Monday, 28 February 2011

The Collective Bargaining Agreement: The Owners

Alright, as I have alluded to recently, the big issue surrounding the NBA that most aren't discussing (but should be) is the upcoming expiration of the collective bargaining agreement (CBA).  If you don't know what it is, then Wiki provides a quick overview that anyone can understand.  The current CBA expires on June 30th.  In 2004, the NBA successfully composed a new CBA and there were no labor issues.  If you recall back to the 98-99 season, the NBA locked out till the last possible day when players and owners came to agreement and saved the, albeit shortened, season.

So why is this a big deal and why should we take a close look at it?  Well if you like watching basketball then you should care because there could be no NBA next year.  And if you don't like the NBA and prefer the NCAA, then you should care because it could mean a different shape of the college scene due to players staying longer or jumping ship to Europe.

What are the issues at contention?  Well, as is typically the case, money is the problem.  Two years ago, ten teams were forced to take a loan from the NBA in order to help with their financial situations.  Last year (I will preface this by saying I can't find the stats but I have a memory of this being the statistic) about two-thirds of the NBA teams last year broke even or lost money.  That means that only ten teams made any kind of money.  David Stern postulated in 2010 that in the next five to seven years, the NBA would lose over one billion dollars.  Just this year, the NBA was forced to purchase the New Orleans Hornets as George Shinn was forced to abandon ship as he drowned in the red numbers surrounding his organization.

The owners are pisssed.  They are the ones making the investments: the players, the stadiums, the tickets, everything.  They expect to see a return on their investments, and most just don't see that.  And a major misconception is that most of these NBA owners can afford to take the losses because they are just that wealthy.  The fact is, though, not all of these guys are billionaires who can afford to lose 50 million dollars in a year because their team can't turn a profit.

One of the biggest issues that the owners have with the current CBA is that at the end of the year, league revenue (not to be confused with individual team earnings) is split amongst the owners and players.  In the past 20 years, the split has turned from the owners receiving the majority to the players getting a 57-43 share.  As the principal investors in the league, the owners feel entitled to a bigger share of the pie.  And they may have a good point.

NBA owners also want to establish a hard salary cap.  This means that no teams would be allowed to exceed the salary cap (which is expected to drop below the 55 million it currently sits at).  What would this mean for the owners?  Shorter, less expensive contracts to players, meaning they have to spend less money.  They also hope to abolish guaranteed contracts because one player with a bad deal can cripple a team's financial situation.  One needs to look no further than Brandon Roy and his max deal which cannot be voided as an example of a player's guaranteed contract causing fiscal issues.

So what does this all boil down to?  Money.  That's it.  The owners want more of it back in these tough economic times, believing that the players receive far too much.  But what leverage do the owners have against the players?  Well for one thing, any guy who can afford to spend 400 million dollars on an NBA team probably has a few other investments up his sleeve.  In the event of a lockout, especially in the case of teams that are losing money, those owners will continue making money off other business investments which means they can continue living their normal lives.  Most NBA players do not have this luxury, especially given their tendency to spend extravagantly and not manage their money appropriately.

I'll save my predictions on what will happen for the third installment of these posts, but I'll preface it by saying the owners are in a good place right now.  Coming up later tonight or tomorrow, the players' perspective and what they hope to accomplish in the CBA negotiations.

No comments:

Post a Comment