Windhorst: "players have no idea about the capwave that's about to hit them"

[sacking123]

Apologies for not reading the thread, but:

All the recent reporting has said the cap will stay artificially flat and the players just won't get all that money, via an escrow mechanism. Why, after all that, did Windhorst come out with this contrary take?

Most here don't seem to understand escrow and are just responding to the OP or the thread title alone but if you listen to the podcast itself, Windhorst isn't coming out with a contrary take at all. He actually says exactly the same things he has been saying...that escrow will likely go up to 30% in order to artificially keep the cap high. His point is that he thinks most players don't fully understand the squeeze they are facing from this and are in for a shock.

This.
And this is why it's a bigger story than what is being put out there. People are looking at it the wrong way, but the players need to keep themselves informed. You just hope their agents are doing their job and making them fully aware of all ramifications, because it could end up being quite a bit of money.

[Darthlukey]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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Coming from a place of total ignorance, how does the escrow actually work? What triggers the return of all/some of the funds withheld? What triggers none of the funds being returned?
How would it work in relation to next seasons salary cap? A cap of $109m, 30% withheld and lets assume 0% returned, effectively thats how the cap is artificially inflated?

[CptCrunch]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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Coming from a place of total ignorance, how does the escrow actually work? What triggers the return of all/some of the funds withheld? What triggers none of the funds being returned?
How would it work in relation to next seasons salary cap? A cap of $109m, 30% withheld and lets assume 0% returned, effectively thats how the cap is artificially inflated?

Most here are not understanding the escrow. It isn't some magical free money that will resolve the cap squeeze. The escrow is not designed to counter the effect of a future lowered cap. Players will get less $ due to the China/Morey fiasco and the dropping viewership numbers.

The escrow is designed to counter the effect of unexpected lower revenue. It is currently a 10% taken out of a player's salary such that the collective NBA player salary does not exceed 49-51% of the total basketball revenue.

If the revenue drops (such as Morey losing 400m in revenue with one tweet), the player's salary will remain the same, as a percentage of the total league revenue will increase. This year players may get (pulling number out of ass) 55% of all league revenue as salary, owners will get 45% which is no bueno under the terms fo the CBA.

As a result, players may not get their escrow back this year at all. In such case 10% of roughly 50% of player salary is 5%, which in effect makes the owners whole, ie owners and players both get 50/50 despite the revenue drop.

In normal years when the expected league revenue is aligned with the projected league revenue (used for cap setting), players will generally get their 10% escrow back. As a result, players do get 100% of their guaranteed salary, not just 90%.

Regarding the whole post about owners agreeing to 109m cap with escrow being raised to 30%. That is akin to saying you have a salary of 100k a year, but we are going to put 30k of it in escrow. If the league makes enough revenue to match the pre-cap drop revenue, you will get your full 100k, otherwise you are expected to get that 70%. Players may be dumb, but the NBPA and their lawyers aren't.

[CptCrunch]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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This whole line of thinking is preposterous and frankly dumb, why don't we raise the cap by 50% to 150m, then increase the escrow to 40%. This will effectively will effectively result in 90m in cap. Owners and players will both get 50/50 given that no Morey scale incidents happen again.

Why stop there, 200m cap with 55% escrow.

1 billion in salary cap with 91% escrow.

[MrGrim]

I'm kind of out of the loop regarding the league's plans for next season. Last I heard they'd originally hoped for Christmas day but are pushing the date back in hopes of having fans attend. I know states are starting to allow fans back to NFL games, but those are mostly outdoors and at 15% capacity. I'm not sure if people would be willing to attend an indoor event even with social distancing. From what I've read vaccines might start getting distributed in some countries as early as late December, but those will initially go only to the elderly and first responders. I doubt we'll have a majority of the population vaccinated until at least the summer. The US also might be behind Europe and Asia as well because reasons ...

Either way, its gonna be weird aligning the moved NBA seasons with a "normal" season again.

[jbk1234]

I don't get what people are failing to understand about the situation, but the owners will not agree to go forward with a season at all if doing so will mean they're incurring significant losses as a result. There's a difference between forgoing revenue while paying fixed costs and borrowing millions to write checks to players.

The cap will either be set at current/ projected revenues, which means it will be lowered significantly, or they increase the escrow contribution. There's no scenario where they keep the cap at $109M and keep the escrow at 10%.

So either the third of the league that isn't under contract takes the hit when they lower the cap, or the 2/3 of the league that is under contract takes the hit when they increase the escrow. The only other alternative is there is no season and they all take the hit.

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[Duke4life831]

A 30% escrow won't happen. It's a complete non starter for any kind of discussion. There is zero chance the NBPA ever agrees to it.

The NFL actually brought this idea up this summer, they were talking about a 35% escrow and it was laughed at.

https://www.radio.com/sports/nfl/nfl-stars-and-personalities-react-to-escrow-proposal

[puppa bear]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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My issue with this is that the top dogs are giving up the biggest amount of cash, but they are still taking home the biggest bag.

The union should not just work for the top 1% of the league, but for the whole league: the min salary guys and league average wage guys. Those min salary guys, especially early career see bugger all (compared to what the average fan thinks they do), so taking a bigger chunk of that hurts even more.

