Official CBA/Labour Talks Discussion Thread II

[ranger001]

Salaries do not hinge on profit. Nor should they. The owner also does not "have" to bear these costs. That's kind of the point. Over inflating the value of a franchise by buying it on credit and asking the players to pay for it is not a necessity. It is what the owners are happy with since their franchise values will increase and make them more money the players can't touch, as long as they can get the players to agree to it. I do not believe the players should agree to that, or that it is in the leagues best interest to let the Robert Sarvers, Bruce Ratner's, or Clay Bennett's of the world buy in.

Lets say we have two businesses that sell 1 million widgets per year. It costs Business A $1 to make them and Business B $10 to make them and the market price is $11. Does Business A have more money to pay salaries if everything else is equal?

[Indeed]

Sleepy, even with a hard cap, the NFL has almost exactly the same payroll disparity from year to year that the NBA currently has. Despite a hard cap, they still have work-arounds (signing bonuses especially) that allow one team to pay way more than the other, and the teams that spend more almost always win more. Any significant changes to the new CBA with the intention of reducing spending disparity will, if they work, actually make the NBA with more spending parity than the NFL.

I hear your argument against revenue sharing in the sense that nobody wants owners like Shinn and Sarver, etc. to benefit from running a horrible franchise, but honestly, that puts pressure on NBA owners to actually regulate themselves. Don't just allow anybody with a loan to buy an NBA franchise. Make for additional terms of sale that you need to maintain a certain amount of liquidity or you need to sell the franchise, otherwise that franchise has a limited ability to weather a rebuilding cycle. Make revenue sharing dependent on certain degrees of success. Don't allow teams to move from better basketball markets in the Seattle/Vancouver areas to places like Charlotte or Oklahoma City just because owners decide they want the team there. It puts pressure on the league to regulate itself wisely rather than just allowing teams to move so long as the other owners aren't inconvenienced, because MLSE probably doesn't care if the Sonics move from Seattle to OKC without revenue sharing, but you can bet MLSE cares with revenue sharing.

I'd also like to see limits on revenue sharing to allow for poorly run franchises to lose money and not receive revenue sharing. That said, I also don't stand for a CBA where revenue sharing isn't required because because all the teams are making money regardless of their records.

Definitely there are other ways to get around it, but the bonus of a player in NBA is limited by his salary in a ratio, so teams cannot cheat on that.

One thing I would suggest is the schedule becomes more like baseball, no rest between games. This will reduce the domination of good players (you cannot have LeBron playing 40mins a game). Thus, you need good bench players, and might have to extend min/max players to 18/20.

Sure, middle class players will get paid less (MLE might be reduced), but there will be more jobs created, better parity in chance of winning.

[Indeed]

Salaries do not hinge on profit. Nor should they. The owner also does not "have" to bear these costs. That's kind of the point. Over inflating the value of a franchise by buying it on credit and asking the players to pay for it is not a necessity. It is what the owners are happy with since their franchise values will increase and make them more money the players can't touch, as long as they can get the players to agree to it. I do not believe the players should agree to that, or that it is in the leagues best interest to let the Robert Sarvers, Bruce Ratner's, or Clay Bennett's of the world buy in.

Lets say we have two businesses that sell 1 million widgets per year. It costs Business A $1 to make them and Business B $10 to make them and the market price is $11. Does Business A have more money to pay salaries if everything else is equal?

Then you have to look at the quality of the $1 ones. I wouldn't buy an Indian car yet, until they actually pass those International safety tests.

There is a reason why players are being paid that much, because the supply is really low. As Wade said, he worth 50m a year, and that is true, he makes 50m from national TV ads for that value, but he is only making 20m from playing basketball.

[ranger001]

.. (you cannot have LeBron playing 40mins a game). Thus, you need good bench players, and might have to extend min/max players to 18/20.

Thats an interesting idea. Limit the minutes of any single player to say 36 min and allow all 15 players to play, no inactive list. Reduces the impact of any one player.

[ranger001]

Salaries do not hinge on profit. Nor should they. The owner also does not "have" to bear these costs. That's kind of the point. Over inflating the value of a franchise by buying it on credit and asking the players to pay for it is not a necessity. It is what the owners are happy with since their franchise values will increase and make them more money the players can't touch, as long as they can get the players to agree to it. I do not believe the players should agree to that, or that it is in the leagues best interest to let the Robert Sarvers, Bruce Ratner's, or Clay Bennett's of the world buy in.

