NBA officials were quick to respond.
“Yeah, we do,” one league official said, according to those in the room. “It’s the most successful sports league in the history of the world.”
And therein lies the crux of the latest labor dispute between NBA players and owners, which could erupt into the second U.S. professional sports work stoppage of the year if the two sides cannot reach agreement by July 1 — just a couple of weeks after a new league champion is crowned. NBA Commissioner David Stern said on April 15 that ownership would deliver a new proposal to the players’ union — the first from either side in nearly a year — when the sides next meet, which could be as early as this week.
Sources familiar with the owners’ thinking say they aren’t willing to make major concessions as they seek to reshape their league using principles employed by the NFL, a $9 billion a year industry that dominates the U.S. sports landscape in fan interest and revenue generation. Philosophically, the NBA owners and players seem to be at opposite ends of the court. Depending on one’s perspective, the NFL offers either the ideal blueprint to develop a robust sports business or an oppressive financial system for players.
Owners seem prepared to follow the lead of NFL’s ownership — which locked its players out in mid-March — if the players won’t accept at least some elements of a revamped, not merely smoothed out, economic system.
“We need a new system,” Adam Silver, the league’s deputy commissioner and chief operating officer said after the NBA’s board of governors meeting last week. “The current system is broken and is unsustainable.”
Deciphering the numbers
National Basketball Players Association Chief Billy Hunter said the fact that television ratings, ticket sales and licensing revenue increased this season demonstrates the exact opposite: the league is thriving and requires no major fixes, other than, perhaps, some self-control on the part of certain team owners.
Despite the NBA owners’ unprecedented decision during these labor talks to open their books to the union, the sides can’t even agree on what the numbers say. Silver said last week 22 of the league’s 30 teams lost money this past year with collective losses at $300 million (better than the $340 million lost the previous year). Hunter maintained during an interview days later that not even a single team is in the red, saying the union disputes elements of the league’s accounting, such as including as losses depreciation figures and certain third-party transactions with team-owned companies.
“They want a guaranteed profit for each team,” Hunter said. “Nobody in business gets a guaranteed profit. If we implement the system they are talking about, franchise values will go through the roof. People will be lining up to buy teams, because it’s a guaranteed return.”
Hunter speculated the NBA ownership was being swayed in part by a half-dozen owners — including the Washington Wizards’ Ted Leonsis — who have experience in busting unions through their ownership stakes in NHL franchises. The NHL lost the entire 2004-05 season to a lockout but gained major financial concessions from players when a new agreement finally was reached.
“I think that’s part of the energy behind it,” Hunter said. “Some of the owners in the league . . . went through the lockout in 2005 that decimated the union.”
The NBA players’ union has demonstrated its solidarity by sending big-name players — and lots of them — to bargaining sessions at the last two all-star games. Derek Fisher of the Los Angeles Lakers has been heavily involved as the union president; James, Dwyane Wade, Carmelo Anthony, Chris Paul and many others have also participated in talks. But little progress has been made over the past year.
The sides are split not only over how to divvy up money to the players, but how much of the total revenue the players should receive. Players, whose $5 million average salary is the highest in U.S. professional sports, want to maintain the 57 percent of the basketball revenues that they currently receive; the league wants to shrink that number to closer to 43 percent by taking more money off of the top to cover certain expenses and splitting the rest in half.
The owners also have argued since making their first and only proposal in January 2010, that the game would prosper — and everyone would benefit — if they adopted an NFL-style hard salary cap on individual teams. The NBA, like Major League Baseball, currently has a soft cap, which allows teams to exceed it in special cases but imposes a financial penalty called a luxury tax if they surpass a certain threshold; that money is redistributed to small-market teams.
The owners, who say large-market owners will always be willing to exceed a soft cap, claim a hard cap would increase competitiveness and allow small-market teams to compete for championships. The players say a hard cap would effectively eliminate the guaranteed contracts and longer-term contracts that currently populate the NBA, while suppressing salaries for marquee players, wiping out the NBA’s middle class and pushing everyone else to the bottom.
“We’re not receptive,” Hunter said, “to a hard cap.”
A move to share revenue
There is one area, Hunter said, in which the players would embrace an NFL-like system: In revenue sharing. Unlike in the NFL, NBA teams negotiate local television deals, which are not shared, on top of a national television deal that is shared. And unlike in the NFL, in which teams share 40 percent of gate revenue, NBA teams keep their gate receipts. “They want to move to an NFL model as it relates to a hard cap, but they do not want to adopt an NFL revenue sharing model,” Hunter said.
Stern and Silver said revenue sharing was indeed a major topic at the recent board of governors meetings and NBA owners are committed to developing and implementing a new plan. Hunter said the players want to know precisely what that plan is. In any case, Stern said, revenue sharing won’t eradicate all the league’s financial problems.
“You cannot revenue share your way to a sustainable business model,” Stern said. “Our issues are not solved by revenue sharing.”
Silver said “several” NBA franchises are so deeply in the red they would lose less money this season during a lockout than by playing under the current system. Three sports business experts told The Post they consider the NBA’s general claims of overall financial losses legitimate. But they also said the NBA already had a relatively restrictive system of free agency.
“The chances for a work stoppage are at least 50-50,” said Andrew Zimbalist, a noted author on sports economics who is also a professor of economics at Smith College. “They do have real losses in the aggregate, so it’s a more difficult situation than the NFL.”
It is not, however, on par with the financial disarray the NHL found itself in before its last labor dispute. About a third of NHL owners lost less money during the lockout than they would have had games gone on, according to NHL Deputy Commissioner Bill Daly. Daly said that, despite the public-relations hit the league absorbed when it canceled the season, the lockout proved to be a valuable tool.
“Ultimately, we did it for the right reasons, I think, to be able to achieve our objectives in those negotiations,” he said during a recent interview. “Our league and our sport is in a much better place today than it was seven years ago. . . We were in a position where we really had no choice.”
The NBA players and ownership seem to agree they do have a choice. Both sides say a lengthy lockout would be disastrous for a business that, while facing some financial challenges, has seen catapulting fan interest in the last year.
“Even those teams that in the short term would do better on a [profit and loss measure] by not playing. I’m sure they would still prefer to be playing and building their business,” Silver said. “And there’s no doubt, from a league-wide standpoint, we would do enormous damage to ourselves if we are not playing.”
Said Hunter: “You’re going to destroy the league because one or two teams might do better? . . . When we had the lockout in ’98, it took until about 2005 for the boat to get righted again . . . and come out of the abyss.”
Hunter vowed to enter the next round of negotiations with and open mind. Howard Ganz, a prominent sports law attorney who has represented ownership in talks, said he, too, hadn’t given up on a deal.
“A lockout is by no means inevitable,” Ganz said. “There’s plenty of time left to reach an agreement.”