Salary Cap Chat With Larry Coon 8/24/11
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.
I like Aminu and Bledsoe, I believe with some work they can become pretty good role players- starters, do you think Aminu will become somewhat like Batum and Bledsoe, will be able to change the tempo of a game off the bench?
Larry Coon:
Welcome to the chat, everyone! Looks like we’re on Day 55 of the lockout, with no news to report on the labor front.
I think Bledsoe can easily become a change-of-pace guard, as you mention, but he may still have the upside to become a solid starter. They have Mo Willams for at least another year (assuming there’s a 2011-12 season), so they have more time to let Bledsoe develop and see what they have, which I think is what will happen unless someone like Chris Paul falls in their laps.
It’s still too early to tell with Aminu, but I think he may not have as much upside. The Clippers apparently agree, and seem to be focusing their efforts on landing a front-line SF. If I had to guess I’d say that Aminu eventually gets dangled as bait in such a trade (although the Clips aren’t necessarily inclined to move him right now).
Do you think with all the players talking about missing games and how the season won’t start on time, is it all just posturing on their part? how do they think that missing games will better the owners offer?
Larry Coon:
In talking to people on the player’s side, I still sense some belief that the owners are really bluffing to some extent — that come September 15 when it’ll become necessary to start cancelling games, they won’t actually do it. They think that revenues are going to explode and they owners won’t want to sacrifice that — not for what to a large extent is just a money grab. The people I’ve talked to actually believe this to a certain extent, so no — it’s not just posturing.
I don’t think that missing games will bettter the owners’ offer. I think it will make it worse. Once they start missing games the financial implications will be enormous, and the offers will go down as a result.
Any chance you’re going to write a piece expounding on your disagreements with Malcolm Gladwell’s Grantland piece about Psychic Benefits?
Larry Coon:
That’s been my problem lately — I have a zllion pages of notes sprawled out, and haven’t had the time lately to put it together in an article.
Tom Ziller already talked about some of the issues in his SB Nation piece. In addition to what he said, I think the Van Gogh analogy was disanalogous, because a Van Gogh doesn’t require a tremendous annual outlay of cash to maintain. A system like this isn’t sustainable if it requires such heavy annual cash infusion, so the investment valueof a franchise is compromised. You’re just left with the idea of buying an NBA franchise simply as a plaything, which isn’t realistic, and doesn’t represent the shifting ownership demographic (and the shift will increase as teams continue to appreciate).
Also, what’s good for the goose is good for the gander. If owners derive psychic benefits and should let those mitigate their losses, then isn’t the same true for players? Shouldn’t the owners say that the players derive psychic benefits which should offset the impact of their needed pay cut?
(Every time I read "psychic benefits" I picture Madam Zuza peering into her crystal ball and saying "I see financial ruin in your future….")
Thoughts on Simmon’s podcast with Stern and/or Gladwell’s "Psychic Benefits". Stern still seemed to have hope, but it was that players would come around to "believe" owners… Do owners deserve to make a profit – is an NBA team a real business.
Larry Coon:
Do they deserve to make a profit? No.
Do they deserve the OPPORTUNITY to make a profit? Yes.
I think the league as a whole deserves the opportunity to make a profit, and if salaries are 57 percent of revenues and non-salary expenses are more than 43 percent, then that’s not going to happen.
And deserve or not, the system as it is isn’t sustainable. What’s going to happen over time if expenses continue to outpace revenues?
Any predictions on NLRB ruling(s)
Larry Coon:
I think both the owners’ and players’ charges are longshots.
I felt an earthquake in my underground compound here in Texas. Was it that durn players union in desertification? How will NBA owners put food on their families now?
Larry Coon:
Last time I put food on my family, my wife wouldn’t speak to me for days.
Will the Maloof Kings have the upper hand with FA’s oce the season starts with the cap room they have?
Larry Coon:
It depends on the new rules, of course. For example, if sign-and-trade goes away, then cap room will become even more valuable.
But players have to want to come to Sacramento. How often has that been the case?
Hey Larry, Stern said in his podcast with Simmons that the owners were simply asking that the players take an 8% cut. How does that jive with percentage of total revenues going from 57% to 43%?
