The Lockout & the Raptors: Players approve CBA, Owners too! (1944)

[MyMomLovesMe]

Interesting article here.

http://sbrother.wordpress.com/2010/0...-players-help/

Are players getting a bigger share of league revenues than their teams can afford to pay?

Or is any pain felt by NBA owners entirely self-inflicted?

Independent financial information says the owners’ arguments are on shaky ground!

Call me a cynic, but it is very hard to take much of what anybody says as credible leading up to labor negotiations. Independent sources of financial information that have no stake in the proceedings are far more likely to provide an accurate approximation of the truth.

Fortunately, Forbes has put out independent estimates of how the North American professional sports franchises have done for years. And we can look up some unbiased information for ourselves. Forbes: NBA Team Valuations 2009

(for 2009)

Last year, the NBA’s franchises made about a quarter of a billion dollars in operating profits.

As Forbes describes it, operating profit includes the cost of arena debt but excludes the financing costs of owning the franchise. And there-in lies the real problem undermining some NBA teams. They simply have too much debt. At $3 billion in debt, the NBA taken as a whole is one highly leveraged enterprise.

This excessive debt level is what has driven the New Jersey franchise to be sold to a Russian billionaire and what is forcing some teams to look for new ownership.

The league’s top five most profitable franchise’s (Lakers, Bulls, Pistons, Rockets, Knicks) are also among the best financed and rake in over 80 percent of the league’s income.

In fact the eight NBA teams that are in the best shape (add in Suns, Spurs, and Raptors) made over 110 percent of the league’s profit’s last year.

A dozen NBA teams did have operating losses in 2008-09, but over half of those teams had relatively small losses. The worst five NBA franchises incurred about 74 percent of all the losses.

Perhaps the biggest argument for how the NBA owners are the cause of their own problems resides with Mark Cuban and Paul Allen. These two wealthy owners appear to treat their franchises as personal toys. They can afford to.

Last season the Mavericks and Trailblazers lost a combined $38 million on an operating basis. That’s about a third of the losses incurred in the NBA. And they had the highest and fourth highest payroll costs in the league.

Watch this video, sorry about not being able to embed it.

http://video.forbes.com/fvn/sportsmoney/mo_sm012607

The above is an interesting take by Russ Granik who was involved in the NBA as a deputy commissioner for a decade. He is not going to point fingers, but you can read between the lines easily in this interview.




So here is the question, if as an owner I leverage my franchise the way others do their credit cards, who has to pay for it? Why is it that some can have a house and 2 cars and not be in debt, and others can run up their credit cards and claim bankruptcy? Who is at fault due to owners leveraging their assets to make zillions on the financial investments that did not pan out in the economic crisis? I know lots of teams lost money on things that had nothing to do with Basketball.

[Joey]

I like this quote:

"The league’s top five most profitable franchise’s (Lakers, Bulls, Pistons, Rockets, Knicks) are also among the best financed and rake in over 80 percent of the league’s income.

In fact the eight NBA teams that are in the best shape (add in Suns, Spurs, and Raptors) made over 110 percent of the league’s profit’s last year."

Just because it highlights how strong a franchise we have up here and within the grand scheme of the league.

[Apollo]

I've been reviewing the posts in here again today. You guys are making some very strong point. I still believe that a lot of teams are losing money because I have really strong knowledge of the economy down in the U.S. and I know America is drifting towards financial collapse. Not to mention the league needed that loan for 15 teams last year.

Its a tough situation because companies don't like handing the books over ever. There is information in there that the PA has no business knowing. We need to remember the nature of the business relationships. The NBA is basically a joint venture made up of 30 partners. The PA is part of the workforce, they're not one of the 30 partners. They have no right to have access to the books. The NBA should provide some sort of low detail income statement to the PA just to add transparency to the negotiations. I agree with this.

