What Does The Compromise Deal Look Like?
The NBA is currently embroiled in a lockout with no clear end in sight.
A new bargaining session is expected to take place prior to Labor Day but the chasm between the owners and players is so wide, there doesn’t appear to be much hope for a deal any time soon.
Unfortunately that probably means a delayed, shortened or cancelled season.
What will it take to reach an agreement? Where will a compromise look like?
Unless the players find some form of leverage, they may have no choice but to accept a smaller piece of the pie.
Owners Dug In
The owners are looking for a drastic reduction in payroll costs.
“The issue that’s first and foremost in the owners’ minds is the players’ guaranteed split of the revenues,” according to expert Larry Coon, creator of the NBA Salary Cap FAQ and frequent HOOSPWORLD contributor. “In the previous CBA [Collective Bargaining Agreement], the players received 57% of the gross revenues — a system the league considers broken and unsustainable.”
The union is willing to take a pay cut but only to a point. The league is looking for fundamental change while the players are thinking it’s time for a trim.
“The owners are seeking a significant reduction in the players’ share of the pie,” said Coon. “They don’t care whether they get it immediately (salary rollbacks) or over time (freezing total compensation at $2 billion for 10 years) as long as they get it.”
The initial proposal from the league asked for players with existing contracts to willingly take less money than previously stipulated. That didn’t exactly go over well with the players.
A revised plan backed off rollbacks and focused instead on flat revenue for a decade, removing the direct tie to Basketball Related Income (BRI).
Again, the players were mortified.
“In this dispute, the deck is stacked against the players,” said Coon. “Time is on the owners’ side — in a battle between millionaires and billionaires, the billionaires can more easily afford to sit back and wait.”
The current system has $57 of every $100 of income going to the players. The owners claim the business of basketball, outside of funding the roster, has cost collectively cost the teams about $50 per $100.
In other words, the owners say they are spending $107 for every $100 they bring in . . . or in practical terms $4.3 billion for every $4 billion.
To prevent that imbalance moving forward, the owners are willing to sacrifice a season.
Players, Naturally, Disagree
The players don’t agree with the league’s accounting methods. They don’t buy the notion of $107 for every $100.
The union contends the existing system allows for enough deductions off the overall gross that 57% of BRI already translates into a 50/50 split.
They feel the owners mismanage their businesses by spending recklessly. Poor coaching choices and/or executive firings often lead to massive buy-outs; money the players don’t feel should reflect on their piece of the pie.
The union even criticizes teams for poor player personnel decisions. Even with the fixed percentage going to the athletes, if teams used their resources more judiciously . . . they’d be more competitive and yield greater fan support (in dollars).
Additionally, teams like the Houston Rockets and now the Boston Celtics have ownership stakes in their local television networks which obfuscates exactly how much revenue should be included in BRI. That’s just one of many gray areas in the league’s accounting.
Even if the players are “right,” does it matter in this battle?
“The owner will be hurt by their lost revenue, but not as much as the players will be hurt by their lost incomes,” said Coon. “This has left the players looking for alternatives, including their NLRB charge and their nuclear option — decertification. So far the players have been resistant to pull the trigger on decertification, but this may change as the dispute continues to drag on.”
Players Need Help from the Outside
The union has filed a grievance with the National Labor Relations Board, claiming the league hasn’t bargained in good faith.
The league in turn did the same with the same with the NLRB (also asserting bad faith) and additionally filed a suit in New York to try and prevent decertification.
It’s unlikely the courts rule on a case that isn’t “ripe” yet but the NLRB may be the union’s best hope in gaining some leverage against the league’s deeper pockets.
“The players’ leverage could be greatly increased should they prevail with the NLRB or file an antitrust suit,” said Larry. “The NLRB could lift the lockout, forcing the teams to open their doors and resume business — or at least pay the players.”
That’s why any negotiation before the ruling probably won’t go anywhere. If the players have a shot at overturning the lockout, they’re not going to capitulate on a deal they adamantly oppose.
If the NLRB doesn’t come through for the players, the next option would likely be decertification. Individual players would sue the league under antitrust law.
The NFL Players Association went down that path and it helped facilitate an end to the NFL labor dispute before the courts truly got involved.
“An antitrust victory could be devastating to the owners,” said Coon. “Players could be entitled to treble damages — up to $6 billion per year — should they prevail. Should the players decertify and file suit, they could potentially leverage a better deal from the owners. They might not be able to leverage a 50/50 split, but they would certainly find the owners more accommodating when faced with potential litigation.”
If the owners were offering anything in the ballpark to the players, there would be a compromise but the players have no choice but to hold out for help.
If Not . . .
“The owners have most of the leverage in this dispute, so the players can’t expect to reach a compromise that splits their differences right down the middle,” said Coon. “Make no mistake — the new CBA will tilt heavily in favor of the owners. Without an unexpected bail-out from the NLRB, the players eventually will be forced to choose between accepting a deal they don’t like, continuing to wait (without income) for a better deal that may never come, or rolling the dice with decertification and an antitrust lawsuit.”
Not a pretty picture for the players.
It’s not a pretty picture for the fans.
To be fair to the owners, the last CBA was inked before the economic downturn. Many teams have had to cut prices to maintain attendance levels, some less successfully than others.
The players have been locked in at 57% of BRI regardless of how much the league had to spend to bring in that money.
The question is degree. It is as bad as the owners are claiming? Even if it’s halfway, does it really matter?
If they hold out for the deal they want and are willing to sacrifice a season to get it, what do the players do if the NLRB or decertification doesn’t pan out?
Nuts and Bolts of a Deal
Union President Derek Fisher spoke recently about his hopes to tackle other issues outside of the split of revenue but the owners had no interest.
“All other aspects of the agreement are ancillary to the revenue split — and may be open to compromise,” said Coon.
They’re just not a priority for the league right now. Once the split of revenue is locked in, the secondary issues will be tackled but all pale in importance to the money issue.
“The owners originally sought a $45 million hard cap and the elimination of guaranteed salaries, but quickly backed-off on both issues,” said Larry. “A likely end-point in the dispute may be a system that preserves guaranteed contracts and the current soft cap, but eliminates or reduces many of the exceptions that allowed teams to spend with wild abandon. The new CBA could see a reduction in contract lengths, the elimination of sign-and-trade deals, and the relaxation of trade rules. As long as the players’ overall revenue guarantee is significantly reduced, the owners can make it work.”
The players would like to negotiate on any of these topics but since there’s such a sizable gulf on the revenue split, they’ve gotten nothing but deaf ears from the owners.
They’ve got little else to do but wait for outside help from the NLRB or pursue the possible end game of decertification.
Some will go overseas. Others will find opportunities like Luke Walton, who will serve as an assistant coach for the University of Memphis.
At this point it looks a compromise happens when the government gets involved or the players start to run out of money, losing paychecks from the very small window (relatively speaking) that they have to make a substantial income playing basketball.
Either way, it will be some time before the NBA resumes play . . .