Larry Coon:
It’s an 8 percent cut in 2011-12, and hold at $2 billion for ten years (unless revenue increases exceed 4 percent).
If the players hold at $2 billion, then as revenues go up year-by-year, their percentage share will decrease.
This new league, Impact, that they are running in Vegas will feature NBA players. Are there more details about it? Is there a revenue stream that will gather? Is it in any way a threat to supplant the NBA over time?
Larry Coon:
I haven’t read much about the new league yet, so I really can’t comment knowledgeably on it yet.
But I will say that there’s an order of magnitude difference beween putting on a small, localized league with a handful of players, and being able to put on a large-scale league that brings in the kinds of revenue the NBA brings in.
If a new "franchise tag" is introduced in the new cba, could It be used as bait for free agents on teams not yet utilizing it? Or will there be stipulations like must play on the team for x amount of years before you qualify?
Larry Coon:
As the NBA proposed it, a franchise tag would be less like what the NFL has, and more of a form of glorified Bird rights. It’d allow teams to designate one player who could get more money in a free agent contract. I didn’t hear whether they wanted this to apply to ANY free agent, or just re-signing free agents.
If no season, whats the likely draft order. I hate the 3-yr-avg idea I heard was used in NHL. It seems to hurt teams like Cle & UT that have been good, but are not good now; & helps teams like Miami & Chi who are much better now than they have been
Larry Coon:
Since drafts are usually based on the records in the previous season, then they’ll need to come up with SOMETHING should there be no season. The system the NHL used is one possible starting point, but it’s not necessarily what the NBA would do. They’ll cross that bridge when/if they come to it.
Under the owners proposal what would the cap be and what would a max salary look like? Thank you for your time.
Larry Coon:
Which proposal? As far as I’ve heard, the owners aren’t married to any specific proposal, but rather tossed out a number of ideas to see if any of them would gain traction. They talked about the idea of a $45M hard cap, and they talked about the idea of a "flex" cap, which is a hybrid soft-hard cap.
The final dollar amount of the cap depends on a couple factors — one is the players’ revenue guarantee. Another is how hard/soft the cap is. The softer it is, the lower it can be.
Isn’t the harangue over the "guaranteed profit" a bit of a red herring? I mean, this is basically employers negotiating with their employees. The employer will and should always be seeking guaranteed profit in that context.
Larry Coon:
I think it’s a bit of a misnomer. None of the league people I’ve talked to referred to wanting a guaranteed profit. Rather, they wanted to get away from the notion of having to accept a guaranteed loss.
If you think the owners offer will get worse, and i think the owners offer will get worse, what does billy hunter think? If the preseason goes, how does he think he can still ‘win’ in a negotiation?
Larry Coon:
It’s like a game of Let’s Make A Deal. You can choose the offer on the table, or you can have what’s behind curtain number two.
For the players, it’s always going to be a matter of deciding whether they’re better off taking the deal on the table (of course, after negotiating to bring that deal up as far as possible), or waiting to see if they can get a better deal later. For now, they think they’re better off waiting — and they still have the trump cards of their NLRB charge and the possibility of decertification.
At some point the balance might shift and they’ll determine that taking the deal that’s on the table is the better choice.
The Hawks were just sold but it doesn’t seem like the Hornets are on anyone’s radar even though Stern claims they are a profitable team. Why is this? Is the NBA somehow using the Hornets as a leverage point?
Larry Coon:
When Stern talked about it before, he said that there were a number of potential buyers, all of whom wanted to move the franchise elsewhere. He said he preferred to wait to find a deal with a buyer who would leave the team in New Orleans. I guess at least one such suitor has emerged, although they might want to wait for the labor situation to be settled.
"What’s going to happen over time if expenses continue to outpace revenues?" Our town will get a new owner that will make better basketball decisions?
Larry Coon:
But I’m talking league-wide. And for some markets, being in the red is orthogonal to basketball decisions.
I think the Raptors should build the team around Alexis Ajinca because he is tall
Larry Coon:
Worked for the Lakers with Chuck Nevitt.
Do you think Irving will be able to be the face of the Cavs and lead them back into the Finals? Not this year, but sometime in his career.
