Tag: hard salary cap

derek Fisher

Economist Murphy takes us all to school on players stance


Kevin Murphy is smarter than you.

And me. And David Stern and Billy Hunter and everyone else in the negotiating room. There’s no objective way to prove that, but do you have a MacArthur Foundation “genius grant?” Are you the guy the people who wrote “Freakanomics” think is the smartest person they know?

That’s Murphy. And he’s the players’ economist. Union head Hunter said that pretty much every projection Murphy made back in 2005 about how the labor deal hammered out then would play out was spot on. He may grasp all the moving parts of this negotiation better than everyone.

And he spoke at length with NBA.com’s Steve Aschburner. You need to read this. All of it.

Know that Murphy has a dog in this fight — the union pays him. But he is too insightful not to read.

And this goes back to the core arguments of the entire lockout — how much money are the owners really losing? And who should pay for it?

I would say the primary disagreement is not over the accounting numbers. It’s what you include and how you interpret the numbers. For example, the accounting picture of the NBA isn’t very different from what it was five years ago or 10 years ago in terms of ratio of revenues to costs and all the rest — it’s changed very little. Which immediately tells you, wait a minute, if the underlying financial picture is similar today to what it was five years ago or 10 years ago, and people are paying $400 million or whatever for franchises, and you’re telling me that these things lose money every year, something’s missing, right? These people aren’t stupid, right? These guys are worth billions of dollars. So why did they pay all this money for franchises that, it looks like, lose money?

Well, the answer is pretty clear. There are a couple of things that are really attractive. One is, historically, you’ve seen franchises appreciate in value and that appreciation has more than outstripped any cash-flow losses that you’ve had. And if you’re in the right tax position, it’s actually pretty good because you’ve got a tax loss annually on your operating and you’ve got a capital gain at the end that you accumulate untaxed until you sell it and then pay at a lower rate. So you get a deferred tax treatment on the gains and an immediate tax treatment on the losses, that’s not a bad deal.

I’ll be honest, the last couple sentences are hard to follow for me. My tax position does no require a lot of thought. But you get the idea that what is in the official books is not the entire picture.

To all of you people saying “name another industry where the workers would get half the revenue” (yes, we read the comments) Murphy has an answer:

In certain sectors, there’s a ton. You go to a law firm, most of its cost is labor. You’ve got to remember, labor is 60-something percent of the economy. In the service sector, it can be much higher than that. And these people really define the product. These are the ones people come to see.

What separates the NBA from a different basketball league? Well, it’s the players. The basketball’s’ the same, the court’s the same, it’s the players who really are the distinguishing feature. That’s not to say that the league doesn’t have value. But the defining characteristic and the scarce resource, if you think about it from an economic point of view, is the talent. It’s not unlike Hollywood, the music business or any of the other ones where the thing that distinguishes one person from another is the talent.

Then there is the competitive balance issue. The idea from the owners that there needs to be more parity, something Murphy says clashes with the NBA’s star-driven league. Like another report yesterday, Murphy says that what you spend really only has about a 5 percent to 10 percent impact on wins on the court.

NBA.com: (The owners) want Milwaukee fans, for example, to not only root for the Bucks but to have most seasons with hope that their team can compete with bigger-revenue markets.

KM: There’s an element of that. But also, be careful what you wish for. When you get a Sacramento-Charlotte NBA Finals, guys will be crying over the TV ratings. We know that even with baseball — it’s an exciting World Series but the ratings aren’t there because it’s the Texas Rangers and St. Louis [Cardinals]. Basketball is even more star-driven. You get to an NBA Finals that doesn’t have one of the premier players in the league in it, it becomes a lot less interesting. And with 30 teams, not everybody is going to have one of the premier players.

All the number crunching is nice. But let’s get to what really matters:

Can the two sides reach a deal soon so we can have basketball?

“I was very pessimistic last week after the Thursday blow-up but I’m beginning to come around and think we’ve got a shot,” Murphy said. “If there’s a deal here, it’s going to be a deal that nobody likes. That’s what deals are. Nobody walks out feeling like they got a complete victory. That’s initially. But then you get back to playing and you realize, geez, I can live with this.”

After 15 hours of meetings, “some progress” in NBA labor talks

NBA & NBA Players Association Announce New CBA

I’ve got to say this for the owners and players, when they sit down to talk they don’t get up.

NBA owners and players union representatives met for more than 15 hours in New York Wednesday — going until 3:20 a.m. Thursday morning. The two sides will get back at it on Thursday at 2 p.m. (with David Stern saying he would have a conference call with the owners Labor Relations Committee prior that).

Out of all that we have a glimmer of hope.

“The energy in the room has been good, the back and forth has been good,” NBA Commissioner David Stern said

Through the day Thursday there were multiple reports that the two sides made progress discussing “system issues” — things such as the luxury tax and length of contracts. Both sides confirmed that.

“We were able to work through a number of different issues today regarding our system,” union president Derek Fisher said. “We can’t say that major progress was made in any way but there was some progress on some of our system issues.”

That leaves the big issue — the split of revenue, or basketball related income (BRI) — untouched. BRI was not discussed at all on Wednesday, both sides confirmed.