[Joey]

But the thing about Pro Sports that seperates them from normal 'Business Operations' is that the Owners and Players share a 'Bilateral Monopoly' of the Market. The PA has a Monopoly on the Work Force, as it is the only supply of Employees for NBA Owners. Consequently, the Owners have a Monopsony on the PA, as they are the only ones who Hire employees from the PA.

It is because of this arrangement, that the Owners are actually OBLIGATED to share their numbers, as it is this crucial information that allows the Two parties involved in the Bilateral Monopoly, to set a fair price, in which the Buyer (Owners) and the Seller (Players Association) come to a middle ground in which they both agree.

This is why the PA actually has a basis in which to Sue the NBA.

[Apollo]

Believe me, if the players were locked out and wouldn't cave for an extended time, the NBA could easily find scabs. It's happened in other pro leagues. It wouldn't come to that though because the players are not ready for a long labor stoppage. This is why they're crying foul right now, because they can't withstand a lockout. They'd fold faster than Mr.Belvedere on laundry day. Hence I've mentioned words like desperation and weakness when referring to the PA. They have enough money to cover player's salaries for one month... Then they need to get creative to pay for those mansions, Italian sports cars and entourages.

[Joey]

Believe me, if the players were locked out and wouldn't cave for an extended time, the NBA could easily find scabs. It's happened in other pro leagues. It wouldn't come to that though because the players are not ready for a long labor stoppage. This is why they're crying foul right now, because they can't withstand a lockout. They'd fold faster than Mr.Belvedere on laundry day. Hence I've mentioned words like desperation and weakness when referring to the PA. They have enough money to cover player's salaries for one month.

But this whole "They'll find scabs to replace them" is complete BS. There's no way I, or anyone else, pays the same kind of money to see NBDL players, play. Its a joke. It's not going to happen. And the owners know it. If Pops Mensah-Bonsu is the best player on any team, then no one is going to pay money to go see them. Fact.

And where has it happened in other pro leagues? I know the MLB talked about it. And I know the NFL talked about it. I don't recall it ever actually happening. I know the NBA did it with the Refs, but that is a WHOLE other argument.

And they're calling foul, because the League Owners are NOT living up to their side of the Bargaining Deal. As I said, the owners are Obligated to share their numbers. That is the arrangement in ALL of Pro Sports. They have chosen to Waive the AntiTrust laws which normally convern such Business deals, and thus have chosen a relationship where there is 100% transparency between the parties. To not share the numbers forces the NBAPA to decide it would be irresponsible of them to make a deal, when they don't even know all the facts.

Would you sign a contract, if you felt you were being given the short end of the stick? Hell no.



And I'm pretty sure they can only sign Replacement Players in the Event of a strike. Not a Lock-out. Could be wrong on that though.

[MyMomLovesMe]

If the players union worked on their solidarity. They very easily can set up NBAPA temp league. They would need big names to co-sign and the local arenas would be off limits. Create a small season of 24 games, and have each team represent themselves.


(Guys we watch summer league games, trust me they will make money at the Hershey Centre or a venue in Hamilton. They will more than pay for their travel and living expenses, and in that time play the game that they love and not rust out their skills. No one will starve, if they don't want to.)


If the option is not there, I say make your own.


This would make Stern and company crap their pants. It would never replace their income but its better than no income and I don't know of a better way to pump up the heat. Who the hell would watch scabs? DLeague is horrible enough.


I was just thinking Toronto PA can take the show on the road anywhere in Canada and sell out. The players split the gate and any small TV deals for the match in question. I don't care about MLSE, or Management... I care about the players. That is all I watch, I don't care about the building or the history as much as I care about the game itself.

I watch this league for the talent, not the logo.

[Apollo]

But this whole "They'll find scabs to replace them" is complete BS. There's no way I, or anyone else, pays the same kind of money to see NBDL players, play. Its a joke. It's not going to happen. And the owners know it. If Pops Mensah-Bonsu is the best player on any team, then no one is going to pay money to go see them. Fact.

