Wednesday, September 21, 2011

This is an Owner's League - Why the players will lose in the NBA Lockout

Today is September 22nd. It is a Thursday. The end of next week will be October, which is followed by Monday, October 3rd. You know that. You have an iPhone. But beyond this lesson in chronology you just had, October 3rd is the scheduled dates for teams in the National Basketball Association to begin its training camps for the 2011-2012 season.

If they were to start on time that is. As news floats in from various outlets, the hope that this NBA season will commence without any games missed is slowly becoming even smaller and smaller every day. (At this moment, I would like to give a big, giant F U to Chris Sheridan, who said that there was a 70% to 80% chance that the NBA season starts on time).

For those of you completely tuning out any and all news of the bargaining between the NBA Players Association and the NBA owners because a) you don’t understand it, b) you understand it, but can’t be bothered with the details and just want to know when it’s over or c) you don’t understand it, but would like someone to do your work for you, you lazy American who is the reason why the terrorists win, then let me break down into very easy, digestible parts:

- The 30 owners of the NBA, collectively, lose money every single year. As in, the costs of running their business outweigh the profits that they bring in.

- There are a maximum 450 player jobs available for NBA players. The owners are (and I’m simplifying a lot here) saying that the players make too much guaranteed money, and that is one of the root causes for their multi-million dollar annual deficits.

- The players are giving the rebuttal of “We worked hard for this money, we are not taking a pay cut when the industry is bringing in BILLIONS each year. We are the product on the floor and the main reason for business. There are many other avenues for you [the owners] to cut costs. Do that. Don’t make us accountable for your shoddy bookkeeping and mismanagement”.

- And thus we have the owners locking out the players (a very important note: this is not a strike. A strike is when the worker's union wants something that the owner will not give. The owners are not allowing this season to happen because the players will not agree to change how much they make. The players are very happy with the current arrangement. The lowest NBA salary is in the low six figures, and Rashard Lewis made 23 million dollars last year).

I’ve been saying this all year long that the NBA season is not going to start on time (though my blog brother here has thought otherwise - as a Knicks fan, false hope is in his blood). In fact, there is a strong chance that the NBA season will be wiped out entirely. This is not a point of pride for me. I’m bummed out that I think I have been right all along.

The NBA owners are completely willing to sacrifice an entire season. A lot of these ownership groups are also NHL owners (or at least took extensive notes from that lockout several years ago) and see that in order to remake a broken system, they have to be willing to sit out an entire season (maybe even two), which is what the NHL owners did before they got an very favorable deal and are now turning record profits.

The NBA is not run like a lot of other companies. If you work in accounting at a paper manufacturer, and the company starts going into the red in profits, you’ll probably be taking a pay cut, if you have a job at all. If you work for the state in the Parks Department, and they tell you that you're taking furlough days, you can either take that pay cut or find another job. Sorry Leslie Knope.

Professional basketball players are different. They cannot be fired or quit and replaced. These are the best players in the world. Letting them go has more significant repercussions than letting an accountant go. Like all unionized workers, NBA players cannot be given a “pay cut” so to speak without massive negotiations between the union and the owners. Also, unlike a lot of other companies or industries around the world, the players, or workers, represent the product itself. They are the product itself.

In a lot of ways, I think the players are right - but this is a chicken and the egg scenario. The players are only there because of the owner's capital, and yet the owners only bring in money because of the players. Who is most responsible for the league's success? You and I can argue that point all day. More importantly, the players have earned their money. They are not awarding Jerome James $30 million dollar deals for 2 weeks of good work or Josh Childress in excess of $25 million for that cute afro.

But the players will not win.

All NBA owners are millionaires or billionaires many times over. They bought NBA teams as an investment, but in the case of guys like Mark Cuban, just something for a rich fat guy to do as a play toy. A very expensive play toy. They can survive this lockout, even if it lasts an entire season, two if need be. True, they will lose hundreds of millions. But they will do it for the sake of turning a profit for hopefully the next 10, 20, 30 years. They will make up lost revenue, hopefully, with a new agreement with the players for as long as they own the teams, tenures that in the case of the Lakers, Knicks, Jazz, Pistons and Wizards, can last for decades. If worst came to worst, the owners don’t need the NBA to survive. But the players sure as hell do.

