SI.com's view of things........
Revenue split will determine NBA’s fate
2011 LOCKOUT, COLLECTIVE BARGAINING AGREEMENT | COMMENTS
If the players' union and league don't reach a new collective bargaining agreement by Monday, the NBA will cancel the first two weeks of the regular season. (AP)
Something big is going happen within the next few days. The NBA and players’ union are either going to shake hands on the general parameters of a new collective bargaining agreement, or the league on Monday will cancel the first two weeks of the regular season, a step that would cost the players about $165 million in salary and the league hundreds of millions in revenue.
We are already at the point where starting the season on time (Nov. 1) and playing a full 82 games will be tricky, since the league could need as much as a month to finalize the agreement, conduct free agency and get teams ready to play. It might be possible for the league to squeeze it all into three weeks, or to somehow delay the start of the season a week or two and still fit in all 82 games. The latter scenario would require either compressing the schedule a bit or pushing back the start of the playoffs and making up time by reducing lay-offs between games — or some combination of all of those things. Changing the schedule like that is tricky, considering NBA arenas have other things booked for nights when the home team is off or away. But while the Monday deadline seems hard, there are ways to avoid the cancellation of games if the sides are close enough to that magic handshake by then.
The question, of course, is: Will they be close enough?
The encouraging part is that the lone remaining sticking point is money — how to split up the nearly $4 billion in basketball-related income the NBA brings in every year, a pie that will grow as the NBA’s popularity grows. This is not to say the two sides have agreed on the precise elements of the salary cap, the luxury tax and all the complicated rules that govern how and when players become free agents, get traded and move around the league. The horse-trading on that stuff continues, and the pendulum swings in concert with the revenue split. But sources close to the talks have stressed over the last few days that the discussions on those system issues have been friendly and fruitful, leaving those in the know optimistic that when the revenue split is settled, everything else could fall into place quickly.
As for the split, we left off Tuesday with the league having informally floated either a straight 50-50 split or a similar system in which players would be guaranteed 49 percent of all basketball-related income, with the possibility of getting up to 51 percent, depending on a few variables. The players countered with an informal offer that would guarantee them 51 percent of basketball-related income, with the possibility of grabbing up to 53 percent. Again: These are informal offers the sides brought up in small side discussions. In formal terms, the players have stuck to 53 percent, while the owners have put on the table a proposal that would give the players 47 percent.
The formal gap is huge; the informal one is small. Each percentage point the players lose represents about $40 million shifting from their wallets to the owners’ wallets every season — and that number will grow as revenues jump. If you take the most optimistic view of those informal offers, the two sides are really only two percentage points apart, which amounts to $80 million a year initially and as much as $900 million or so over the course of a 10-year deal. But one source close to the talks said the two sides aren’t quite viewing things that way yet. Even though the dueling informal offers both include that 51 percent figure, making it an obvious magic number, one source said that the two sides are now looking more at the extreme ends of their respective offers — 49 percent and 53 percent. That amounts to a $160 million gap in the first year, something like $1.6 billion over 10 years and about $1.1 billion over seven years.
That’s a lot of money, and it feels like a lot to players, since they were guaranteed a whopping 57 percent of basketball-related income in the last CBA — a deal that was viewed at the time as a massive win for the owners, by the way. The players have been at least 53 percent for the last 28 years, and they have spent the last two years watching the league try to cut their share first below 40 percent, and then even on Tuesday as the cancellation deadline approached, all the way to 46 and then finally 47 percent. You can understand why they were not in the mood to jump at a 50-50 offer on Tuesday, a stance union president Derek Fisher and executive director Billy Hunter reiterated emphatically Wednesday in a letter to players.
That 50-50 split may be the best deal the players can get, at least in a timely fashion, and SI.com’s Sam Amick is right that the rank-and-file — some of whom appear just fine with a 50-50 deal — deserve Hunter’s ear now. The phrase “timely fashion” there is key. As Larry Coon and Tim Donahue pointed out on Thursday, if the players decide to sit out games in order to get a better deal, they will have lost more in aggregate salary — about $800 million — by mid-December than the total salary gap over six years between a settlement that involves a 50-50 split and an on-time start to this season, and one that involves a 53 percent split in the players’ favor and a 2011-12 season that starts sometime past that mid-December point.
In other words, the players might have leverage now, given that lots of owners are happy with the state of the things and would like the season to start on time. But that leverage is fleeting and fluid, and if the two sides can hit that 51 percent mark this weekend, we could get a positive announcement late Sunday or early Monday.
Going down to 51 percent or 50 percent would anger a lot of powerful agents, seven of whom wrote a letter on Monday urging the players to stay firm at 52 percent and push for more. The agents got a lot of flak for that, but they are just protecting the interests of the players and doing their best to make sure their clients understand exactly what is happening here. The only disingenuous thing about that letter was the agents’ attempt to paint the 52 percent split as having the same impact as a hard-team-by-team salary cap.
The players’ union is dead set against the latter, arguing it would mean the end of guaranteed contracts and solid mid-level salaries, since teams will stress cap flexibility above all else. They’re probably right, and they have stood fast on the principle that player salaries should rise and fall — but mostly rise — with the league’s overall revenues via a percentage share system.
Cutting that share to 52 percent is a blow, but it is not the same thing as instituting a hard cap, and for the agents to paint the two as congruent represents a scare tactic amid an otherwise fair letter. In any case, we’ve yet to hear from a single player who has declared he will follow the wishes of agent when it comes time to vote. We have no evidence that the agents are powerful enough to derail a deal.
And a deal is there to be had. It will be difficult, but it is there, because after two years, we’re down to the money.
