On July 1, NBA Commissioner David Stern issued the NBA’s fourth lockout between the players and the owners. This lockout basically derives from an inability between the players and owners to reach an agreement on how to divide “Basketball Related Income” (BRI) and how to structure a salary cap. However, to understand what is happening right now and how it can be fixed, one must look back and understand how a lockout comes about in the first place, how a lockout can be avoided and some solutions to previous lockouts that may be applicable in today’s lockout.
The last lockout occurred during the 1998-1999 season. At that time, the owners and players successfully reached a six-year Collective Bargaining Agreement (CBA) that was set to expire on June 30, 2005. Due to negotiations held during January, February and May of 2005, the owners and players had no problem meeting the June 30 deadline, and they were able to smoothly sign on to another six-year contract, which would take them to June 30, 2011. Under the 2005 CBA, the players agreed to collect 57 percent of the BRI while the owners took home 43 percent. Additionally, the 2005 meetings also tackled issues such as rookie contracts, the structure of a salary cap, toughening the stance on performance enhancing drugs, and long-term contracts. In 2005 the players and owners were able to avoid a lockout by coming to an agreement over a fair split of all cash flows.
The owners understood the fact that players put their bodies on the line and risk all sorts of injuries, while the players understood the fact that the owners have a very steep financial interest in the teams themselves. In 2005 they reached an agreement which set the BRI accordingly. These two facts are understood in today’s lockout, but due to a faltering economy, the profits are not where they once were, and the owners cannot keep running a loss (22 of 30 teams lost money last season).
Anyway, back to the history. In early 2011, just as in 2005, negotiations to hopefully reach another successful CBA started up again. The big difference between 2005 and 2011 is the poor performance across the board in today’s economy. Simply put, the NBA is not making as much money as it was in 2005 – and this is bad news for the players and the owners. In very simple terms, the owners cannot afford to pay the 57 percent to the players anymore. On the other hand, the players are also a part of this economy, and they are steadfastly refusing to accept a substantially lower paycheck.
With these points in mind, the players and owners went into the negotiations with highly pessimistic attitudes.
Now the June 30 deadline is fast approaching, and the deal isn’t looking good. The first meetings were held in New York City, where Commissioner Stern proposed to NBA Players Association (NBAPA) president, Derek Fisher, and Players Union director, Billy Hunter, an $800 million salary decrease in addition to a salary cap at $45 million per team. Not surprisingly this deal was quickly rejected, and the meeting was over in an hour. As the months began to tick dangerously closer to the deadline, Hunter and Fisher proposed a new deal: Instead of an $800 million decrease, the players would agree to a $500 million reduction over five years and a “flexible” cap of $62 million per team. This would reduce the players’ portion of the BRI to roughly 54 percent. Stern deemed it unacceptable.
The June 30 deadline then came and passed, and as previously stated, Stern signed the lockout papers. The lockout essentially means that under no circumstance can teams deal players or even have any contact with them. On the other hand, the players cannot contact the coaches or medical staff, or even use the down time for practice at the team facilities. Any violation is a guaranteed fine; too bad nobody told Miami Heat owner Micky Arison – his Twitter violation set him back $500,000.
Now what? With the lockout in place, Stern cancelled roughly the first half of the season. Apparently the Christmas games have a chance to be played, but with Jay-Z, Taylor Swift and Kanye West concerts to take place at the SAME arenas at the SAME time as the “promised” games, this is obviously very unlikely. In this lockout, there will be no winners. Then again, in a down economy and a faltering business such as the NBA, how can one expect to come out from this deal with a smile on his face? In my opinion, it sounds like either the players are going to have to take a hefty paycut, or Barack Obama is going to have to sink a full court shot and get our economy back on its feet. Too bad the odds of either are extremely low.