Lets say we have two businesses that sell 1 million widgets per year. It costs Business A $1 to make them and Business B $10 to make them and the market price is $11. Does Business A have more money to pay salaries if everything else is equal?

Then you have to look at the quality of the $1 ones. I wouldn't buy an Indian car yet, until they actually pass those International safety tests.

There is a reason why players are being paid that much, because the supply is really low. As Wade said, he worth 50m a year, and that is true, he makes 50m from national TV ads for that value, but he is only making 20m from playing basketball.

As I said "everything else is equal". This means the widgets are equal in quality.

[Sleepy51]

Then you have to look at the quality of the $1 ones. I wouldn't buy an Indian car yet, until they actually pass those International safety tests.

There is a reason why players are being paid that much, because the supply is really low. As Wade said, he worth 50m a year, and that is true, he makes 50m from national TV ads for that value, but he is only making 20m from playing basketball.

As I said "everything else is equal". This means the widgets are equal in quality.

We're not talking about widgets. We're talking about talented revenue generating employees in an entertainment field. Widgets couldn't be any less applicable.

[ranger001]

Then you have to look at the quality of the $1 ones. I wouldn't buy an Indian car yet, until they actually pass those International safety tests.

There is a reason why players are being paid that much, because the supply is really low. As Wade said, he worth 50m a year, and that is true, he makes 50m from national TV ads for that value, but he is only making 20m from playing basketball.

As I said "everything else is equal". This means the widgets are equal in quality.

We're not talking about widgets. We're talking about talented revenue generating employees in an entertainment field. Widgets couldn't be any less applicable.

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

[Indeed]

Then you have to look at the quality of the $1 ones. I wouldn't buy an Indian car yet, until they actually pass those International safety tests.

There is a reason why players are being paid that much, because the supply is really low. As Wade said, he worth 50m a year, and that is true, he makes 50m from national TV ads for that value, but he is only making 20m from playing basketball.

As I said "everything else is equal". This means the widgets are equal in quality.

We're not talking about widgets. We're talking about talented revenue generating employees in an entertainment field. Widgets couldn't be any less applicable.

Yup, exactly, those players are not equal, everyone of them are unique.
And I think it is fair for them to have revenue sharing. Just like artist (music, performance arts, and etc), I think they deserve revenue sharing, instead of music recording companies taking all the credits for it.

[Indeed]

As I said "everything else is equal". This means the widgets are equal in quality.

We're not talking about widgets. We're talking about talented revenue generating employees in an entertainment field. Widgets couldn't be any less applicable.

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

You have to understand, a casino business, widget business, and etc has nothing to do with the employee. The employee is not the selling point of the business. However, the selling point of the NBA is NOT just the game, but the players. You gonna watch Asia basketball? You think they are the same? No, the product is completely different.

[Indeed]

.. (you cannot have LeBron playing 40mins a game). Thus, you need good bench players, and might have to extend min/max players to 18/20.

Thats an interesting idea. Limit the minutes of any single player to say 36 min and allow all 15 players to play, no inactive list. Reduces the impact of any one player.

You cannot limit a player, unless you reduce the foul limits.
However, it is more effective for them to play consecutive games without day to rest.
Furthermore, they can expand the number of games to 120 games (almost 50%), and owners can get more gate reception revenue from it. The only problem is, the arena being shared will suffer a little.

[I_Like_Dirt]

Definitely there are other ways to get around it, but the bonus of a player in NBA is limited by his salary in a ratio, so teams cannot cheat on that.

One thing I would suggest is the schedule becomes more like baseball, no rest between games. This will reduce the domination of good players (you cannot have LeBron playing 40mins a game). Thus, you need good bench players, and might have to extend min/max players to 18/20.

Sure, middle class players will get paid less (MLE might be reduced), but there will be more jobs created, better parity in chance of winning.

Honestly, I think that's a terrible idea. That cuts down on the ability for a coach to set up plays (not nearly so necessary in baseball other than with Pitchers, who don't pitch every day) and it sets things up for a lot more injuries, and we already see a lot.

Personally, I haven't seen anybody come up with an argument that worked better than my idea of abolishing max contracts (which includes the potential for player opt-outs of rookie scale contracts just like teams currently have opt-outs). It doesn't completely abolish the possibility of a super team, but I don't mind giving the option of allowing Lebron to choose to be on a super team for $17 million/season or to play for a different team at $50 million/season and force him to make a choice. Even without a hard cap that puts a pretty big stranglehold on a team's ability to load up on talent with the current system. Yeah, some teams will be better than others, but the gap will be a lot less and the incentive to tank is lessened if the ultimate prize is a player that will cost you $25 million/season after a season or two. Cut the margins on both ends and you get more parity. No need for much negotiating, just put all players on the same market.

