The NBA Lockout: It's Gonna Happen, And It's Gonna Be Worse Than The NFL

Yeah, yeah, tell you something you didn't already know, right?

Frankly, an NBA lockout is a foregone conclusion. All that's happening now is a series of attempts to set public perception. It's in both the players' and owners' best interests to get the media (er, public) to buy into their rhetoric so the next 6 months of no-progress articles will be skewed in their favor.

The NFL and NFLPA did the same thing a few months ago, and their differences were minor compared to basketball. The NBA will be no different.

The owners and players will meet at least 2 more times this week, purportedly in an attempt to bridge their astronomical gap in CBA proposals. Reps from each side will emerge with exasperated facial expressions, spout convenient half-truths to reporters, and point big nasty fingers at the other side while shaking their heads in dismay.

Then on Thursday, we will hear a relatively disappointed David Stern announce that the owners have no choice but to lock out the players, starting at midnight.

From that point on, the clock will stop. Owners get a relatively free summer (only paying front-office staff) to offset their usual lack of offseason revenue. They won't have any incentive to negotiate hard until October, when the preseason schedule kicks off and revenue fails to appear.

Players, on the other hand, will begin to panic. I read that as many as 200 NBA players have 12-month pay schedules built into their contracts. So every month that goes by will be a struggle. But the players association will insist on patience, and the owners won't care.

What is the biggest problem? Some teams are losing money - or at the very least, are not making nearly as much as they should.

The owners' solution is to roll back player salaries and lower the cap on total payroll.

The players' solution is to help the owners negotiate a properly-balanced revenue-sharing plan amongst themselves, and leave salaries alone.

The biggest markets make five or more times the non-ticket revenue of smaller markets, yet all teams share the same rules on spending and have to compete against one another for players. Reportedly, the NBA revenue-sharing plan is the most unbalanced (ie. least effective) of all major sports. So New York paying $90 million in salaries is not the same as Phoenix paying $90 million. New York will makes a big profit, while Phoenix takes a modest loss (per the owners, anyway).

You can probably guess that the owners have no interest in letting the players tell them how to share their money.

And you can also guess that the players have no interest in being "rolled back" just to help the smaller teams stay afloat while the biggest teams make a few more truckloads of cash.

There are lots of stories out there about the details of the economics. I really don't want to repeat them there. The ownership group is divided between the long-time big market owners and the short-time mid-to-small market owners, though David Stern would like us to think otherwise.

“Our owners are thoroughly united in the need for a change and also completely behind our various proposals as we seek the compromise with the players,” Stern said during the NBA Finals.

Yet, the differences are obvious to observers.

"The idea is that the Los Angeles Lakers cannot exist in the NBA by themselves. They need competition," Tulane law professor Gabe Feldman said, as posted in the Tucson Citizen. "They need to play other teams.

"The quality of the NBA product is reliant not only a few successful teams but on all of the teams being relatively equal. It all comes down to competitive balance."

 

Owners like Jerry Buss (LA), Jim Dolan (NY), Wyc Grousbeck (Boston) and Mark Cuban (Dallas) are raking in the dough on local revenue (network deals, merchandise sales, etc), making it so much easier to "exceed the cap" and spend as much on players as they possibly can. These guys would exceed $100 million or more if they could.

Meanwhile, smaller markets are struggling. They HAVE to outbid their competition to win the best players in free agency, so either their payrolls are just as bloated (and hence they lose money) or they just don't spend nearly as much as end up in the lottery over and over.  

Maybe you don't believe that teams lose money? The New Orleans Hornets are now owned and managed by the NBA and have been looking for a new owner for a year now. Five other teams have changed ownership in the past two years.

Maybe you believe there already is competitive balance? In the last 32 seasons, the NBA Champs have come from the top-5 US markets a whopping 25 times (exceptions: Detroit/12th in 3 seasons, and San Antonio/25th in 4 seasons).

 

Let's talk about the Phoenix Suns

Phoenix is the 14th largest metropolis in the country (when including surrounding areas covered by the same TV networks; Dallas is 4th, by the way), placing them right in the middle of the 30 NBA teams in terms of market size. The Hhoenix market compares more to San Antonio, Detroit and Minnesota than Dallas and LA.

Robert Sarver spent a boatload on the Suns just 7 years ago and likely has not seen a healthy profit in any year since 2004-2005 when the Suns took the league by storm on the back of a relatively low payroll. Sarver is one of the "young" owners who haven't seen the return they'd hoped for, but don't pretend that he's alone.

Without better revenue sharing, the system is skewed toward the bigger markets being able to afford the highest payrolls year over year. The only penalty a team will incur for over-paying is the dollar-for-dollar "luxury" tax. Yet when the big markets make 5 times more money on local revenue (ie. on top of ticket sales), they can more than afford that penalty.

Sarver paid that penalty - with the Suns top-5 in salaries - for 4 straight years despite not getting nearly as much local revenue as the other teams in that stratosphere. When was the last time you saw a random person wearing a Suns jersey outside the stadium on game nights? And just how "luxury" are the luxury boxes in a stadium built 20 years ago?

I don't mean to defend Sarver here. He's not a great owner. I'm just pointing out the difference between him and Mark Cuban and Jerry Buss isn't entirely personal choice and business acumen.

For every $50 Sarver makes off merchandise sales, Mark Cuban might make $100. That makes it a lot easier to swallow big payroll, doesn't it?

You can bet that Robert Sarver is one of those owners fighting to lower salaries and institute a hard cap. But that's not only to save money for his back pocket.

It's also to improve the Suns' chances of winning a championship amongst bigger markets with much deeper revenue pockets. Take a look at this pretty picture to illustrate the problem, thanks to Tom Ziller at SBNation.

I'm all for that. Unfortunately, it likely means a long, long wait till basketball starts up again.

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