When the NBA celebrated its new nine-year, $24 billion broadcast rights contract earlier this month, the sunniest, most hopeful takeaway centered on the possibility that the rising TV tide will lift owners' and players' boats so high that neither side would jeopardize the jackpot. With everyone benefiting from a monstrous infusion of new cash, why would either side dig in for a prolonged labor battle in the summer of 2017, the first opportunity for either side to opt out of the 2011 collective bargaining agreement (CBA)?
glad sad you asked. From the players' perspective, a new round of negotiations would represent an opportunity to regain what was lost in 2011, when their share of basketball-related income (BRI) dropped from 57 percent to a 49-to-51 percent "band" (depending on whether the league met or exceeded growth projections) in a move that would shift an estimated $3 billion from players to owners over the 10-year term of the CBA. The players, still (understandably) smarting from that $300-million-a-year haircut, are likely to opt out and try to get whole now that owners can't cry poor.
There's pretty simple logic from the owners' side, too: Yeah, we got an awful lot last time, but we didn't get everything we wanted. Like a higher age limit for entering the NBA draft, the implementation of HGH testing and, most of all, a hard salary cap.
NBA Commissioner Adam Silver — who, lest we forget, works for, is elected by and can be terminated by the NBA's 30 owners, per the league's constitution and bylaws — intimated as much after a Wednesday news conference, according to CBSSports.com's Ken Berger:
With high-profile players already barking that the league's massive TV deal won't allow owners to cry poverty when the current collective bargaining agreement can be terminated in 2017, Silver managed to slip an interesting line into his news conference: one-third of the league's 30 teams still are not making a profit.
Given that the owners ran the table in the 2011 labor talks, winning a 12 percent reduction in the players' share of revenues, it was a significant revelation.
The league's new $24 billion broadcast and digital rights agreements taking effect in 2016 obviously are not yet baked into the NBA's profit-loss statements. Still, it's ominous that so many teams still rely on revenue sharing to balance their books.
Lest you think that Silver is moving the goalposts as far as the league's goals from the 2011 lockout are concerned, I asked him the following question after his news conference: If all 30 teams aren't making a profit on July 1, 2017, is that reason enough for another lockout?
"No," he said. "No, because the caveat has always been, if well managed. And I would also say, if you don't have a hard-cap system, for example, one of the teams that isn't profitable are the Brooklyn Nets. That's an election they're free to make under our compensation system. They've elected to be unprofitable. My preference would be to have a harder cap, where teams couldn't elect to spend so much more than other teams.
"We've always said to the players' association ... you can make revenue sharing our issue, not yours," Silver said. "We've never come in and said because a particular team is unprofitable that that somehow becomes your problem. We recognize it's our obligation to run a well-managed league."
And apparently, Silver and the BoG continue to see a hard cap as a boon in their management efforts. Hmm.
As it stands, there's a "soft cap" (set for this season at $63.065 million) that teams can exceed with the understanding that if they spend more than a certain amount (set for this season at $76.829 million) they must pay a "luxury tax," which becomes more punitive the more you spend. (This is how the Nets wound up spending close to $200 million for last year's second-round squad.) There's a de facto hard cap in the current system, triggered when a team uses its non-taxpayer midlevel exception, which prevents that team from exceeding the so-called "apron," the point $4 million above the tax line, by even $1. Beyond that, though, the current cap's spongy, provided you're willing to pay the taxman.
There is, of course, disagreement as to whether the institution of a hard cap would have any impact, beneficial or otherwise, on the health of the league's management. When Silver was banging the competitive-balance-and-hard-cap drum as David Stern's deputy commissioner back in 2011, SB Nation's Tom Ziller convincingly argued that the imposition of a new hard cap would actually have a meaningful negative impact on low-revenue teams; that any boost to financial sustainability could come at the cost of "talent sustainability" in smaller markets; that a hard cap would do zip to promote parity in a league where there aren't 30 LeBrons and Durants; and that it would do little more than depress salaries for the "middle-class" players, since max-level stars and rookies on slotted deals will always going to get their money, leaving less cash for the rank-and-file.
"Stern and Silver have always claimed competitive balance as the purpose of a hard cap. Research has indicated that all hard salary caps lead to is reduced player salary," Ziller wrote this January. "[...] a tighter cap drops the highest team salaries, which is mighty helpful for owners unwilling to far exceed the luxury tax threshold. With a hard cap, Peter Holt in San Antonio and Herb Simon in Indiana don't need $80 million payrolls to compete with the big spenders because the big spenders have limits, too."
And with small-market ownership flexing its muscles in those Board of Governors meetings — check out the list of franchises whose no votes got draft lottery reform scuttled — it wouldn't be surprising to see the institution of those limits top of Silver's list of priorities come the summer of '17.
Now, lest we all start pounding the panic button, Silver did stop short of bringing back the "blood issue" talk of 2011 when discussing the hard cap. From USA TODAY's Sam Amick:
Above all else, the owners are clearly hell-bent on winning the hard cap war that they waged and lost three years ago. [...] Yet with conversations such as these already officially underway behind the scenes, Silver stopped short of deeming this an all-or-nothing issue.
"No, not at all," he replied. "And there's gradations of hardness in terms of the cap as well. I wish our current cap system was harder. It's what we proposed last time around, but we compromised." [...]
"As I've said to the players from Day One when I became commissioner, my focus is on growing the pie, and if we do our job growing the pie, the incremental differences in percentages will be a rounding error compared to us both sharing in the success of the league," Silver said.
To be sure, the TV deal does substantially increase the size of the pie. But with players still sore at the 12 percent reduction in the size of their slice and finding it increasingly difficult to stomach that reduction when franchises are netting record sale prices, it's tough to see the National Basketball Player's Association, now led by new union boss Michele Roberts, buying that "rounding error" talk. (Especially considering Roberts' not-to-be-trifled-with rep.)
And if the players aren't buying what Silver's selling, and the opt-out comes, this will become less about pie-growing and more about pie-slicing, just like the last round of negotiations. (Witness the recent back-and-forth about the elimination of max contracts and guaranteed contracts.)
While Silver says "it's premature even for me to be concerned" about a work stoppage, the positioning has clearly already begun. Every comment about still-unprofitable clubs, owners "working for" the players and the preference for a harder cap, "gradations" or no, sets the agenda for the fight to come. It remains to be seen whether the players union has greater wherewithal to withstand an in-the-trenches battle over those system issues than it did in 2011. Here's hoping the new revenue provides a path to a different outcome this time around.
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