An Idiot’s Guide To The NBA Lockout. Written by An Idiot.

With the NBA announcing the cancellation of the first two weeks of the season, there’s been an increase in interest on the state of the NBA and why there is a lockout. The following is a cliff notes version of the NBA lockout, written by an idiot, including links and quotes from people who are in fact, quite intelligent.

While the matter at hand is complicated, the reason for the lockout is simple: The owners are reporting that they are annually losing in excess of 300 million dollars.

While that number is surely inflated or “enhanced” there seems to be enough signs to show there’s some validity to their claims on losses: Despite increased interest in the sport, this league has still gone through multiple changes in ownerships and team re-locations,  and the league still had to take control over a failing team after they were unable to find a buyer despite the team having a bonafied superstar. Even the NBA players’ willingness to concede certain things in negotiations (we’ll get to this) seem to point out that, yes, the current system is not working for NBA ownership.

With that, the negotiations have been revolved around finding a system that would find a better balance. The owners are searching for a system that would all but guarantee them a profit, and the players  are pointing out that these businessmen  should focus on being better at their own jobs: Highlighted perfectly by current NBA player Etan Thomas when he explained “If the owners want to be businessmen, they should be accountable for bad decisions.” Essentially: Spend more wisely, find more opportunity.

On that note; this is probably as good of a time as any to link a great article by the author of “Outliers,” Malcolm Gladwell who rightfully pointed out that while these owners may be “losing” money on their team, they may be capitalizing on the prescience of a professional sports team on other ends / business opportunities (parking lots, nearby establishments, etc).

Aside from the CBA (the deal with the players), the owners still have to work on an increased revenue sharing program to help assist with the smaller market teams. While those details still need to be ironed out, a huge domino has reportedly fallen in line as reports state that Lakers owner Jerry Buss has agreed to increased revenue sharing. The Lakers, along with the Knicks would seemingly have the most to lose in an increased revenue sharing system. Here, Henry Abbot masterfully points out what teams in the league are most likely to support the increase of revenue sharing.

For the most part, the reports on the negotiations between players and owners seem to focus on the split of Basketball Related Income – or BRI: A split between the league and it’s players on the percentage of all the revenue the NBA brought in.

The previous CBA agreement called for a 57 – 43 split in favor of the NBA players. Meaning the players are entitled to 57% of all profit the league makes (from everything to TV deals to summer camps. Here is a breakdown of everything that’s considered revenue by Salary Cap guru, Larry Coon: Therefore, a player’s salary is never necessarily set in stone: As it can increase or decrease based on if the league made more or less than what they speculated (which is also why the salary cap changes year to year).

And it’s the BRI that made Monday’s cancellation so upsetting – because the sides were so close, and the finances work out where it appears that the only thing that’s stopping an agreement might be pride and ego – not common sense and financial responsibility.

Reports state that only 3% points – or 120 million dollars – separate the two sides. With the NBA owners seeking a 50-50 split, and the players requesting a 53-47 (which to be fair to them, is already a giveback of 160 million dollars of the debatable 300 million dollar loss figure presented earlier). And here’s why that’s especially frustrating

The players are holding out for an additional $120 million in 2011-12, but holding out costs them $82.4 million per week. They would lose everything they stand to gain this season in less than two weeks. On Monday the league is expected to announce the cancellation of the first two weeks of the season, which will cost the players $164.8 million.

Over a six year agreement, the players would burn through the $796 million in a little under 10 weeks. If they continue to hold out for 53 percent, and the owners hold firm at 50 percent, the players will reach the break-even point around December 16th. If the sides settle for 53 percent past that date, then the players would have been better off by taking the owners’ offer of 50 percent before games were cancelled.

Source: Larry Coon

Essentially, if BRI is truly the issue (reports state that there are other smaller things also) the players are fighting for an annual difference that is exceeded by the amount of money they just lost by the cancellation of the first two weeks of the season (holding out for 120 vs 164.8 lost in salary).

Though blame for this can’t be solely be brought on the players: As Adrian Wojanowski rightfully pointed out three weeks ago – The commissioner never gave these players an out. He backed an inherently competitive group into a corner, and refused to give the slightest concession to the players to make them feel like at least they got away with something. 

Instead on Monday, Stern and the owners got even more aggressive: Requesting to limit Larry Bird Rights (ability to pay a player who’s been on a team more than any other team), and increasing luxury tax (amount paid when go over the salary cap) in an effort to limit spending. Two ideas that kind of backup Bill Simmons’ age old anecdote: The owners need protection from themselves.

And that’s where we’re at today. Lost games for the fans, lost paychecks for entry level employees, and all for what, ego?

One comment

  1. Nice wrap up, Matt. That Larry Coon article did a good job articulating the nonsense it would appear to be for the two sides not to agree. I also think this lockout is becoming more about egos and pride than about $.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s