The only example I can think of is the 1982 NFL players strike. The Redskins won the super bowl that year with scabs. I think they did ok in attendance and sold out the SB. If scabs are playing then there is no CBA and so the league is taking in all the revenue. As such they can afford to lower ticket prices to compensate for the lack of star power. You an say "BS" and "no way" but you're not standing on solid ground.

And where has it happened in other pro leagues? I know the MLB talked about it. And I know the NFL talked about it. I don't recall it ever actually happening. I know the NBA did it with the Refs, but that is a WHOLE other argument.

NFL, 1982.

And they're calling foul, because the League Owners are NOT living up to their side of the Bargaining Deal. As I said, the owners are Obligated to share their numbers. That is the arrangement in ALL of Pro Sports. They have chosen to Waive the AntiTrust laws which normally convern such Business deals, and thus have chosen a relationship where there is 100% transparency between the parties. To not share the numbers forces the NBAPA to decide it would be irresponsible of them to make a deal, when they don't even know all the facts.

The owners did live up to their end of the deal and they're claiming it's why now they need to claw back the money the players are making. Too many teams are losing money. No teams should be losing money and if they are then something is broken. This is the league's stance. The PA is perusing this as an act of desperation in my opinion. They don't want a lockout because they will crumble in such a scenario. The league knows the laws as good as anyone. I don't how this appeal will turn out but I have to think the league has run through the different courses of action the PA could take and are ready for this one.

Would you sign a contract, if you felt you were being given the short end of the stick? Hell no.

It depends on how weak my position is when push comes to shove. Right now the players' position looks weak and if they lose this appeal it's checkmate.

And I'm pretty sure they can only sign Replacement Players in the Event of a strike. Not a Lock-out. Could be wrong on that though.

I think you're wrong. It's happened in labor disputes in the past. I think I read a case study on one in a labor relations course I did while in University... But I could be wrong. It's been a while.

Think about contracts in the private sector company. Your organization signs a contract with a company to do work. When the contract runs out that company is free to fill those positions with whoever it chooses.

[MyMomLovesMe]

The comments by the league are vague, it costs them more than 43 cents on the dollar to operate.


The problem is that its turning out to be debt load. If you take on debt, the interest will eat in to your operating revenue. So this means that good teams can pay their players, and mismanaged teams can't.


This is why they don't want to release the books, because what it will end up showing is that most of the profits are going to service bad debt by some mismanaged franchises. If a player racks up his credit cards, does he get to change his slice of the pie? No.


Hence let the mismanaged teams die, instead of taking a bigger cut of the players pay. Who's fault is it that a franchise is over leveraged? Why should players as a union make these concessions, when there are plenty of franchises that are operating in the black? Why must the players union, bail these guys out and not the owners union?


The other clubs don't want to give up their profits, why should the players? If a franchise is not making money, they should cut back their expenses/restructure/fold, not seek it from an entire group (and worse demand it from the players instead of their fellow owners)

[slaw]

The article MMLM posted is very interesting for two reasons: one, it seems to confirm what must be true: a huge amount of the cost associated with running these teams is on the financing side (i.e. long-term debt costs). Two, if you exclude the losses in Portland and Dallas, you end up with a few teams making lots of money, most teams breaking even or losing around the margins, and a few teams in real trouble. Intuitively, this makes sense.

Part of the problem here is that we are always talking about 'league revenues' and 'league costs' in the aggregate when, in reality, no such thing exists. Revenues and losses only matter on a team basis. That's why I'm not so sure that making changes in the aggregate does much for the teams in real trouble (see, Phoenix Coyotes, Thrashers, Blue Jackets, Panthers, etc.). The real issue is the spread between the haves and have-nots and the easiest solution to that is to simply get rid teams that can't work.

