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Tuesday, May 31st, 2011 at 3:31 pm  |  9 responses

Breaking Down The CBA

Sports economists weigh in on the NBA owners’ latest proposal.

Non-guaranteed contracts
Is your brain overworked from all that math? Rest up as we move quickly through these next few points. First up is the proposal of non-guaranteed contracts. The NBA has been commended and loathed simultaneously, depending on whether one’s interests lie with player’s unions or team owners, regarding the nature of fully guaranteed contracts. Boland doesn’t sense that non-guaranteed contracts are a deal breaker for players.

“It’s very much dependent on where the player is at,” Boland said. He noted veteran players would possibly accept short-term contracts to reach free agency more often. Young players would be more optimistic about non-guaranteed deals, he reasoned, since their inexperience and yearning to simply stay in the League would win out over any contempt they have for a contract that isn’t fully guaranteed.

Vrooman said this arrangement “will not fly at all with the players.” Dean Baim, a sports economic and finance professor at Pepperdine University, said via phone that work stoppages are typically more costly for players than owners. Given that sports leagues tend to rebound following work stoppages, the clock is ticking for the players, implying that even non-guaranteed contracts might be something players must accept.

Shortened years, annual raises for free agents
Baim explained that front-loading contracts could become a popular tactic to skirt the limits to how long and how much free agent can sign. “Clever people are going to find ways of evading these rules,” Baim said.

But a potential result of shorter deals is something to which Boland alluded earlier: players who feel cornered by limits on the terms of their deals will likely find any remaining leverage they have. In that case, they could turn to the benefit of free agency in and of itself. If players can decide where they play and, in some cases, for how long, then they could be more likely to value the city in which they play and/or who their teammates will be. Which includes players looking at cities with better marketing opportunities to take some of the financial bite out of their shortened, less lucrative contracts.

The notion that owners want shorter deals which pay less is unsurprising. “It almost strikes me as it isn’t a way for management to get better and become more talented; it’s a way for management to immunize its mistakes,” Boland said.

Vrooman cut to the point about the NBA’s negotiating strategy on this chunk of the CBA. He said that in regards to the Bird Rights players, the owners are looking to settle for five-year max contracts which pay between six and seven percent annual raises; they’re looking at four-year max contracts that pay between four and five percent annual raises for free agents who sign with a different team, according to Vrooman.

Categorizing NBA players
This is one the more contentious parts of the owners’ proposal, especially for the Category D players who have to slide into whatever remaining spots there are on each team. This represents as well as any the idea that NBA owners are in it for the long haul with a take-it-or-leave-it mentality in this proposal.

“What I’ve heard through the grapevine is [each side] being very pessimistic about being able to reach a deal,” Baim said. He explained that there is a wing of NBA owners who feel emboldened by the NHL owners’ lockout of the players for the 2004-05 season. While the league struggled for several years to gain its footing financially, it recently inked a 10-year deal with NBC reported be worth in the area of $2 billion. The impression Baim gave was that NBA owners feel as though they can wait out the players until they panic enough to accept a deal on the owners’ terms.

Six NBA owners also control a majority interest in NHL teams and were the primary owners during the 2004-05 lockout:
–Atlanta Spirit, LLC, which sold the Atlanta Thrashers to True North Sports and Entertainment in a deal announced May 31.
–Stan Kroenke, who also owns the Colorado Avalanche.
–Madison Square Garden, Inc., which owns the New York Rangers.
–Comcast, which owns the Philadelphia Flyers.
–Maple Leaf Sports & Entertainment, which owns the Toronto Maple Leafs.
–Ted Leonisis, who owns the Washington Capitals.

The players who could lose out ultimately aren’t the veterans who would represent Category D, according to Vrooman. It’s the stars and superstars. “If we look deeper it is LBJ and D-Wade who are the truly exploited ones because of the individual veteran max-cap and they are carrying the other players on the court and to the bank,” Vrooman wrote. Vrooman went on to write that the NBA owners’ proposal is filled with ideas that are “extreme and without justification in fact.”

Vrooman continued: “The NBA does not have a labor problem; it has a revenue sharing problem. In these proposals the NBA is demonstrating NFL extreme envy when the ideal NFL business model has been blown apart. Big Dave [Ed. note: David Stern] and the owners had better be careful because they might get what they ask for. The NFL has traded excellence for mediocrity through the hard salary cap in the name of competitive balance, and the NBA is on the fast track to do the same.”

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  • mohi

    first

  • http://www.bulls.com Rigo Gonzalez

    This is the most informative piece I’ve read on the proposed CBA yet.
    Really not hard to understand why the players turned down the latest proposal.

  • IndyB

    Profit Sharing?

  • rich

    this wont keep players in small market teams, this makes even less of a reason to stay in a small market town. the only reason small market teams keep their stars is because they can go into the cap to grossly overpay them, i think if they couldnt afford that big deal joe johnson would be a bull right now for example. i think players will take less money to play in bigger markets where they can earn tons of revenue outside of basketball, look at that sheet stuff lebron came up with, that wouldnt sell well if it was based in oklahoma, but in miami la or ny it would. this is gonna backfire stern

  • Double J

    I have to say, incredible post. Greatly appreciate seeing something like this considering we are all teetering on an NFL-like lockout of our most praised sport.

  • http://slamonline.com Ben Osborne

    Kyle did a great job as usual. Seems like the owners should figure a lot of things out before they ask the players for so many concessions.

  • http://www.youtube.com/user/officerbarbrady what

    Great post. I agree with everything the economists said except the last line. The NFL has not traded excellence for mediocrity; they have traded excellence for a handful of elite teams for excellence across the league, which has worked perfectly for them. The NBA is not in the position to do the same thing, because the talent pool for basketball is not as deep as the talent pool for football, in large part because basketball requires taller players who comprise a smaller percentage of the general population.

    I’m glad someone pointed out the unintended consequence of limiting player salaries and implementing a hard cap. If player salaries decrease, endorsement money starts comprising a larger share of a star player’s total earnings, which only increases the value of moving to a big market. And I wouldn’t be surprised if David Stern fully knows this and is asking for these concessions for that very purpose of enticing stars to go to big markets in larger numbers.

  • LeBron de Con

    pay me foo, imma big fuc

  • http://itsahardwoodlife.blogspot.com omphalos

    That amnesty thing sounds interesting, am I right in saying each team gets to nullify one players contract? Could be a nice solution to give some teams a chance to fix up their mistakes, whilst not really hurting the good teams. I can see Joe Johnson getting wiped somehow.

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