If the parity the owners want is financial parity rather than competitive parity (which, let's be honest, is really what they're after), then revenue-sharing (even if the form I just described to you) at the very least solves a massive chunk of the problem with no CBA negotiations required. Nobody here knows whether it would or wouldn't solve the entire problem since the owners definitely aren't letting that information out any time soon, but the owners haven't shown any inclination towards being interested in either option.

[ranger001]

You have to understand, a casino business, widget business, and etc has nothing to do with the employee. The employee is not the selling point of the business. However, the selling point of the NBA is NOT just the game, but the players. You gonna watch Asia basketball? You think they are the same? No, the product is completely different.

Makes ZERO difference to my point. Let's say the NBA had no CBA. Franchise A makes 100 m in profit not including player salaries. Franchise B makes 40m in profit not including player salaries. All other things being equal does Franchise A have more money to spend on player salaries?

[Sleepy51]

As I said "everything else is equal". This means the widgets are equal in quality.

We're not talking about widgets. We're talking about talented revenue generating employees in an entertainment field. Widgets couldn't be any less applicable.

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

IF the entertainers bring in revenue and are in limited supply, then Casino A will have to compete in an employment market with Casino B. Salaries for revenue driving entertainers in demand and limited supply will not be set by the economic difficulties of Casino B. If Casino B tries to hire revenue generating, in demand entertainers at lower the compensation "they can afford" then they will have carrot to and vanilla ice performing in the parking lot for tips.

If we are assuming that all things are equal, then Casino A is terrible at their business or in a lousy market. They should relocate, or shutter their doors.

[Sleepy51]

.. (you cannot have LeBron playing 40mins a game). Thus, you need good bench players, and might have to extend min/max players to 18/20.

Thats an interesting idea. Limit the minutes of any single player to say 36 min and allow all 15 players to play, no inactive list. Reduces the impact of any one player.

You cannot limit a player, unless you reduce the foul limits.
However, it is more effective for them to play consecutive games without day to rest.
Furthermore, they can expand the number of games to 120 games (almost 50%), and owners can get more gate reception revenue from it. The only problem is, the arena being shared will suffer a little.

I would love for us to go back to 5 fouls. We could scrap the illegal defense rules and stop all this streetball, but players would have to ration contact. It would also make benches relevant again and reinforce the value of ball movement and team play on both ends.

[ranger001]

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

IF the entertainers bring in revenue and are in limited supply, then Casino A will have to compete in an employment market with Casino B. Salaries for revenue driving entertainers in demand and limited supply will not be set by the economic difficulties of Casino A.

If we are assuming that all things are equal, then Casino A is terrible at their business or in a lousy market. They should relocate, or shutter their doors.

Exactly, salaries are going to be set by Casino B who can pay its entertainers more because they make more profit. Now lets say its in the interest of casino B that casino A not go under, there is some kind of huge competition that make tons of money.

The casinos can work together and set the salaries of entertainers. Casino B will naturally want a lower salary unless there is some kind of revenue sharing from the competition.

[TiKusDom]

Salaries do not hinge on profit. Nor should they. The owner also does not "have" to bear these costs. That's kind of the point. Over inflating the value of a franchise by buying it on credit and asking the players to pay for it is not a necessity. It is what the owners are happy with since their franchise values will increase and make them more money the players can't touch, as long as they can get the players to agree to it. I do not believe the players should agree to that, or that it is in the leagues best interest to let the Robert Sarvers, Bruce Ratner's, or Clay Bennett's of the world buy in.

Look up profit-sharing and gain-sharing. Welcome to the 21st century. Also look up pay for performance salary plans.

[Indeed]

You have to understand, a casino business, widget business, and etc has nothing to do with the employee. The employee is not the selling point of the business. However, the selling point of the NBA is NOT just the game, but the players. You gonna watch Asia basketball? You think they are the same? No, the product is completely different.

Makes ZERO difference to my point. Let's say the NBA had no CBA. Franchise A makes 100 m in profit not including player salaries. Franchise B makes 40m in profit not including player salaries. All other things being equal does Franchise A have more money to spend on player salaries?

The word "profit" means it includes the deduction of expenses (including salaries). Perhaps you are talking about revenue in your case.

