Wednesday, November 24, 2010

NBA Armageddon 2011: a near certainty


David Stern vs. Billy Hunter II appears to set for this summer. The current National Basketball Association collective bargaining agreement is set to expire on June 30, 2011 long before the start of the 2011-12 NBA season. However, several reports suggest the owners will lockout the players that day. It remains to be seen how long the lockout will last but the two sides are at loggerheads heading towards a very dark place.

"I think it's highly probable that there will be a lockout and that's what I'm preparing for because I don't see anything else right now," NBA Players Association union chief Billy Hunter said.

The NBA and the NBAPA have headed in this direction three times before. The first two times were quiet skirmishes, a three-month labor dispute in 1995 and a brief work stoppage in 1996 that lasted a couple of hours. On both occasions, the players and owners reached a deal before the start of the season. Before 1998, the NBA was the only major sports league in the United States that had never lost a game because of a work stoppage.

A six-year CBA had been in place since September 1995, but it included a clause allowing NBA owners to reopen the contract after three years if more than 51.8 percent of "basketball-related income" went to player salaries. By the 1997–98 season, 57 percent of basketball-related income was used to pay players, while the previous deal called for a 48 percent split. According to the NBA, 15 of the 29 teams posted losses that season. The NBPA disputed this figure and claimed that only four teams had losses. The leagues owners voted on whether to reopen the CBA on March 23, 1998 and the vote passed by a 27–2 margin. Negotiations between the NBPA and owners started on April 1 and nine further bargaining sessions took place in the next three months (if this is starting to sound like the current scenario – it is very much history repeating itself).

The primary issue then was player salaries as it is now, which owners wanted to see cut. A salary cap had been a part of the CBA since 1983, but it included loopholes that allowed teams to exceed the payroll limit.

Among them was the "Larry Bird exception", named after the former player who was an early beneficiary of the rule. The Bird exception enabled teams to spend an unlimited amount of money to re-sign their own players, causing a substantial increase in the value of upper-end contracts. Club owners wanted to remove the exemption and place limits on maximum player salaries. Funny how more than a decade later one of the biggest issues the NBA faces is not a Larry Bird rule but instead is what happens to NBA franchises when franchise players (that was Larry Bird representing the Boston Celtics) like LeBron James and Chris Bosh leave their current teams?

Owners also desired a modified pay scale for rookie players that would prevent them from gaining unrestricted free agency after three seasons. The players union, wanting to protect negotiating gains from previous years, opposed changes to the salary cap system, in particular those involving the Larry Bird exception. Other NBPA positions included opposition to a cap on individual player salaries and support for a raise of the minimum salary, which 22 percent of NBA players earned during 1997–98.

After negotiations between the sides broke off on June 22, the lockout started nine days later. Teams were barred from making player transactions and holding workouts or meetings for the duration of the work stoppage.

Negotiations eventually resumed at an August 6 bargaining session, the first since the start of the lockout. NBA commissioner David Stern and several owners left the talks after the NBPA presented an offer that included increased revenue sharing between teams. By September 25, twenty-four exhibition games were cancelled and training camps were postponed indefinitely as a result of stalled talks. Further negotiating sessions took place in October and November, but no agreement was reached.

The season’s first two weeks were officially cancelled on October 13 and 99 games scheduled for November were lost as a result. It was the first time in NBA history that games were cancelled due to a labor dispute. On October 20, arbitrator John Feerick ruled that the owners did not have to pay players with guaranteed contracts during the lockout. Feerick's decision gave the owners leverage in the bargaining talks.

Further games were cancelled as the lockout continued through November and December, including the 1999 All-Star Game, which had been scheduled to be played on February 14, 1999 at the First Union Center in Philadelphia. Negotiations throughout the lockout were characterized often by frequent hostility between the players and owners. One example of the heated nature of the talks came at an early December bargaining session, when Stern and NBPA executive director Billy Hunter became involved in what CBS News called "an extremely heated, expletive-laden screaming match". Both men temporarily walked away from the bargaining table.

As the days and weeks turned to late December David Stern suggested that unless there was an agreement in place by January 7, 1999 the NBA would cancel the entire 1998-99 season.

