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.
 

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.
 

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.
 

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.
 

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.
 

Larry Coon:
Thanks Mr. Stern. Talk to you again next week.
 

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.
 

Larry Coon:
Thanks Mr. Hunter. Talk to you again next week.
 

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.
 

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.
 

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.
 

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.
 

Larry Coon:
Thanks Mr. Beatty. Talk to you again next week.
 

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.
 

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?
 

Larry Coon:
Have to return to work.
 

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.

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.
 

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.
 

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.

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.
 

Larry Coon:
The next item on the agenda is the players’ NLRB complaint. They’ll wait to see what happens with that.
 

Larry Coon:
Stockton & Malone deserved at least one.
 

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.
 

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.
 

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.
 

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.
 

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.