Hubbard column: Players beware: It’s a Cold-Blooded Financial World

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By Jan Hubbard

Although records for this sort of enterprise are not kept, it seems safe to suggest the two sides in the NBA labor negotiations have received unprecedented help in trying to resolve the impasse. 

The pack of news people who have had the tedious duty of documenting the skirmish in New York over billions of dollars have listened carefully to both sides, recorded the concerns of each and offered logical solutions.

Judge Judy and Dr. Phil combined couldn’t have done better.

Perhaps that sort of precise reporting on dividing revenue has occurred on a small scale in the past, but not to this extent. Once ownership set the amount of its losses at $300 million, and when both sides shared percentages of what they wanted out of negotiations, diligent reporters went to their iPhones, pressed the calculator app and did the numbers. It wasn’t that difficult. Presumably they all passed math in grade school. 

As the percentages each side said were required for a deal got closer and closer, writers covering negotiations have been more and more dumbfounded that a middle point could not be found. By not playing basketball games in the preseason and now cancelling the first two weeks of the regular season, each side has sacrificed more than it would lose with the other side’s deal. So why not compromise?

And therein lies the problem – the assumption that logic applies; the belief that it is common sense to believe both sides will exercise common sense.

That has been incorrect, which leads to an obvious conclusion. This financial contest is not about dividing revenues fairly.

It’s about winning.

It’s about owners – who, by the way, include Michael Jordan – pulling a Michael Jordan and imposing their will on their opponents.

It has been noted that wealthy owners can survive a labor stoppage longer than the majority of players. But that’s only part of it. Wealthy owners are nothing less than cutthroat in getting their way, and ownership has claimed the players got the better of the last two collective bargaining deals. So owners are interested in compromise only on their terms.

Consider the “concessions” made so far by David Stern and the owners. Originally, they wanted a hard cap (which they knew they could not get) and a rollback in salaries (which they knew would not happen).

So, magnanimously, Stern agreed to drop both. What a great negotiating tactic – drop something you never had and had no chance of getting. And then portray yourself as flexible and dealing in good faith.

It is wonderful to believe that a middle ground exists, but it’s kind of like sharing a dessert with an older brother, who says he has an inalienable right to “the bigger half.”

To become the CEOs and billionaires that they are, these mega-wealthy men have had to make cold-blooded decisions. Take the league office, for example. In mid-October 2008, the league announced that it was investing in the construction of 12 arenas in China.

The next day, Stern announced at an NBA event in London that 80 league employees had been laid off.

The timing was brutal. How must those 80 people and their families have felt about an investment overseas while losing their jobs? And ultimately, will it really matter if there is no Yao Ming to enrapture the Chinese public?

But, hey, life goes on. As we have been told, it’s just business.

The owners aren’t the only dubious performers in this dispute. The players have developed an acute sense of entitlement, and while there is no doubt they have contributed greatly to the popularity of the NBA, the league has also provided them with the best playing and traveling conditions in the world. Players also benefit from a tremendous publicity machine and ultra-aggressive marketing. And that’s expensive.

So when we hear the concessions the players have already made amount to more than a billion dollars in “givebacks,” the reaction is laughter. By definition, you can’t give back something you don’t have, and the players do not have a contract.

It is correct to say they have been offered considerably less than what was in the last contract, yet even if they don’t believe league officials when they say 22 teams are losing money, there is no doubt that a bunch are. That’s why no one wants to buy the Hornets. So to continue to have 30 teams playing in the best arenas in the world – and 450 full-time jobs – concessions have to be made.

But all of that is not to say that either side is worth supporting. The players, however, should be aware of this: NHL commissioner Gary Bettman played an integral role in league financial matters during a 12-year career at the NBA. And he shut down his league for a year in 2004-05.

You can be sure that Stern, Bettman’s old boss, knows all the background information on that NHL work stoppage, and it is a certainty that Stern and Bettman have conversed at length.

Since losing a season because of the labor dispute, the NHL has steadily grown. In 2005-06, it had a $39.4 million salary cap per team. This season, the cap is $64.3 million.

Hockey’s revenues pale to the NBA’s, but the point is that league has been healthier since it was shut down. The NHL contended that some teams lost less money by not playing than playing. And the owners of the big market teams likely had other businesses that made significant revenues.

Put it this way: Anyone on the Forbes list of wealthiest people in the world did not lose a place on that list because of one season of missed hockey. And the same will be true in basketball.

The players, on the other hand, lost a year of salary and ended up with the same system they would have had without missing a year.

So the bottom line for NBA players is to understand is that the owners are capable of shutting down the league. And these negotiations have a bottom line, which for the owners is to power their way to victory.