“I think we’ll turn to the split when we finish with the system…” Stern said. “Right now it has been profitable to turn to the system.”

In the old system the players got 57 percent of BRI, they have offered to come down to 52.5 percent, but the owners have not budged off 50 percent. The system issues the two sides discussed would impact salaries and BRI, but at the end of the day the split is the key issue.

However, some in the negotiations believe that if they can solve the system issues the BRI will become easier and almost fall into place.

Maybe. Maybe not. What is undeniable is this bargaining session left a general sense of optimism that things might be moving forward again.

Remember, however, that this has been the pattern in the past. When it is a small group led by Stern and Hunter progress is made, but when that progress is presented to larger groups of players or owners that is when things blow up. That is when the hardliners step in.

Still, “some progress” will lead to some hope we will see NBA basketball soon.

“I can’t describe (the progress made) other than to say it’s better than not making any progress at all,” Stern said.

Report: NBA labor negotiations to resume on Wednesday


The pattern continues. First the NBA owners and players have an intense few days of negotiation. Then they break up with one side making an emotional outburst to the media. Then they cool off for a few days. Then they sit down at the table again and talk. And make incremental progress. Lather. Rinse. Repeat.

NBA labor relations talks broke off last Thursday abruptly, despite the presence of a federal mediator, but the two sides will be back at the negotiating table on Wednesday, reports the New York Daily News.

The two sides are scheduled to meet in a midtown Manhattan hotel, according to league sources.

The resumption of talks is the reason the league held off on the cancellation of at least two more weeks of the regular season.

Not that it really matters if they cancel those games or not. Even if the two sides reached a deal this week — and with the gap of more than $1 billion over the course of the deal that is about as likely as Vin Diesel winning the Best Actor Oscar — they would have a hard time starting the season by Dec. 1. However, both sides see Christmas day games as a goal, a day that is usually almost a second opening day for the league, complete with marquee matchups on national broadcast networks.

When the two sides broke off talks last Thursday, they were miles apart on a new deal. The key gulf remains the owners demand for a 50/50 split of “basketball related income” — the players got 57 percent in the old deal and think they have made a major concession coming down to 52.5 percent. The owners want not only a larger slice of that pie but also to put in a new, harsher luxury tax to limit big spending teams as well as reductions of contract lengths and other steps that help them get out of bad deals. The players balk at giving up both percentage points and allowing a change in system.

But hey, they are talking again. So, if you want to be optimistic go ahead. Just be careful, they’ve burned us all before.

No games officially canceled Tuesday. Not that it matters.

*Jul 24 - 00:05*
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For a couple days now, we’ve been waiting for the NBA to officially wipe out games through the end of November. There were even reports that the ax would drop Tuesday.

Now, as it moves past 5 p.m. Tuesday in New York (where the NBA offices are located), no games have been called off yet.

Which means … nothing. Not one thing.

The official announcement will come when it best suits the league’s negotiating tactics. Not before, not after.

But it will come. Know that right now all the games in November are toast. It’s going to take roughly 30 days from the time the owners and players get their act together and solve this labor dispute to when games start. It’s Oct. 25 and there are no formal meeting scheduled. There will be no deal before Halloween, which means no games before Dec. 1. Christmas Day games are not yet toast, but they are being brought to the gallows soon enough.

The big sticking point in talks remains the owners’ demand for a 50/50 split of basketball-related income — the players got 57 percent in the old deal and have offered to lower it to 52.5 percent now. That is a $180 million give back for next season. The owners want not only a larger slice of that pie but also to put in a new, harsher luxury tax to limit big-spending teams as well as reductions of contract lengths and other steps that help them get out of bad deals. The players have given in some on the percentage of income, trying to get the owners to give on the tax, but the owners remain steadfast that they need both. Basically, they aren’t negotiating, the owners are going for the massive, 50-point win and will not call off the full-court press.

Meanwhile, it’s the fans and the game that lose.

NBA owners to talk revenue sharing; owners/players staffs talk

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There is talking going on. No, the bigwigs of the league and the NBA players union are not sitting down across a table and actually doing work — why would they do that? — but there is talk going on.

Specifically, the NBA owners are talking revenue sharing again Tuesday. Meanwhile, staffs from the NBA owners and players have been talking even if their bosses haven’t.

The owners will be on a conference call Tuesday to discuss revenue sharing again, according to Ken Berger of CBS Sports and Kaufman Sports.

Last week at the Board of Governors meetings the owners were presented a long worked on revenue sharing plan… that left everybody confused and not everyone in support of it. So, they are back at it today. The revenue sharing plan cannot be finalized until the deal with the players is in place, but the plan presented would have about tripled the $60 million shared last season. I’m sure Cavs owner Dan Gilbert doesn’t think that’s enough, but it sounds like it to me.

On another note, Chris Broussard at ESPN reports that the staffs for the owners and players continue to talk and met for a while on Monday. Which is nice. Not thrilling, but nice. But until the big guns — Billy Hunter and David Stern — sit down in a room again with actual desire to get a deal, it’s hard to get too excited about it. Especially with more games about to be canceled.