Do the players have alternatives? Sure. A lot of people are crowing about how the basketball world is different now than it was during 1999, the last lockout. There are tons of alternatives - a rumored "barnstorming tour" (a glorified traveling All-Star game) and a dozen overseas leagues that are much more competitive, not to mention lucrative than they were 10 years ago – see Kenyon Martin’s $3 million plus deal he reportedly just signed with the Chinese basketball association (the best thing about this lockout so far? We are being guaranteed zero Kenyon Martin exposure for a year).

But the truth is that like everyone else, no one really wants to move to Turkey, (except for Hedo Turkoglu and Memhet Okur). No one wants to spend 6 months away from their families and friends out in Istanbul, Lyon, Hamburg or Moscow for a small fraction of what they make in the NBA, but without the luxuries given by the NBA. The players don't want to play each other in glorified pick-up games in Rucker Park or play in non-competitive All-Star games in Beijing or Mexico City. They want the truest and highest level of competition in the world. They want to play NBA basketball.

Even more important than any factor the players will face personally, is that the owners are willing to sit out one or two years of what could be a 20 to 40 year run in the league. One or two years to a player could be his entire career, or in the case of even the longest tenured player, at least one-tenth of it. Especially with millions at their disposal, the owners can sacrifice a year or two to gain for their own greater good. The players can't afford to throw away these prime years of their earning potential, considering the window for their specific skills so rapidly opens and shuts.

In some aspects, the players do have leverage. They are the product on the floor. Flawed as they are, other avenues to playing basketball exist. What I find most distressing is that in all of their interviews that I read, a lion's share of the players don't seem to have a grasp on why this lockout is happening.

In one article, I see both Jermaine O'Neal and Corey Maggette focusing on one issue: revenue sharing. In response to the key issue of this lockout, O'Neal offers his opinion: "If it's about small-market teams not profiting, if the owners are really using that as a bargaining tool, if you're really concerned about it, then why aren't you profit-sharing like the other leagues are doing?" Maggette goes on to voice similar sentiments.

I've heard this from about a dozen NBA players. I don't know all the information. I haven't looked at the books or the numbers and i certainly don't have an inside source with anyone with the league or any of the 30 teams. But I know that the hard line issue is that the owners are losing money, and they need the players to give it back. Jermaine, if the owners COLLECTIVELY are losing $300 million a year, then how does revenue sharing allay that problem? The deficit doesn't shrink because you spread it out amongst everyone. Regardless of everyone is averaging $10 million in losses or 20 teams are averaging $15 million in losses, it still adds up to $300 million in losses. The money needs to come from somewhere else. Yes, revenue sharing creates smaller holes for every team to dig themselves out of, but at the end of the day, the profits need to expand, period. The money needs to come from somewhere. Unfortunately, it's going to come from the players.

As ill-informed as some of the players seem, it's indicative of where their mindsets are. They want a quick fix to this. They are throwing around buzzwords like "revenue-sharing", "profit margins" and "depreciation", without a real base of knowledge, but knowing that they all turn the focus back on the guys who own the arenas and cut the contracts. They are putting the onus on the owners and trying to find ways that the players do not have to change their ways of life.

Obviously a lot of people are going to align with the players on this one. No one wants to take a pay cut and give that money back to "the man". I'm sure it doesn't look any better that a league of black players are being asked to give money back to a largely white ownership group for an enterprise that grossed over 3 billion dollars last year. But the truth is that they need to give in. The owners cannot collectively come together and agree to not give $30 million dollar contracts to mediocre players. That's collusion, and the NBA Players Association (not to mention the US legal system) would quickly squelch that movement.

The short term losses are going to hurt, but the truth is, with the model that is currently present, at least 2 teams are going to be contracted. You think losing 6% of your income is bad Derek Fisher? What happens in a league of 450 players when 30 jobs are no longer available? I know that the players enjoy the current system as currently constructed (Luke Walton), but its this system (Brendan Haywood) that is going to eliminate 6% of current available jobs rather than 6% of income for 100% of current available jobs (John Salmons). This is about the long-term health of a league. Unfortunately, the battle is coming down between the owners, who plan to be in this for the long term, and the players, who for the most part, are only in this for the short term. These short term gains for the players have to last them for the long term.

I understand both sides, and sympathize with everyone, but the players just don't have enough juice here. They are fighting for what's beneficial to them, not to the prolonged financial success of 30 franchises, the fans and the other employees of the sport that don't have numbers on their backs. The league will not survive as currently constructed without them giving something back. Maybe not everything the owners are asking for, but close to it.

The players are bringing knives to a gun fight. They'll lose, and all we'll have to show for it is a winter without NBA basketball.

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