There’s an eerie consistency to management rhetoric during labor standoffs, one in which the boss insists that without a drastic reduction in employee pay, the business or government entity in question is destined for insolvency. The NBA’s current player lockout, a result of the expiration of the collective bargaining agreement on June 30, is no different. The owners are citing a $300 million loss, with twenty-two out of the thirty teams said to be in the red. In a sluggish economy, they say, the only way to fix this is by cutting payroll through a hard salary cap, with a $45 million player payroll per team.
Included in that consistency are questions about the owners’ cries of poverty. The union has argued that as much as $250 million of those losses are from depreciation and amortization when a team is sold, and that owners can shift revenues among their teams and the other businesses they control that take in basketball-related dollars. An investigation by Forbes showed that while ticket revenue was down 6 percent from five years ago, media revenue has grown significantly, in part because the league is bound by long-term contracts. Nate Silver of the New York Times amplified this argument, pointing out that publicly available estimates, via Forbes and other sources, show the NBA has been moderately profitable in recent years—and the profits that big-market teams typically earn are more than enough to compensate for the losses of their small-market brethren.
The league claims these figures are inaccurate and says it uses Generally Accepted Accounting Principles, but this hasn’t extinguished doubt. Larry Coon, an oft-cited expert on NBA labor relations who runs NBA Salary Cap FAQ, said, “Just because something is legitimate from an accounting perspective doesn’t mean it’s a good argument in terms of dealing with the players.”
Despite the fact that many fans dismiss sports labor conflicts as squabbles between billionaires and millionaires, the current struggle between the National Basketball Players Association and the owners has much in common with classic labor disputes, including a misrepresentation of owners’ losses and so-called worker excess. The union, meanwhile, claims that at no point during this round of bargaining has it asked for anything more than a firewall against givebacks, and argues that the owners are using a weak economy to further erode the NBPA’s power.
The players now receive 57 percent of “basketball related income,” or BRI, which includes proceeds from ticket sales, TV deals, etc. In addition to reducing this percentage, the league wants to end exceptions to the salary cap. Currently, a free agent can receive a salary increase of up to 10.5 percent if he retains his so-called “Larry Bird” rights (more on this later) and 8 percent if he is re-signed to another team. The league wants to cut this to 3 and 2 percent, respectively, according to the union. “The owners are looking for pretty draconian changes,” Coon said.
From the get-go, even though the union has questioned the size of the losses, it has made serious concessions, including an offer to lower the percentage of BRI set aside for players. Initially the owners wouldn’t agree on a number higher than 39 percent and insisted on other cuts as well. In June, owners proposed a 50-50 split, contingent on redefining BRI. Union officials claimed players would lose between $900 million and $1 billion under this new definition, according to the New York Times, an excessive sum when the league is claiming a $300 million loss.