Larry Coon:
I need to see the guy playing against NBA-level competition before I can make that kind of pronouncement.
Would Bledsoe’s ceiling be Ray Felton and Aminu’s ceiling Luol Deng?
Larry Coon:
I think you nailed Aminu, but I think the jury’s still out of Bledsoe.
Bigger plus for the Wolves adding Williams and Rubio or replacing Rambis with Adelman (if it happens)?
Larry Coon:
I like Kurt, and he’s got a very good basketball mind (and it doesn’t hurt that he’s a really good guy). I wish he’d get a shot in a better situation. He got the Minnesota team in the middle of a rebuild (partly on-hold due to the Rubio situation), and before that he got the Lakers team in a 50-game season and with Dennis Rodman to deal with.
Is it inevitable that the players decertify if their NLRB complaint fails. If they are going to miss paychecks then the players are far better off with the threat of triple damages for all paychecks missed.
Larry Coon:
I don’t think it’s inevitible, but I think the odds will increase. Hunter doesn’t want to go that direction, but the longer this goes without forward progress, the greater the pressure will be.
Is the TV deal a forgotten issue in the negotiations. It expires in 5 years and from what I have heard they current deal is undervalued by about $300 million.
Larry Coon:
Nope, it’s a big deal in both sides’ minds. It’s one reason the league wanted to hold the players to a 10-year deal, and why the players want the next deal to expire before then.
Was Chuck Nevitt that really injury prone Laker in the 80s?
Larry Coon:
He’s 7-5. How could he not be?
Cavs need a SG and C, which position should they draft in the 2012 draft and who should they take? Drummond, Barnes, Rivers, Beal?
Larry Coon:
Way, way, way too soon. For me, at least.
Would the NBA ever consider putting ads on team uniforms, like they do in soccer?
Larry Coon:
There are ads on everything else, so I can see them biting the bullet on this eventually.
But if they did it now, it’d just be a band-aid on the current problem, not a solution.
What percentage of BRI do network TV rights make up?
Larry Coon:
I just grabbed some numbers I have for a recent season (not 2010-11), and local TV was about 13% of BRI, while national TV was about 22% of BRI.
if a player is restricted and his team matches an offer, does he still have the choice of which team he wants to go to?
Larry Coon:
No, that’s the whole point of restricted free agency. Once the player signs a contract with a new team (technically it’s an offer sheet at that point), his original team is given the opportunity to match the contract and keep him.
Do you see an NBA season in 2011-2012 at all? Neither side seems to be in a hurry to resolve anything. If you do, when?
Larry Coon:
I think the lack of current activity has little to do with whether they’ll be able to salvage the season.
The pressure really doesn’t start to mount until around September 15, when it will become necessary to start canceling games, and won’t REALLY become stifling until November 15, when most players start to miss paychecks.
In the meantime, both sides are waiting to see what the NLRB does, and the league also has that lawsuit on the books.
These things always seem to come down to the last moment — which will be sometime in January, when they have to decide whether to cancel the season entirely. There will be a flurry of negotiation at the last minute, and I think it’s a coin flip whether they’ll be able to get it done in time to save the season.
So I think the chances of saving a full 82-game season are essentially nil, and the chances of saving a season at all are essentially a coin flip.
what wOuld become of restricted free agents if we were to miss a whole season? Would they become unrestricted?
Larry Coon:
In order to answer this question we first need to wait & see whether restricted free agency even exists under the new CBA. If restricted free agency goes away, then your question is moot.
But for the purpose of discussion let’s assume that it doesn’t go away (which I think will be the case in any event). The answer is still "we don’t know."
As with the draft, it depends on what the two sides agree to do to handle this unique situation. Let’s say we lose the 2011-12 season, but the two sides come to an agreement in May 2012, which allows business to resume as normal in July 2012. The two sides could decide to count 2011-12 as if it never happened, so any qualifying offers that were made prior to July 1, 2011 will make the player a restricted free agent beginning July 1, 2012.
They could also do something like defining a window of time (such as the last week of June, 2012) in which teams are allowed to make qualifying offers, invoke options or ETOs, etc.) which take place on July 1. I like this option because it allows teams and players to make their decisions with certainty regarding the new rules, and not based on the uncertainty that existed in June 2011.