At the end of the day – wage disparity (more than any other major sport, the few make a great deal in the NBA while many of the players made the league minimum) proved to be a key to the lockout coming to an end. Agent David Falk who was considered an influential voice for the players, represented NBPA president Patrick Ewing and nine players on the union's 19-person negotiating committee. The NBPA scheduled a meeting in New York City on January 6, where players would vote on a proposal by the owners that the committee had recommended opposing. Several players, including Shaquille O'Neal and Hakeem Olajuwon, wanted the vote to be conducted by secret ballot, while others indicated a desire to return to competition regardless of how the vote went. Kevin Johnson stated that most players "were just ready to throw down [fight] Wednesday at our meeting if an agreement hadn't been reached." Faced with a splintering union, Hunter moved to resume talks with Stern. On January 6, the day before Stern's deadline, he and Hunter reached an agreement, which was ratified by the NBPA later that day and by the NBA Board of Governors on January 7.

Widely viewed as a victory for Stern and the owners, the agreement was signed by both parties on January 20, officially ending the lockout after 204 days. It capped players' salaries at between $9 million and $14 million, depending on how long they had played in the NBA. A rookie pay scale was introduced, with salary increases tied to how early a player was selected in the NBA Draft. The Larry Bird exception was retained, though maximum annual pay raises were capped. New "average" and "median" salary cap exemptions, which the NBPA had proposed, allowed teams to sign one player per category even if they were over the spending limit. The league's minimum salary was increased to $287,500, a $15,000 raise from before the lockout.

The two sides with little fanfare reached a six year agreement on July 30, 2005, averting any real labor issues since David Stern and the NBA owners pinned Billy Hunter and the NBA Players Association to the mat the one time they did battle each other.

What has changed and moving the two sides to a major showdown? The NBA is bleeding red ink, teams are losing money and the league wants serious salary rollbacks from their players. NBA Deputy Commissoner Adam Silver said so on the eve of the current NBA season.

“We pay the players 57 cents on every dollar, which by definition means it needs to cost us less than 43 cents on every dollar we generate.

“Even though we reported we have record season ticket sales over the summer and otherwise very robust revenue generation because of the built in cost of the system, it's virtually impossible for us to move the needle in terms of our losses.

“As we've said previously, our losses were roughly $380 million last season. We made a report to the Governors that said in essence we're going to lose in the range somewhere around $340, $350 million this season based on our projections.

“The answer to your question is there's no chance we can change the fundamental economics regardless of our success because it just costs us too much money to generate those sales.”

And the 30 percent cutback? Currently, NBA players are collectively paid $2.1 billion annually. “We would like to get profitable, have a return on investment. There's a swing of somewhere in the neighborhood of $750 to $800 million that we would like to change. That's our story and we’re sticking to it.” Stern announced following the league’s October Board of Governors meeting.

As far as Hunter is concerned – David Stern can stick his story wherever he would like too.

"I don't really see that the argument's all that compelling for the changes that they're asking for," Hunter said.

"I think the message has to be driven home to I guess that hawkish group of owners that if they're inclined, if they want to lock us out -- because we're not going to strike -- if they want to lock us out and they want to pull the roof down on themselves, then hey, have at it," Hunter said.

It is clear that NBA owners, regardless of how “hawkish group” they may or may not be, believe they can again beat the players as they did 12 years ago. Consider the players are led by the same man (Hunter) and there really is nothing to suggest the players will act any differently from how they did 12 years ago.

Does it seem unreasonable to ask workers to accept salary and payroll rollbacks? From auto workers to the minimum wage frozen at the levels it has been at for years, the working force everywhere has had to deal with frozen wages or salary cutbacks.

The current minimum NBA salary for a player with one year experience stands at $762,195 and that is for players sitting at the far end of the bench. The average NBA career is four years. The minimum NBA salary for a player in his fourth year is $915,852. If players are forced to give back some of their salaries – they will still be making far more than the average American. Now that said, they are very gifted employees with a very unique set of skills but they will still be very rich young men.

Patrick Ewing the President of the NBA Players Association offered one of the silliest comments in sports player/labor history during the 1998 lockout “sure we make a lot of money but we spend a lot of money”. One issue is certain – in any sports labor dispute neither side wins, fans and sponsors feel alienated. Maybe David Stern and Billy Hunter should be less concerned on the comments they are making and think more about how basketball fans and the NBA’s sponsors and TV partners might react to a lengthy lockout.

For SportsBusinessNews.com this is Howard Bloom. Sources cited and used in this Insider Report: Wikipedia

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