Occupy Lenox Ave.

[Mike G]

It seems the struggle is between wealthy players who want a bigger slice of the pie and ultra-wealthy owners who insist this should be another big money-maker.
They're really just bickering over something like 5% of the pie, aren't they? So players hope to have as much as 10% more money, while owners run the gamut from losing money to making twice as much?

When commentators use language that suggests it's one side vs the other, it's just bizarre. What should be a win-win situation becomes lose-lose. It's rather too much like American politics of late: certain parties define a "win" as "making the other party lose"; even if we all lose in the process.

[EvanZ]

To me, players intimating that they wouldn't play for a Jordan-owned team in the future is akin to the fans who say they'll boycott the league when the lockout ends.

People are pretty fickle these days. Netflix lost a million subscribers when they raised rates by a few bucks (with really no better alternatives out there). I imagine there will be plenty of casual NBA fans who will boycott with their eyes and lose interest in the NBA after this. Sure, diehard fans (like us) are going to still be there, but I can't see how the NBA doesn't take a big in viewership after this debacle.

[AYC]

I don't think both sides are equally wrong here. The players have made all the concessions. Dropping from 57% of revenue down to 51% is a huge concession; and that's not enough for the owners? In most businesses over 50% of revenue goes to labor; over 60% isn't unheard of. And I don't buy that all these teams are losing money. If they are, they should prove it by opening up the books.

[mtamada]

[...]

Dropping from 57% of revenue down to 51% is a huge concession; and that's not enough for the owners? In most businesses over 50% of revenue goes to labor; over 60% isn't unheard of.

Indeed, in industrialized countries the wage share is commonly measured around 70%, although it's been falling in recent decades and there are different ways of measuring it.

Different industries of course will differ in their labor-intensity and capital-intensity. One might argue that the NBA has high capital costs due to the costs of arenas. But given that they tend to be highly subsidized, rather than paid for by the owners, I wonder how the NBA owners justify their claim for at least 50% of the revenue. (And no, "we're losing money" does not cut it.)

The real answer? Almost certainly what economists call economic rent. There's excess profits being made, but they are reflected in the cost of a franchise. Which means that a new owner, who has to purchase a franchise, has to pay for the privilege of participating in those economic rents. And thus does not make an excessive return on his investment (he collects economic rent, but it's counterbalanced by the fact that he had to pay an inflated price for the franchise).

That's my best guess as to why the owners are taking a hardline. They're already making economic rents, but many of them had to pay for that privilege and are not making an excess returns on their investments. Squeezing more economic rent away from the players does give them an excess return.

[Crow]

That sounds right Mike.


Going from 57% of BRI to 51, 50 or less as a group has one appearance but the experience will be quite different for those with long-running current contracts vs the rest, especially the current batch of free agents. With existing contracts (and presumbaly rookie scale contracts) secure and the BRI lowered substantially the free agents will probably have 20+% less money to divide among them. Might be a bit harder for the top guys to get as big money as before but I assume a fair number of guys who would have gotten $3-5 million in the past will get pushed downwards by a million or two.

Will the league require the same number of roster spots be filled as before? Easing on that would allow average salaries to be a bit higher, but cut off some guys out who would have otherwise made it in.

[kjb]

To me, players intimating that they wouldn't play for a Jordan-owned team in the future is akin to the fans who say they'll boycott the league when the lockout ends.

People are pretty fickle these days. Netflix lost a million subscribers when they raised rates by a few bucks (with really no better alternatives out there). I imagine there will be plenty of casual NBA fans who will boycott with their eyes and lose interest in the NBA after this. Sure, diehard fans (like us) are going to still be there, but I can't see how the NBA doesn't take a big in viewership after this debacle.

I've thought that about other labor disputes, but the research I've seen shows that fans come back. It always looks bleak during the dispute. Once the games start -- fans ultimately want to see them.

[mtamada]

One thing that I belatedly realized about the 51%-53% share that the owners are demanding, whereas in other industries it's more like 30%-35%: the owners have other labor costs besides the players' salaries. Coaches' salaries, front office personnel, maybe some maintenance and janitorial personnel -- and yup statistical analysts' salaries or consulting fees. Enough to justify lopping the player percentage down from 57%? My guess is no, but this is where more detailed data are required.

[Mike G]

Maybe the players could agree to 51% IF the owners agreed to give arena workers a raise, a bonus for coming back after this layoff, etc.
Both players and owners would thus give up a temporary bit of revenue, which would go to the neediest in the organizations. And neither would have to feel they've "capitulated".

[kjb]

One thing that I belatedly realized about the 51%-53% share that the owners are demanding, whereas in other industries it's more like 30%-35%: the owners have other labor costs besides the players' salaries. Coaches' salaries, front office personnel, maybe some maintenance and janitorial personnel -- and yup statistical analysts' salaries or consulting fees. Enough to justify lopping the player percentage down from 57%? My guess is no, but this is where more detailed data are required.

