A true hard cap isn’t necessary to get the job done, and in fact, it can make it harder for the league to operate. Even David Stern talks about the advantages of Bird rights — and once you have Bird rights, you have a soft cap by definition.
So that’s why I think we end up with a soft cap — a hard cap isn’t a requirement for the owners, and it’s a big philosophical stumbling block for the players. The owners will deal it to the players in exchange for something they want more.
That’s all for today, everyone. The chat was swamped today — apologies for all the questions I couldn’t get to.
Look for more from Larry Coon on Twitter at http://www.twitter.com/LarryCoon, become a fan of the Salary Cap FAQ on Facebook, and find the FAQ itself at http://www.cbafaq.com.
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