Add in that those signing new deals will have less guaranteed money this season, and possibly less security with teams more likely to roll over cap space to 2021 when there may be actual money to spend.

A tiered escrow would be more beneficial to holding big amounts of money back without hurting those on the lowest incomes. Not sure where the scales should be set, but tiers at 10-20-30% escrow, based on their salary as a percentage of the current salary cap would be the fairest way.

[vxmike]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

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The cap just needs to adjust to reflect revenue like any other year. The only possible compromise is keeping it flat with a firm agreement to “make up” the losses in future years by keeping it flat even after revenue rises above the level required for $109m.

[old skool]

I think we should all realize that when it comes to predicting future results in an uncertain economy, we posters on this forum have no idea what will happen. Just a few months ago the general consensus here was that when NBA basketball returned, the TV ratings would be huge because fans were so hungry for live sports. After the fact we see a much different result.

Undaunted, we now have posters trying to predict what will happen with team revenues, profits (losses), TV contracts and franchise values. Conjecture is fun, but we really have no idea.

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[Warriorfan]

Most owners the NBA is not their main income so they can wait. It is greater pressure on the non stars and those not good with their money.

[jbk1234]

A 30% escrow won't happen. It's a complete non starter for any kind of discussion. There is zero chance the NBPA ever agrees to it.

The NFL actually brought this idea up this summer, they were talking about a 35% escrow and it was laughed at.

https://www.radio.com/sports/nfl/nfl-stars-and-personalities-react-to-escrow-proposal

The status quo, if you just go by the current CBA, would result in a lower of the cap to $90M. Even if the owners agreed to leave the tax line where it is. Basically no team would have more than the MLE to spend on a F.A. this offseason and most teams would only have the mini MLE. You think all the players who won't be under contract would be cool with that?

This isn't the NFL we're talking about. There aren't 8 regular season home games. There's 42 and that revenue isn't going to be there. the NFL gets the lion's share of it's income from national TV contracts. The NBA does not. Also, for a lot of owners this isn't going to be a choice. They're getting killed in both directions because of the type of non-NBA business they run. They're not going be able to float $30-40M in losses.

[jbk1234]

The only way the owners are going to agree to keep the cap where it's at is if players agree to a considerably larger holdback and that's going to create a serious tension within the union.

Let's say the owners say okay, we'll keep the cap at $109M, but the holdback needs to go up from 10% to 25-30%. Now, if you're unsigned, or you're going to be a FA next summer, that sounds great. But if you're LBJ or CP3, the two top officers in the union, you're being asked to give up a huge chunk of money because the NBA isn't going to make up that lost revenue, and the money held back is gone.

The talk about delaying the season further doesn't strike me as terribly serious. Unless you're talking skipping a season, come pay to attend super spreader events, indoors, before a vaccine is developed and widely distributed, isn't a serious business model.

Sent from my SAMSUNG-SM-J327A using RealGM mobile app

My issue with this is that the top dogs are giving up the biggest amount of cash, but they are still taking home the biggest bag.

The union should not just work for the top 1% of the league, but for the whole league: the min salary guys and league average wage guys. Those min salary guys, especially early career see bugger all (compared to what the average fan thinks they do), so taking a bigger chunk of that hurts even more.

Add in that those signing new deals will have less guaranteed money this season, and possibly less security with teams more likely to roll over cap space to 2021 when there may be actual money to spend.

A tiered escrow would be more beneficial to holding big amounts of money back without hurting those on the lowest incomes. Not sure where the scales should be set, but tiers at 10-20-30% escrow, based on their salary as a percentage of the current salary cap would be the fairest way.

Yeah, having two superstars serve as the President/V.P. is probably never going to happen again.

[kan_t]

A 30% escrow won't happen. It's a complete non starter for any kind of discussion. There is zero chance the NBPA ever agrees to it.

The NFL actually brought this idea up this summer, they were talking about a 35% escrow and it was laughed at.

https://www.radio.com/sports/nfl/nfl-stars-and-personalities-react-to-escrow-proposal

It really doesn't matter if NBPA didn't agree to. If strictly follow the CBA the players need to give back money from their pocket anyway if the owners couldn't get 49-51% of the BRI. Escrow just makes it easier for the adjustment.

[ATRAIN53]

They have been pointing this out for months.

Salaries are out of control as it is, so the fact all NBA teams just lots a ton of revenue for almost 1/2 a season and are losing $$$ as we speak since they shoukd be hosting pre-season games, this is really what they all should be expecting.

This is what players have agents for to - to prepare and explain this stuff to them.

No one knows. This is uncharted waters.


Sports without fans is lame.....

[G35]

You do realize if the situation comes where the owners will have to keep the cap artificially high in perpetuity, the league won't be profitable and the values of the franchise will drop as well, so no, what you are saying is objectively not sustainable nor realistic.

So the profit is supposed to be split 50/50 between players and owners. so Owners theoretically making 100 million Profit every year. not sure how much revenue you need to lose to lose 100 million in profit but dont think the teams will be losing that much. Teams should still be able to break even at least and be happy that the value of franchise is definitely higher than when they bought it.

