Tag: hard salary cap

NBA lockout Stern Hunter

NBA owners, players back at bargaining table Thursday

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This is good. There is a growing sense of optimism from both the NBA owners and players sides that a deal is there to be had — and now they are both actually working hard toward it.

Less than 11 hours after they walked away from the bargaining table at 3 a.m. Thursday morning, representatives of the NBA owners and players returned to the conference room of a fancy New York hotel to complain about their financial pain.

Sure, there’s some irony there, but in a 15-hour session yesterday the two sides made progress on key system issues. Issues such as contract length, the mid-level exception and other issues that will be the framework of a new labor deal saw progress.

How much progress depends on who you ask. You’ll hear “some” in certain quarters, “significant” in others. Either way, it’s progress and we’ll take it. Especially after talks blew up last Thursday and a storm of pessimism swept over the NBA landscape.

But know there are three key hurdles yet to clear.

First is the luxury tax. The owners want a more punitive tax to keep the highest-spending teams in line, the players do not. Zach Lowe sums it up well at Sports Illustrated.

Sources close to the talks indicated last Thursday that the league had softened the tax ratios, but that the multiplying penalties for routine payers remained. A source close to the talks tells me that remains true today-that the league has stood by the multiplied penalties for teams that pay the tax three or more times during a five-year span.

Second remains the split of “basketball related income, or BRI, which is the revenue that flows into the league. There are those that believe that if a system framework can be put in place, the BRI will slide right into that and not remain such a huge issue. Or to be honest, if the players feel they can get enough give from the owners on the system issues they’ll come down closer to or at the 50 percent the owners want. The players’ only real leverage is to give up points of BRI to get system gains. That’s what they are trying to do, but the players have yet to come down from 52.5 percent of BRI — which is a $100 million difference from the owners offer. That’s a lot of cash. This will not be that easy to close.

Finally, whatever deal is struck is going to leave both sides unhappy. Which is how a good negotiations usually ends. But both Commissioner David Stern and union head Billy Hunter are going to have to sell this deal to their hardline constituents. When larger groups have gotten involved in the past is when talks have blown up. That is a risk again.

But, for the second straight day they are talking. Which is good.

Economist Murphy takes us all to school on players stance

derek Fisher

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.