Ultimately, it’s just business.

Jan Hubbard has written about basketball since 1976 and worked in the NBA league office for eight years in between media stints. His columns will appear every Tuesday on SheridanHoops.com. Follow him on Twitter at @whyhub.

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  1. For all intents and purposes it appears the sticking point in the negotiations is now with system issues rather than with the BRI split. So in a way, Chris, your optimism wasn’t necessarily wrong. You assumed, I as did, that the BRI split was THE issue, and economic rationale should dictate that a compromise gets done. However, with system issues, the economic concerns take a backseat to concerns over principles.

    As far as the system issues go, I simply cannot back the players in any way, shape or form. They apparently could be persuaded to a BRI split somewhere between 50-52, but can’t be accept a harder cap or shorter contract lengths. With a guaranteed BRI split, the total money paid to the players will not be changed. So essentially what they are defending is all of the bad contracts that owners, front offices, coaches, and fans are constantly up in arms over. They have circled as a blood issue, their right to have a good season, get a huge contract and then shut it down for 5 more years while the money rolls in and everyone hates them for underperforming and killing the team’s cap space.

    The NBAPA needs to take some responsibility for those bad contracts. Unfortunately, they are doing exactly the opposite. They are defending them as a blood issue.

  2. @Dan.

    Both sides are playing chicken with each other and everyone except them knows neither is prepared to carry out their bluffs. The players aren’t going to find financial backers and start a new league (or all go to China/Europe/etc, or turn themselves into full-time Harlem Globetrotters, or anything else they throw out there), and the owners aren’t going be left holding their dicks (empty arenas) with no one to rub them (fans) for multiple seasons. And they certainly aren’t going to let it get to the point where they start getting sued because TNT/ESPN/etc paid them all this money to broadcast games and now there are no players. As much as the players need the owners to market themselves, the owners need the players so they actually have something to market. But they both want to act like they’re more important to the other side than the other side is to them.

    This sounds redundant at this point, but they need to just zip their pants up and call it a draw. As much as both sides say they can’t “afford” to go to an even split, what they mean is “we can’t afford to go to an even split and still say we won”. Well great, now you both lose.

    The fact that you have the commissioner of the league getting into a shouting match with one of the players just shows how unprofessional and personal this thing has gotten and demonstrates the fact that the people that are making decisions have no business making those decisions at this point.

  3. Mike Dierlam says:

    Players need to come down to 50% of BRI. Fairness is irrelevant when one party is losing money, so the players need to stop pretending like they “deserve” more.

  4. Name a team that will pay LeChoker, Kobe, Wade, KG, etc.. 15-25mils a year for several years ?

    I am not for the owners but the players are pretty arrogant now. The players think they are the show, well prove it LeChoker. Let’s see if these players can put on the show themselves.

    Let’s see if the players can negotiate TV contracts etc….

    • Damn near every team would do that. Kobe, Wade, Lebron, Melo and a handful of other players will generate exponentially more revenue for the owners than the 15-25 mil a year they would get paid.

      But at this point, that’s not what they’re fighting over.

      • Name a team except NBA teams would do that. A Spanish team ? LOL. An Italian team ? LOL. How about some teams in Russia or even China ?

        • You didn’t say a “non NBA team”. From reading your comment it seemed that you were asserting that no NBA team would/should pay any of those guys that kind of money; which, I’m sure you would agree, is just silly.

          As to your amended point, that’s partially true. But the fact of the matter is the elite guys you mentioned are generating revenue, and substantial amounts of it, from other sources. They won’t crack, and as it relates to them on a personal level, they shouldn’t crack. It’s the Ramon Sessions and CJ Watson’s of the world that are hurt by this, and until a large number of those guys start having real financial problems, their voices aren’t going to be heard in this.

          • Well, if the CJ Watsons let the super rich players speak for them then they deserve to lose their jobs and/or money.

            Think about it. Without the NBA and the structure in place now, even Kobe would have a very hard time showcasing his talent on TV every night. You think Nike or Adidas would sponsor Kobe and others if they are not on TV every night ? even the lesser players get endorsement deals.

            Unless the players can create their own league by convincing some investors to put up the money, they don’t deserve to earn more than 50%. The players are only half the show, maybe less without the NBA, ESPN, TNT etc….

            Hey I don’t care about the money these players make but it is time for them to take responsibility and be accountable. They want more all the time and asking for raises now….

            The players will always get the big contracts w/ or w/o the hard cap. The question is how much ? I say 50/50 split is fair for both sides. If the players want 53%, let them walk. Let them go overseas Spain, Italy or maybe Romania . Williams is playing for 3mils in Turkey ? WTF is that ? I wish him the best and be safe over there but that’s so stupid.

