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The Milton Measure

NBA Lockout Threatens League’s Success

by on Friday, September 16th, 2011

On July 1, 2011, the NBA’s Collective Bargaining Agreement (CBA) expired, bringing the NBA into a lockout. The CBA is an arrangement between the owners and the players of the NBA that sets rules such as player contract rules and revenue split. The NBA’s previous CBA awarded the players a 57% split of the total revenue, while owners took the remaining 43%.

The players also have guaranteed contracts. They get paid their full salary regardless of injury or performance. While the salary cap in basketball is meant to limit a contract’s length and payout, it is a “soft” cap, meaning there are many exceptions allowing teams to exceed the cap.

Often, this has led to owners paying players a lot more than they are actually worth. Examples of this are Gilbert Arenas and Rashard Lewis who, combined, made over 40 million dollars last year despite being only slightly above average players in the NBA. According to the owners, the combination of inflated contracts and the revenue split caused the NBA to lose $340 million last year, a loss that must be paid by the owners.
While Billy Hunter, the head of the Players Association, has disputed that costs such as depreciation and amortization were wrongly included in that figure, his calculations still suggest that the NBA lost money in the hundreds of millions.

Since the owners are losing money, they are the ones pushing for a much more favorable agreement. They argue that the current system is systemically broken, since, despite one of the most competitive and entertaining seasons in NBA history, they are still losing such a large amount of money.

They are asking for three major pieces of reform. First, they want the revenue split to be an even 50-50. They are pushing for a hard cap, meaning a limit to the amount of money each team can give out in contracts, which will hopefully limit the number of overpaid players in the league. The last major reform the owners want is non-fully guaranteed contracts, so that if a player gets hurt and can’t perform, teams can cut him without paying his full salary.

Compared to the NFL’s CBA, the NBA owners’ ideal contract is a great deal for the players. The NFL has a 52-48 revenue split in favor of the owners, has a hard cap, and non-guaranteed contracts.

Furthermore, the average NBA player makes about 5 million a year (guaranteed), compared to about 2 million (unguaranteed) for an NFL player. What is even more astounding is that NFL owners reached this agreement with the players when they were making millions of dollars in profits. While the NBA owners’ plan is far superior to the CBA the NFL has, the Players Association disagrees with almost every reform the owners want.
The Players Association has agreed to decrease the players’ percentage of revenue from 57% to 54.3%. While this change alone won’t keep the owners from losing money, the Players Association argues that the NBA should insist on other ways to even out their books, such as revenue sharing between teams. At this point in time, both sides are far from reaching a compromise.

Many predict that only when players stop getting paychecks (it happens in November) will they start to cave to some of the owners’ demands. Already, star players such as Deron Williams and Wilson Chandler have signed contracts abroad in Europe and China, respectively, in preparation for a long lockout. Most depressing, the lockout threatens to halt the progress of a league that had been rapidly growing in popularity after a truly riveting season and playoffs.

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Posted by on Sep 16 2011. Filed under Sports. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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