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Ball Don't Lie

A new NBA revenue sharing plan is taking shape

Eric Freeman
Ball Don't Lie

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Plan architect Wyc Grousbeck poses as a caricature of a Wall Street fatcat (Jim Rogash/Getty).

During the NBA lockout, as owners griped about a lack of competitive balance and the large salaries that cause it, a chorus of observers (including me) opined that the differences in market viability were more likely to be overcome by improved revenue sharing than by cutting the pay of every player. Changing the playing field for all does little to affect small-market clubs relative to their big-market brothers -- there must be major structural changes for such a result to come about.

The NBA decided that revenue sharing would be a topic for post-lockout discussion among owners, not collective bargaining talks. To many (including me), that seemed like a sign they weren't going to cover the issue at all. So we should give credit where it's due and applaud the owners -- especially Celtics owner and plan architect Wyc Grousbeck -- for working out a new system. Talks aren't yet finished, but some details have come to light. Here's the report from John Lombardo of SportsBusiness Daily (via PBT):

When fully phased in by the 2013-14 season, it will see a stunning $140 million in additional revenue sharing coming into play compared with last year, moving money through a complex formula that shifts some of the financial wealth of big-market NBA teams to the league's neediest teams, each of which could receive up to $16 million a year as part of the plan.

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Sources said that the core of the plan calls for all teams to contribute an annually fixed percentage, roughly 50 percent, of their total annual revenue, minus certain expenses such as arena operating costs, into a revenue sharing pool.

Each team then receives an allocation equal to the league's average team payroll for that season from the revenue pool. If a team's contribution to the pool is less than the league's average team payroll, then that team is a revenue recipient. Teams that contribute an amount that exceeds the average team salary fund the revenue given to receiving teams.

There are limits built into the new plan to protect high-revenue teams, such as the Celtics, Chicago Bulls, Los Angeles Lakers, New York Knicks, and Orlando Magic, with no team to contribute more than 50 percent of its total profits into the revenue-sharing pool. As is the case in calculating league revenue to determine the salary cap, audits are used to determine team revenue.

The article has many more details, so I suggest reading it in full if you're interested in the issue. And while notions of fairness suggest that revenue sharing should have been discussed in relation to player salaries if owners cared so much about a level playing field, this plan is still pretty significant. As Lombardo notes, the NBA's previous revenue-sharing plan depended almost entirely on the salary's cap luxury tax. This deal is about total profits, including the local TV contracts that make teams like the Lakers so rich. This new agreement could very well make a major difference in the long-term financial viability of a team like the New Orleans Hornets. The same even goes for a small-market playoff mainstay like the San Antonio Spurs, a franchise likely to see a dip in wins as its best players grow older.

It's important not to view revenue sharing as a panacea for what ails these teams, particularly on the court. For instance, Major League Baseball has a fairly robust revenue-sharing structure, but teams like the Pittsburgh Pirates use that check to boost the owners' profits instead of helping the team get better. Nevertheless, basketball is not football, and a bad, poor team can improve itself with relative ease through the draft. Even if bad teams stay bad, the good news here is that revenue sharing will make it easier for well-run teams like the Oklahoma City Thunder to hold on to their best young players when they become free agents. This is a positive development, albeit one that comes with some caveats.

There's still plenty of room to argue about whether or not the owners negotiated in good faith by acting as if this issue and player contracts were unrelated. For now, though, let's point to this good thing that happened and try to hold everyone who gets a big pile of shared revenue accountable to use it properly. Let's not let a good system go to waste.

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