  5. The owners win… unless the players can find investors to start up their own league– an XFL to the NBA’s NFL. All the barnstorming/exhibition games have suffered from streetball-like play, but if the players were serious and could get backing (like from Larry Ellison as suggested by Bill Simmons) the owners’ leverage would be much less.

    • The owners win as long as they don’t damage their product to the point that they will not be able to recoup that money back. Think of it as a stock, last May the NBA’s stock was at it’s highest, if this drags on it won’t matter what percentage they get, because the “pie” (so to speak) is going to get smaller.

      Yes, at some point, it appears the players are going to have to take less than what they want or feel they deserve. But that doesn’t necessarily mean that they win, just that they lose less than the players do. It’s all relative, and that’s what drives me crazy. Even though they’re on opposing sides, their goals of promoting the league and increasing the league’s value will benefit everyone. At this point, they are seriously jeopardizing the value of what they can’t seem to divide up.

      • Luis.m die hard knicks fan says:

        First and formost this situation is ridiculous we are talking about wat we hear not the real points. First the players are fighting for the long term. If u get 2 to 3 percent less than what u will get over a multiple of years (especialy if we are talking millions per year) then there is a significant loss. Right now the players have not lost anything. (especially if there is still a chance for a season).
        Making money over seas for someone like jason williams makes sense since he is coming on a contract year and has had injury issues (that doesnt mean it cant backfire on hime if he gets injured). He brings his stock up tremendously for teams with actual chances of getting into the playoffs (sorry nets fans) if he doesnt get injured n makes tidal waves over seas that reach the usa.
        I keep hearing the blame pointed at everybody but the reality is if u were in the same situation u would do the same (ask micheal jordan player turned owner). If u are a player u know the more u give the more they take.

        • Luis.m die hard knicks fan says:

          Whos is really gonna be hurt are the middle men the role players not the stars. The stars will get their money but the jj bareas the ibakas the cartwrights toni kucoch danillo gallonaris all the supporting cast which the teams that need the support like dallas wont be able to win championships without will be losing to think that kobe cant find a contract woth more than 9 million a yr is crazy n he is just a little past his prime smh. The problem with this situation is that those players instrumental to the team will recieve less money. In other words no middle class. Now is that the ethical thing to do? Well this is not ethics this money politics n a power struggle in other words its war. Rule number one in war only make tactical retreats like sterns has made. Rule two dont give up stratigic points like the players did in losing at least 4 percent on the bri. Because everything else is a ploy or shall we say war propaganda to recruit more recriuts (fans) to the owners side. So as a true knicks fan n nba fan

          • Luis.m die hard knicks fan says:

            Play hard or go home. They need to put allt the balls in one basket and start from there not play how high low poker i mean this is basketball. The players are the workers and the product the owners are only the marketers n check sighners give the players their do. Players play hard owner go home this is the playoffs and i will never go for a team just cause its winning i stcik with my teams ive always beens a knicks giants meats fan and will die that way. God blees the game of basketball and all the people that support it all other people must realize that this is their livelihood that they have worked for their whole life basketball is not a sport about height or athletism or else shawn bradley or other no name athletes would have made it in this sport so i say play hard support the winning team yourselves the middle class the people with a voice nuff said

Trackbacks

  1. [...] [To read entire column on Sheridanhoops.com, click here] [...]

  2. [...] are not about what’s fair, they are about owners not losing for a third consecutive time. It is about who controls the industry and in that sense, the NBA is no different than any other business in the world. Workers provide [...]

  3. [...] Post-doomsday NBA column: Players beware this is an absolutely brilliant article. in fact, i think all nba players need to read this article so that they can get off the planet that they're in right now and realize that the only thing this lockout will do is allow them to lose money and accomplish absolutely nothing in the end except lost time and the loss of fan support. as for the post above me, why do the owners insist on 7% pay cut or whatever it is that they're asking for? because they are the owners, they feel the past 2 negotiations heavily favored the players, and they want to see a very favorable profit for organizations THEY run where they treat their players like they are royal princes. running a sports franchise is a big deal. if i'm(or anyone else for that matter) not making the kind of profits necessary to run a franchise, why would i do it and why would i flush that much money into it? the bottom line is, if this is what they want, it might suck for the players to have to settle for less, but they must be out of their minds if they think anyone on this planet is going to feel sorry for them because they might make 3 million instead of 5 million. they are too greedy and ungrateful for what they already have for being in the nba. __________________ I collect STEPHEN CURRY RC AUTOS [...]

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