I suppose they could also take a "too bad" approach, and say that restricted free agency applied to the 2011-12 season and expired on July 1, 2012 (even though there wasn’t an acutal 2011-12 season), so these players are now unrestricted. I doubt they’d go this route, but it’s possible.
Were all of the teams audited by the same firm? If so do you know which one? If not that may explain some of the player’s union complaints about how the teams define profit and revenue.
Larry Coon:
No, because the teams (and league) operate under Generally Accepted Accounting Principles, or GAAP.
Everything the league is doing is kosher per GAAP. The real problem is that what is correct under GAAP doesn’t necessarily make sense when trying to persuade the players that they should take less.
A case in point is interest paid on debt used to finance part of the cost of purchasing the team. GAAP allows them to count this interest as an operating expense — it is, after all, money that’s going out the door. The league says that as long as franchises aren’t overly leveraged (and they’re not), then this expense is a legitimate part of operating the league. And as I said, it IS money that’s going out the door.
The players are saying that even though GAAP says it’s an operating expense, it’s still related to the cost of purchasing the team, not of operating the team. And since they don’t share in the profits when a team is sold, nether should they help finance the cost of purchasing the team in the first place.
So it’s really a philosopical issue that runs deeper than one of who’s doing the auditing.
In the event of a strike shortened season (15 games or more) Do you see a loss of games helping any teams have a shot at a title that normally wouldn’t. If so who?
Larry Coon:
If 1999 is any indication, it’ll help veteran teams that didn’t have many changes to adapt to. In 1999 it was the Spurs. Maybe this year it’ll give the Celtics a better shot.
Do the NBA Players have that lockout insurance that the NFL players claimed to have had?
Larry Coon:
No. From what I heard they looked into it, but the premium costs were prohibitive.
Hat’s off to Pat Summit. Great coach, role model. Many un-named People suffer the same fate. She’s tackling it head-on. An inspiration. GO Lady VOL’s!
Larry Coon:
Do you think the new CBA should have an out provision for players/teams after the first 2 years of contract as a standard?
Larry Coon:
There’s a balance between security and performance, and it’s going to be impossible to make everyone happy.
Teams have a legitimate concern with guys like Eddy Curry, who shut it down after earning their big payday. Teams should have a right to expect performance, and should have a recourse when players are paid for six years and only try for a year or so.
But what do you do with guys like Brandon Roy, who is no longer earning the full value of his contract, but through no fault of his own (in fact, through an injury that can be considered work related)?
Fairness tells me that Roy should still make his money while Curry shouldn’t. I’m just not sure how to codify this so that we get the right result in every case. A two-year team opt-out likely would be invoked for both these players, so Roy wouldn’t be protected as he should be.
This is one reason I’m in favor of shorter contracts. If the maximum contract length was three years, then nobody would be entitied to long-term guaranteed money in the first place, which eliminates the problem of this money going to underperforming players. It would also more closely couple pay to performance, which I think is a good thing. Not only would it address this issue, it’d also address the issue of star players continuing to earn megabucks at the end of their careers (such as Kobe Bryant earning $30 million at age 35).
Imagine is the NBA season get’s canceled and they did the draft in the exact order as 2011 draft. My Cavs would be in a great situation with the 1st and 4th pick!!!
Larry Coon:
I could argue that they wouldn’t get the first pick. It was the Clippers’ pick, which they traded. The Clippers didn’t trade their 2012 pick.
That said, this is a big reason why they wouldn’t just use the 2011 draft order. It’d be accommodating teams twice for the same bad season.
Can you explain why all 15 players cannot play in a game even though they get paid. I feel all players should be active for every game.
Larry Coon:
I think the total of 12 is arbitrary, but it’s been around for so long that it’s completely entrenched. They ARE making incremental progress — it used to be that a team could only sign a 13th player if one of their 12 was on the injured list (and what a coincidene that the number of NBA players with plantar fasciitis plummeted after this rule was changed).
That’s all for today, everyone. Talk to you in two weeks (I’m out of town next week).
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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