Occupy Wall Street? How about Occupy NBA

By Ari Rada

Reviewed by Kyu Hee Chu

112 days ago the former Collective Bargaining Agreement (CBA) between NBA owners and NBA players expired resulting in the possible termination of the entire 2011-2012 NBA season.  A similar situation happened back in 1999 when the NBA owners and the NBA players had difficulty compromising on a labor agreement which caused the typical 82 game season to be reduced down to 50 games because of the delay.  The NBA owners and NBA players association (NBAPA) have been negotiating and mediating for the past 112 days regarding what the new labor agreement will be for the next seven to ten years.  In other words, the owners and players are negotiating on how to split revenues generated by the NBA and how much the players can get paid over the next seven to ten years (longer than the average career of an NBA player).  The delay in reaching a new CBA has already resulted in David Stern (NBA commissioner) to cancel the first two weeks of the NBA season, which was originally scheduled to start on November 1st.

The CBA is essentially a legally enforceable labor contract between the NBA owners (employers) and the NBA players (employees).  Therefore, contract law applies to the CBA agreement in the NBA as it does to any other business.  There are laws preventing one side with significantly greater leverage from taking advantage of the services of the disadvantaged side.  However, in the case of the NBA, both parties have relatively equivalent leverage and both sides are “adequately” compensated.  Essentially, this is a legal argument between billionaires (NBA owners) and millionaires (NBA players), and therefore laws preventing the “taking advantage of” the weaker party do not really exist in this legal battle.  This legal battle between billionaires and millionaires is controversial as it is causing the cancellation of the NBA for millions of fans around the world.  What is even more disturbing about this situation is the fact that a legal argument between billionaires and millionaires is causing middle and lower class people working in the stadiums to be out of a job.

So what exactly are the owners and players arguing over?  Basically everything.  The NBA claims that 22 out of the 30 NBA teams have lost money in the past fiscal year, and the NBA owners want a guarantee that all 30 teams will be profitable.  A lot of this is due to the fact that the United States economy has not been what it once was and consumers don’t see the purpose of spending money on a Minnesota Timberwolves game when that money can go towards rent or car insurance.  The fact that the economy has slowed down makes it essential to restructure the former CBA to the current economic climate, and therefore both sides are going to have to make concessions.

The three major issues that the owners and players are in conflict over are the split of Basketball Related Income (BRI), the length of guaranteed player contracts, and whether or not the current salary cap structure is appropriate in today’s economy.  BRI is the amount of money the NBA as a whole makes off of ticket sales, merchandising, television contracts, and anything else basketball related.  The past CBA agreements have had a 57-43 percent split in favor of the players.  This means that 57% of all basketball related income as a whole is designated for players’ salaries and 43% of it goes to the 30 owners of each individual NBA franchise.  The NBA players realize that because of the economics of the entire situation, the players are going to have to come down from the 57% to something more manageable for the owners. But how much?  The players are willing to drop down to 53% of the pie, however the owners still feel as if that is still too much to be asking for and the players aren’t budging.

The next major issue is the length of guaranteed player contracts.  NBA owners are trying to shorten the length of guaranteed player contracts from a maximum of 6 years to a maximum of 4 years.  Also known as the Allan Houston clause, NBA owners do not want to invest hundreds of millions of dollars into a player and then continue to pay that player even though he is chronically injured and cannot play.  How would you feel if you are paying a player 120 million dollars and then he tears his ACL and can’t play for the last four years of his contract?