[Apollo]

At the end of the day, I don't really give a damn about how they end up agreeing to share the money. That doesn't affect me. What I care about is a hard cap implemented and tighter rules to discourage guys from bailing on the team who drafted them. Those two rules are for the greater good of the league as a whole. I don't care how they make it happen, whether it be locking out the PA and breaking them or extending the salary cap to a larger number so that players' salaries in general don't need to shrink or anywhere in between. I just want that hard cap ASAP.

[grindhouse]

If there are serious losses, opening the books would not be such a problem. If my business was loosing this sort of money I would be pushing the books on all my creditors. I would be putting it in their face any chance I got.

You can't expect one side to take a cut, without seeing what the other side is making. The owners know what the players make, that is public info for them (since they pay it), the other side know little about how ownership is using its take.


As far as Adam Silver is concerned, you can't get a much more biased point of view from ownership other than asking Stern for his opinion.



Are you kidding me? It costs them more than 1.7 Billion to run the league? This is with players salaries subtracted of 2.3 Billion which are also deducted against your revenue as an expense. How much are the suits paying themselves? What cuts are they going to take to their salaries?

Where is this money going? if Players make up 2.3 billion, but running the league costs 1.7 Billion, than it seems to me that the problems are in the bureaucracy and management. The owners signed the deals in good faith, now the minute their business model gets stagnant, it is the players that must make ALL the concessions.

We are not talking 1% or 2%, we are talking about taking 20-30% from one group, and ignoring more efficient ways of doing business. Why are the players being asked to make up the ENTIRE SHORT FALL?


Who forced the owners to sign these deals? (if teams are losing money, let them move or fold. That is the way business works, no one should be asked to subsidies inefficiency. If clubs don't have the money, they will not sign the contracts. This is not complicated. There is no reason to isolate PRO sports from the REAL world of competition.)


These owners are acting like children. Fold it or don't sign the contract. If you can't reach solidarity with fellow owners as to how much money is being paid out, than maybe some owners are simply lame ducks that are holding the others back. Why would an old boys group need these policing strategies if they were really losing money?

Why are the players being asked to make up the ENTIRE SHORT FALL?

the players salaries equal 57% of what the league brings in, that is more than half which I think is the highest of any sport.

It costs them more than 1.7 Billion to run the league?

probably, repairs, maintenance, utilities, supplies, equipment, office staff...what do you think a company would charge to change A light bulb at the ACC?

Who forced the owners to sign these deals? (if teams are losing money, let them move or fold. That is the way business works, no one should be asked to subsidies inefficiency. If clubs don't have the money, they will not sign the contracts. This is not complicated. There is no reason to isolate PRO sports from the REAL world of competition.)

All of the title contending teams are spending money over the cap, so if a team doesn't spend money because they don't have the money to spend, then that team shouldn't be able to compete? the system is flawed and needs to be changed simple as that.

If there are serious losses, opening the books would not be such a problem?

no business in the world opens up the complete books to its employees

[MyMomLovesMe]

Grindhouse,

I said everything I need to say, please read the posts about financing and the Forbes figures. Just so you know the product is the players. The difference between the D league and the NBA is not the suits and owners, it is the talent. The players drive this league. Take out the players and leave the owners and the 4 Billion dollar take falls apart.

[Apollo]

T minus 30

Publicly, the signals have been decidedly mixed since All-Star weekend in Los Angeles about whether a lockout – presumed inevitable for at least a year – can be averted. The rhetoric was significantly softened at All-Star weekend in February, and deputy commissioner Adam Silver made the most optimistic comments to date at the draft lottery in Secaucus, N.J., earlier this month, saying the “throttle is down” on efforts to hammer out a deal before the current one expires June 30.

But those olive branches subsequently were snapped in two by National Basketball Players Association executive director Billy Hunter, who has described the owners’ revised proposal – in which they offered the non-offer of phasing in their draconian changes over several years – as worse than the original one. Last week, the NBPA filed an unfair labor practices charge against the NBA with the National Labor Relations Board, alleging, among other things, that owners have not negotiated in good faith or provided suitable financial proof of their claims that the league is losing hundreds of millions a year under the current system.