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

Your original question, no you cannot give more money in salary to its entertainers iff your entertainers are the main business here. However, as we discussed (please read the conversation between Fairview, Sleepy and Boris), the owner never lost money because of player salaries, it is because of their own decisions (loan and debts). They never claimed they cannot make profit, they said they want more.

[Sleepy51]

In terms of salaries and profits its applicable. Lets say its casinos. Casino A is making 1m profit/year, Casino B is making 100 million profit/year. All other things being equal can Casino B give more money in salary to its entertainers?

IF the entertainers bring in revenue and are in limited supply, then Casino A will have to compete in an employment market with Casino B. Salaries for revenue driving entertainers in demand and limited supply will not be set by the economic difficulties of Casino A.

If we are assuming that all things are equal, then Casino A is terrible at their business or in a lousy market. They should relocate, or shutter their doors.

Exactly, salaries are going to be set by Casino B who can pay its entertainers more because they make more profit. Now lets say its in the interest of casino B that casino A not go under, there is some kind of huge competition that make tons of money.

The casinos can work together and set the salaries of entertainers. Casino B will naturally want a lower salary unless there is some kind of revenue sharing from the competition.

Ok, so now we're done with widgets and we're back to talking about the NBA right?

[Hassassin]

Interesting article on NBA owners and their positions on the lockout:

Lawrence Tanenbaum, Toronto: Lost Chris Bosh to Miami, and his young team vanished; supports revenue sharing, tighter spending.

Canada.com

[TiKusDom]

I'm disappointed that I still can't get an honest acknowledgement from you that indeed the RDA does appear on the statement of operations on audited GAAP financial statements.

I did look at the entire financial statement when deadspin published it, and no I did not focus on the statement of cash flows. A net cash loss does not represent the companies "loss." For example, an increase in accounts receivable in a year of increasing sales and revenues is by no way shape or form an actual loss. It's a negative movement in net cash on the balance sheet, to balance net cash to net income, but it is not necessarily pertinent in a discussion of profitability.

I focused on the P&L (less the specious depreciation expense) which still results in a net loss for the Nets. I know the New Jersey nets lost money. I do not dispute that the Nets lost money. But, a business loss can result from a number of factors. Some of those factors can be inherent in the business model or business market. Others can result from ownership, management and capitalization strategies. In the case of the NBA lockout, for me and for the players, the crux of the debate comes down what amount of losses are attributable to ownership & management strategic inputs, vs. what portion of losses are attributable to the NBA player compensation system.

There are different valuation tools and different accounting reports for different purposes. A statement of cash flows happens to include the movement of funds around the balance sheet: changes in AR, accrued salaries, changes in AP, etc change on a balance sheet year to year and those changes are impacted by management decisions and strategy. There is also a loss on "equity share of NBA related entities" which most likely represents the league's substantial investment in new media over the past decade. I believe it is not only acceptable, but important to isolate those kinds of factors and look at the underlying business model and market in the context of this labor dispute. EBITA was an easy place to start because Forbes has those numbers for all teams. The Nets P&L viewed with a critical eye represents an even more accurate tool, but we don't have 30 P&L's from each year of the CBA to review.

The players claim that the owners are overstating their losses by virtue of accounting convention holds up to scrutiny. Whether the NBA is using net income (which includes the RDA) or is talking specifically about net cash, I don't agree that those are the appropriate tools given the context of NBA team operations, and I doubt the players representatives agree either.

As a fan, why do I care? Because just like I understand the risk to the game posed by owners giving out too many years of guaranteed money, I also recognize the risk to the game if the NBA financial system guarantees NBA franchises a profit no matter how poorly they choose to run or capitalize their teams. If the owners of NBA teams are not at risk of financial loss, the management and operational decision-making driving these teams will suffer. I have lived that as a fan under the current CBA. I do not see further insulating NBA owners from financial loss as a progressive decision for the fan experience.

Some of these guys need to fail when they have failed.

That's going to be it for the back and forth between us. I am not comfortable with your tone, or your moving goal posts, or your refusal to acknowledge that you mispoke or were misinformed about the SOO. There is no basis for a respectful or productive exchange with you.

Account receivable ? You mean payable. Receivable is how much a company is set to collect, payable is how how much they have to pay out. Yes your debt is a good measure of how well your business is running.

Why shouldn't investment in new media affect players' salaries ? Curious for your reasoning. Owners invest in marketing their players, who reap the rewards by becoming more marketable and receive more endorsements