However Billionaires did not become billionaires by being satisfied with small profits they will make the players share the pain to increase there profit

I'm not sure where you're getting the 100 million in profit every year. But it's not a 50/50 profit split between the league and players. It's a 50/50 revenue split. That's a very big difference.

+1

The problem I have with arguments is the wording is not correct. Profit and revenue sound the same but are very different.

https://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-profit.asp

Revenue vs. Profit: An Overview
Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. Profit, typically called net profit or the bottom line, is the amount of income that remains after accounting for all expenses, debts, additional income streams and operating costs.

[Richard4444]

According to CBA rules, NBA can reduce the cap space or tear the CBA by Force Majeure clause. Every other solution must be agreed upon with the owners and Players Association.

Increasing the escrow is a better solution for the owners and for the free agents. If the losses are bigger than the escrow, the difference is paid by the owners. In addition, these parts dont want to reduce the cap space. If the cap space drops, owners cant pay many free agents, and quite a few of them would have to pay luxury.

Players under contract dont want to increase the escrow too much. They want guaranteed money. They would prefer the reduction of cap space.

I think the majority of players are under contract, including almost all the big names. I dont think will be an easy negotiation.

[kan_t]

According to CBA rules, NBA can reduce the cap space or tear the CBA by Force Majeure clause. Every other solution must be agreed upon with the owners and Players Association.

Increasing the escrow is a better solution for the owners and for the free agents. If the losses are bigger than the escrow, the difference is paid by the owners. In addition, these parts dont want to reduce the cap space. If the cap space drops, owners cant pay many free agents, and quite a few of them would have to pay luxury.

Players under contract dont want to increase the escrow too much. They want guaranteed money. They would prefer the reduction of cap space.

I think the majority of players are under contract, including almost all the big names. I dont think will be an easy negotiation.

It doesn't matter if the players have already got paid full salary under contract. At the end they have to follow the BRI split by the end of each season. Just because escrow is less than the revenue loss, it doesn't mean that the owners would take the loss all by themselves. The owners have the right to ask the players to reimburse those loss to make it back to the 49-51% split. But players would still prefer to not have such a big escrow percentage because it's always better to have the money in their bank account first than to have cheque being held by the employer.

Escrow is just a way for the owners to hold the money and it doesn't necessary correlate to the salary cap. Because at the end it's the revenue that determines the cap, not how you settle the payment. If they want to keep the cap flat, they should spend more time on determine whether they would like to to level the revenue loss out in the next few seasons or take a one year hit.

[jbk1234]

According to CBA rules, NBA can reduce the cap space or tear the CBA by Force Majeure clause. Every other solution must be agreed upon with the owners and Players Association.

Increasing the escrow is a better solution for the owners and for the free agents. If the losses are bigger than the escrow, the difference is paid by the owners. In addition, these parts dont want to reduce the cap space. If the cap space drops, owners cant pay many free agents, and quite a few of them would have to pay luxury.

Players under contract dont want to increase the escrow too much. They want guaranteed money. They would prefer the reduction of cap space.

I think the majority of players are under contract, including almost all the big names. I dont think will be an easy negotiation.

It won't be. You'll have separate groups of owners with different incentives. You have, right now, owners whose fortunes are tied to the hospitality/entertainment industry. They're not really in a position to just absorb losses. You have players who have very different incentives. If you're a F.A., there's no way you're good with lowering the cap to $90M.

The starting place needs to be how much will the owners lose if there's no season. Because if the union wants them to absorb more than that amount, there won't be a season. The union could try to split the baby by dropping the cap down to $100M and raising the escrow to 20%. That way all their members are taking a haircut and the loss isn't being hoisted solely on one group of players.

[Richard4444]

According to CBA rules, NBA can reduce the cap space or tear the CBA by Force Majeure clause. Every other solution must be agreed upon with the owners and Players Association.

Increasing the escrow is a better solution for the owners and for the free agents. If the losses are bigger than the escrow, the difference is paid by the owners. In addition, these parts dont want to reduce the cap space. If the cap space drops, owners cant pay many free agents, and quite a few of them would have to pay luxury.

Players under contract dont want to increase the escrow too much. They want guaranteed money. They would prefer the reduction of cap space.

I think the majority of players are under contract, including almost all the big names. I dont think will be an easy negotiation.

It won't be. You'll have separate groups of owners with different incentives. You have, right now, owners whose fortunes are tied to the hospitality/entertainment industry. They're not really in a position to just absorb losses. You have players who have very different incentives. If you're a F.A., there's no way you're good with lowering the cap to $90M.

The starting place needs to be how much will the owners lose if there's no season. Because if the union wants them to absorb more than that amount, there won't be a season. The union could try to split the baby by dropping the cap down to $100M and raising the escrow to 20%. That way all their members are taking a haircut and the loss isn't bein hoisted solely on one group of players.

I think players (majotity under contract) will try to push for a 100M salary cap and 20% escrow. While owners (majority with no cap space and near luxury) will defend a 109M salary cap and a 30%+ scrow. I dont know if an agreement will be easy.