So where are we? Thirty days out from what would be a debilitating and foolish display of stubbornness by both sides, sources familiar with the negotiating climate say it isn’t time to panic – but that time is coming soon.

“If there’s going to be a deal, I would say there are tipping points," one person familiar with the negotiations told CBSSports.com. "One tipping point is June 30. Once you get past June 30, people are inclined to sit around until the next tipping point, which is September.”

While the two sides remain far apart on the issues of a hard cap, reduced player salaries and an eventual elimination of guaranteed contracts, they at least are in agreement that they are farther along in negotiations than they were prior to the 1998-99 lockout, which resulted in a 50-game season. But one of the people familiar with the talks said there has been less progress at this point than there was in 2005, when noxious lockout fumes were in the air and catastrophe was averted with a surprise agreement during the NBA Finals. The owners, clearly, are no longer celebrating that victory, since they are trying to detonate most aspects of the deal that was ratified at that time.

Representatives for the owners and players met for a small bargaining session last week in New York, and a larger session is scheduled when the Finals shift to Dallas for the middle three games next week. Despite immense differences, the dialogue has been consistent for weeks – proof that neither side likes its chances if the dispute follows the NFL path to the courts.

“I think everybody is taking every opportunity right now to see if something can be done without a whole lot of distractions and rhetoric,” a person familiar with the negotiations said.

Of more importance is a ruling from the Eighth Circuit Court of Appeals on the validity of the NFL lockout. Oral arguments are scheduled to be heard June 3, with a ruling possible before the NBA lockout begins. If the appeals court upholds the portion of U.S. District Judge Susan Nelson’s ruling that proclaimed the NFL lockout of a decertified union illegal, leverage in the NBA negotiations would swing significantly toward the players. At that point, the proverbial throttle would be pushed even harder toward a negotiated deal; why would NBA owners want to follow the same futile path through the courts that foiled their NFL counterparts?

A ruling in favor of the owners in the Eighth Circuit would shift the leverage to the NBA owners, and raise the chances of a lockout to a near certainty.

But while there is no disputing the communication and momentum, there are a few problems with comparing the NBA’s current situation to the NFL’s – or even the NBA’s in 1998 and 2005. As for the NFL comparison, legal experts believe the NBA owners would have a better case in the courts because they are claiming to be losing millions under the current system – and have provided audited financial statements and tax returns to prove it. NFL owners don’t claim to be losing money; they just want to make more.

As for comparing this to the NBA’s ’98 or ’05 negotiations, the NBA is in a different place than it was then. In ’98, salaries were out of control and the game was about to embark on the uncertain journey of life without Michael Jordan. In ’05, owners were looking for tweaks to the ’99 agreement. Now, they are looking to permanently and dramatically alter the landscape of the sport.

Source: CBS Sports

[Apollo]

Players willing to take less

Why is there so much to talk about? Sources told CBSSports.com that the players made a formal counterproposal last week in Miami -- the first such proposal since the owners made their second proposal in April. Sources were reluctant to discuss details of the players' plan, since much of the time in bargaining sessions during the Finals has been spent explaining the details and responding to the owners' questions about it. But one detail, CBSSports.com has learned, is a sliding-scale model for the players' share of basketball-related income (BRI), where the players would take a reduced share of the pie if revenues went up.

In view of the NFL labor talks getting bogged down in the courts and mediation, Stern said there was “expressed determination on both sides to reach a compromise and accommodation with each other.” The language suggested a further softening of the public rhetoric, though Stern described the tone of the negotiations as “in the language of diplomacy, open and frank.”

“I just take it as a real positive that we’re continuing to meet,” Stern said. “When you have parties like this, it’s just as easy if you don’t think that there’s a possibility of a breakthrough to say, ‘All right, let’s pack it in and let’s go home.’ But nobody on either side wanted to go home.”

Source: CBS Sports