When I did my brief stints as a statistical consultant, I can assure you that my "statistical analysis" fees had only the most minuscule possible affect on the league's profitability. One team refused to pay me a consulting fee of less than $10,000 (for half a season) because it, "wasn't in the budget." Then they went out and hired a player on a 10-day contract, renewed that contract for a second 10 days, then signed him for the rest of the season. Total expenditure: about $180,000. He played 15 minutes. Total. Must've been one helluva practice player or a real nice guy.

[mtamada]

When I did my brief stints as a statistical consultant, I can assure you that my "statistical analysis" fees had only the most minuscule possible affect on the league's profitability. One team refused to pay me a consulting fee of less than $10,000 (for half a season) because it, "wasn't in the budget." Then they went out and

Heh, yup that's why I listed that statistical consultants and analysts after the janitorial and maintenance personnel.

[EvanZ]

I appreciate Etan Thomas' rant on ESPN. I think he makes a lot of good points. One of them:

During the lockout of 1998, Michael Jordan famously said to Wizards CEO Abe Pollin "If you can't make a profit, you should sell your team." That was then and this is now. Why do people have difficulty understanding that he is no longer a player but currently joined at the hip with the rest of the CEOs of the NBA, who -- like Bank of America, Wall Street and the rest of the 1 percent -- not only want but expect a bailout for their own actions?

[Bobbofitos]

Looks like no season. Decertification or something like that.

[schtevie]

This. Is. Crazy.

I return to my initial point. Why isn't the NBPA, instead of lawyering up and going to court, very publicly going about creating a new league? The ever-charmingly smug commish speaks very clearly in his "nuclear winter" ESPN interview: "The franchises will be here, and they're not going away."

As long as that is the NBA's rational belief, the players (and fans) are going to get screwed.

Instead of going to court in New York, Messers Kessler, Boies, Hunter, or whomever should be heading to the Bay Area, to pay visits to Google, Facebook, and Apple to begin discussions about televising a new league in the future digital age (along with visits to conventional broadcasters). Word is that the current contract to televise the best basketball league in the world is undervalued at $900+ billion.

They should very publicly be teaming up with agents, or whomever, setting up a committee tasked with establishing new merchandising networks.

They should be organizing a tour of prospective new franchise locations. Seattle, interested? Newark, got an empty stadium? St. Louis, you used to have a basketball team, no?

Players need to come up with a credible $1.9 billion in hypothetical income. You start with a possible digital rights contract well over $1 billion and a few hundred millions from licensing fees for merchandise, and that is before any revenue from selling the new franchise rights or first tickets, and you are there. Do this and David Stern would be compelled to advise his bosses that their franchises though here today, might, indeed, be going away tomorrow.

The NBPA is now bluffing with a losing hand, hoping for some judge to bail them out, and if one does, the NBA will appeal to a higher authority. Season(s) lost. The best they will get out of this is the NBA "folding" for the threat and simply accepting the players' give back of a billion or so. And the fans will then be gifted with a short season and a far less interesting league, for the anticipated decrease in player movement.

This is painful to watch unfold. And entirely unnecessary.

[Crow]

Has any reporter at any time asked Billy Hunter if the union / trade association has ever taken a serious look at forming a league (temporary or maybe longer-term)? I can understand he might not be forthcoming with the truth, whatever it is, but I don't recall him ever being asked or quoted in an article on the topic.

The option to form a players league does undermine the case for 'monopoly" and damage from anti-trust behavior, so maybe you don't talk about it at all, now if you are mainly interested in a negotiated settlement or damages and some sort of settlement or victory. Maybe you only talk / do anything about it after a defeat and only if the defeat is so terrible that you can't stomach the final defeat / settlement. Or maybe you talk about after you sign the deal and give yourselves a few years to work on it. Would probably want to start a new league before the NBA gets a new TV deal. Maybe try to offer a competing product to those top bidders and maybe get one of them. Maybe have players plan to make the jump to the new league on a rolling basis in 3-5 years to boost the credibility of the league and force recognition of cases where the NBA rules are suppressing contract sizes.


A new league wouldn't have to be a players league or entirely so. There are a range of hybrids possible. It is possible players could have no ownership but merely a better relationship, more favorable work rules and relatively comparable pay or maybe better pay for some players. It would have to achieve a high standard of viability, but if it did, it would be an option and possibly provide some protection from even tougher terms in the future.

[schtevie]

Sigh....more down the memory hole....what gives?

My advice to Billy Hunter lost forever.

An NBA conspiracy, I tell you, an NBA conspiracy.....