By Marcus Shockley
Will there be a basketball lockout next season?
Right now, everyone involved is giving every indication that there will be. Owners are saying they aren’t going to budge, and commissioner David Stern says that they need to drastically cut costs, ideally shaving 30% from the players’ salaries. Players are being told by their union representatives to start saving their money and limit unnecessary expenditures in able to be able to survive not getting a salary in the event of a lockout and subsequent strike. If the NBA and the NBPA cannot hammer out a new collective bargaining agreement, the owners may lock the players out of their facilities as early as July 1, 2011.
So, let’s start at the beginning.
A collective bargaining agreement is the agreement between a union, in this case, the NBPA, and the owners of the business, in this case, the NBA. In the case of the NBA collective bargaining agreement, it covers such things as revenue sharing, which is at the crux of the NBA’s steadfast determination to either get a new deal or walk away. The NBA owners want to lower the salary cap, and David Stern has stated that the league lost $300 million last year. That figure is disputed by the NBPA, and these statements by the owners should be seen for what they are: negotiating tactics.
It’s unlikely that the NBA is losing as much as they claim, but the NBA is not like the NFL, which has built decades of fan interest and loyalty to specific teams over players, while the NBA has banked all of their marketing on the players. So, it’s tough for the NBA to claim that the players are overpaid when the entire marketing message of the league focuses entirely on how valuable those same players are. It’s also a near certainty that a shortened season or in a worst-case scenario, the season never occurs, the NBA might never recover. They are just now regaining their traction from the last labor dispute and shortened season in 1999, and it is a tenuous resurgence which could easily erode.
The NBA has a few options to save money, either cutting player salaries, which is the only hand they’ve played at this point, or contracting teams, or even cutting the number of games that are played. Cutting the number of games would increase ticket sales due to the increased importance of the games while potentially lowering salaries. However, the NBA owners are married to the idea that they need more games, not less, and more teams, not less. So they are pretty much sticking with the idea of cutting player salaries.
The owners want to reduce players salaries and reduce the percentage of basketball related income that they shell out. The economy has hammered the owners, and the reality is that the NBA has long been treading a dangerous ground of ticket prices that have gotten too high, too many games, too low television ratings and too low attendance. If what the owners say is true, they intend to stop hemorrhaging money and they’ve sent that message loud and clear to Stern, who already believed player salaries were too high.
In short, the owners say their businesses are going under while the players say they won’t cut a single dime. The owners at this point are declaring all-out war on the players’ union, and that means not only will there almost certainly be a lockout, it means that it could have ramifications reaching into other leagues. The players currently receive at a minimum of 57% of basketball related shared revenue, which includes revenue from ticket sales, broadcast deals, area signage, revenue from camps, etc. Shared revenue is not all of the money that the league and teams make, but it is the bulk of it. The NBA’s 57% is higher than the NHL or NFL, and Major League Baseball does not have this type of revenue sharing model. It’s entirely possible that the NBA wants to slash their sharing percentage to 50% or lower, in order to bring down their costs, and they are using the NFL’s model as a basis.
There are some differences in the NFL model, where teams have to carry rosters of 50-plus players, and the NBA, with only 12 plus. But the arenas hold less capacity in the NBA, so ticket sales are generally much lower, and the extended NBA season depresses ticket sales even more. In addition to that, the NFL has focused on on growing their television viewers more than the NBA, with technology and on screen production, rule changes, etc. So the broadcast deals available to the NFL are much higher than the NBA. Too many times writers, players, fans and agents will compare salaries between the leagues as a gauge, but the underlying revenue is drastically different.
The hard truth is that by working to crush the players’ union, the league might ultimately spell their own demise. After the last labor dispute, ratings suffered and only now are working their way back, so a massive, public dispute which lasts too long may destroy their profits for years, which could cause some teams to ultimately fold. Of course, if they aren’t profitable now, they are already in danger on this happening.
There’s a lot more on this to come.
Hey, if you like this kind of basketball coverage, do yourself a favor and sign up for the BasketballElite.com newsletter, which is free for basketball lovers.