Finally, the third major issue is regarding the salary cap structure of the NBA.  The NBA has a “soft-cap” salary structure.  A salary cap is the amount of money a team can invest into its players.  For example, each team can spend up to a certain amount of money on all of its players (this is the “cap”).  Additionally, NBA teams can exceed that number to a certain extent but have to pay a luxury tax which has been $1 for every $1 a team exceeds the salary cap.  Therefore, if a team exceeds the cap by, let’s say, 10 million dollars, they have to pay an extra 10 million dollar tax.  The problem with this is that big market teams such as the New York Knicks, Los Angeles Lakers, Boston Celtics and Chicago Bulls can afford to pay such luxury tax while small market teams such as the Sacramento Kings, Minnesota Timberwolves and Milwaukee Bucks cannot.  This results in an unfair advantage to big market teams because they can spend more money on better players.  It’s no coincidence that the majority of the teams that are the most profitable each year are the big market teams.  The NBA owners at first wanted a “Hard-Cap” similar to the NFL, in which no team can exceed a pre-determined salary cap at all.  However, NBA owners have instead offered to increase the luxury tax from $1-$1 to $4-$1, meaning that every dollar a team goes over the cap the team has to pay $4 (instead of $1) in tax.  The NBA players have rejected this idea because they think the increase in luxury tax will essentially result in a fake “hard-cap,” because no NBA team will be willing to pay that steep of a price to go over the salary cap.

As long as both sides are negotiating and mediating in good faith and there is no extreme disproportion in leverage, the future CBA agreement will be enforceable.  It is clear that both sides have legitimate arguments.  In no business in the world are there any guarantees that your business will be profitable, and therefore the owners are ill-founded to ask for that sort of guarantee.  Secondly, although the owners are the ones who showcase the players’ talents to the entire world, the players are still the ultimate commodity because they are the “talent.”  Therefore I believe a 53-47 split in favor of the players is fair because it represents that they are still the foundation of the NBA while also showing that the players are conceding 4% from the previous 57% they were receiving.  Regarding the length of guaranteed contracts for NBA players I have to agree with the owners.  It is ridiculous for a player to get paid millions and millions of dollars while they are sitting on the bench twiddling their thumbs.  These NBA players get paid millions of dollars and although players like Lebron James or Kobe Bryant are underpaid (Lebron makes 13.5 million dollars a year but absolutely brings in more money to the franchise than that), a majority of NBA players are EXTREMELY overpaid.  Do you think Jerome James is worth 60 million dollars?  You probably don’t even know who Jerome James is.  While it’s true that these NBA owners are the ones making these awful signings it is still ridiculous for a 12th man on an NBA team to make millions of dollars when he doesn’t even play.  Lastly I am going to have to side with the players on the salary cap issue as well.  The NBA wants parity but fails to realize that no matter what the salary cap structure is, top NBA talents want to play in a big market (Carmelo to NY) or play in a trendy, warm climate (Lebron to Miami).  Baseball has no salary cap which is why the Yankees are always good, but look who is in the World Series (teams with a much lower payroll than the Yankees).  The NBA has a much more fair salary cap structure than baseball and although it’s not a hard cap, there is no reason to prevent teams from using their assets the way they want to when a hard cap won’t have much of an effect on the parity of the league.

So who is right? The answer is no one.  The owners and players need to make a fair compromise in order to ensure an NBA season for the fans and stadium workers who are out of a job.  On top of that, the longer the lockout continues, the longer the players will miss paychecks and the longer the owners will lose millions of dollars.  While I do favor the players’ position more than the owners, it takes two to tango.  This is a war, and it is clear that there are no winners in war.  Not only do both parties lose the longer this continues, but the fans and the stadium workers lose as well.  What am I going to do on a Tuesday night when I can’t watch my Knicks play?  Can you imagine going 4 months with only hockey highlights on ESPN?  It sounds like a nightmare and that’s because it is.

Who is to blame?  Greed.  That’s right, greed.  The same thing that infested Wall Street and contributed to the cause of the economic disaster is the same thing that is infesting the owners and the players.  Regardless of what kind of CBA is agreed to, the owners will still be billionaires, and the NBA players will still be millionaires (not to mention that NBA players get millions of dollars to play a game that they love).  Both these sides are arguing over how many billions and how many millions they should make at the expense of fans and stadium workers across the country.  People have been occupying Wall Street for their greed at the expense of innocent people.  I say we Occupy NBA for the same reason.

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One response to “Occupy Wall Street? How about Occupy NBA”

  1. klownboy says :

    Both sides are screwing this thing up. People are going to starting caring more about college basketball than the NBA if the NBA keeps messing around like this.

    Good post!

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