Next CBA

[ranger001]

Do you really think the players will just walk away from the NBA and go to Europe and China to make a tenth as much(or less) while NBDL players are hired as replacements and get paid and the draft starts the process of getting in new NBA players?

They will if all they're offered is the onerous terms you were suggesting.

I don't really follow this line of reasoning. If I was making 5 million dollars a year and my employer came to me and said "Sorry, we're losing money I'm going to have to cut your salary to 3 million". There's no way I resign and go work somewhere else for $500,000 for pride when I know someone else will be filling my shoes in a few years.

As for the owners, most of them don't own their arenas, so many will be sitting on a $300-400 million investment, paying interest on the money they had to borrow in order to buy the team, and losing a whole lot more than they say they're losing under the current system.

Well I don't know the details of all of the NBA owners but AFAIK the majority of them are owned by billionaires or multimillion dollar corporations who can take a huge loss for a year or two if necessary. If the owners are serious the others who are scraping by will get cheap loans from the richer guys to be paid back after the lockout is over.

Bottom line, they're not going to be just able to dictate terms to the players as you assert. An agreement will be reached through negotiation where each side gives up more than they would like. That's the only way either side can make money.

I agree there will be negotiation but how far the cap does down all depends on the owners' resolve. We'll see how serious they are about a hard cap and how much power the players have. If the cap doesn't go down at all or just a little bit then you will be right.

[Three34]

All this talk about all the money lost, how the system is failing, how revenues don't cover expenses, about how the whole system of the cap needs to change, etc, overlooks one rather interesting detail:

The cap went up last year. All that bitching and moaning about how far it's going to go down, and it went up.

Says something about the scale of the problem to me.

[ranger001]

The cap going up just means revenue went up, its got nothing to do with profits. Stern himself said revenue was not a problem, its the cost to generate that revenue.

One thing I think the players will get is more revenue sharing. Rich teams like LA, Chicago, NY, etc have to do more to support the poorer teams like in the NFL.

[Three34]

How can you say revenue going up has nothing to do with profits? Revenue isn't a synonym for profits, but it sure as **** has a lot to do with it.

[ranger001]

Ok, lets say revenue is only one part of the equation. What I should have said is that the cap going up does not mean that profits have gone up.

Profit = Revenue - Expenses

If you're making 200 million in revenue but spending 220 million then if revenue goes up by 2% and your expenses stay the same or also go up then you're not making a profit.

[DBoys]

How can you say revenue going up has nothing to do with profits? Revenue isn't a synonym for profits, but it sure as **** has a lot to do with it.

Ranger001 is correct. "Revenue" merely indicates whatever incoming money hit the cash register, so to speak. It never means a profit is made. That's Business 101 stuff.

In fact, if done at a higher cost of sale, "more revenue" can actually have a negative effect on net profits. A business owner has to be careful not to become inefficient in chasing the next dollar, as sometimes happens.

In summary, his observation that the rising cap does not necessarily indicate there were rising profits is 100% correct, and may be a surprise to many to hear. Anyone in an employee mentality who hasn't owned a business doesn't appreciate that amortized expenses and cost of sale is oftentimes a bigger problem than gross revenues, and those types of factors are the ones that drive the bottom line way more than mere income.

[Three34]

I know the difference between revenue and profit, and between expense and income. Thanks for that. This doesn't change the fact that revenues, which were supposed to go way down, didn't.

[DBoys]

"I know the difference between revenue and profit, and between expense and income."

Good to hear. From what you wrote earlier, it didn't sound like you understood how more revenue can in some situations be a net negative rather than a positive. Some simply can't grasp that harsh fact of business.

"...revenues, which were supposed to go way down, didn't."

Very true. My thinking is that Stern didn't account for the human will as part of the ownership equation, and simply made projections on the assumption that if the economy slowed traffic, the owners would accept that outcome. Instead, they worked their butts off to market their teams and create more business (like any good owner of a business does) with creative salesmanship in a bad economy. I bet there were more giveaways or discounts than usual, and they probably had to hire more salespeople and pay for more advertising, but they kept the money and fans coming in, which is good for everyone and keeps the fan base solid.

[x-]

I don't see why cheap or poorly run franchise should get any more compensation than they already do.
If you don't do your homework (sign bad players, overpay a guy or take a chance on injury prone players) then you'll likely fail (don't win). Why should you be able to cheat (tank, cut players) and get rewarded (draft, revenue sharing) for poor effort/performance, while others who put in the time, effort and money get handicaped (unguaranteed contracts, hard [and possisbly lowered] cap, revenue sharing).

I guess some changes are needed, but I'm not sure a hard cap and unguaranteed are necessarily the answers.

[killbuckner]

No doubt guaranteed money can cause some very odd incentives and can really bind teams up if they miss with one. So I think in the next CBA they should definitely make it legal for teams to offer non-guaranteed contracts. But I also think they should still leave it an option to have guaranteed money to make an offer better if teams think its in their best interest to do so.

I also think that 5 and 6 year contracts are a huge risk to a team when there is a salary cap because teams are stuck with a guy if they don't perform well enough. So I think in the new CBA that they should let teams offer free agents shorter contracts than that. But once again if there is a player you really want to lock in long term then I think you should be able to sign them for 6 years. (or maybe just 5 if its another team's free agent so players do have some incentive to resign)

[SJSF]

Hockey and Football have caps. Basketball will and should have one. And it won't be up to the players this time around. If the players don't have a lot of money put aside. They will be in trouble. There won't be basketball in 2011-2012.

[SJSF]

Do you really think the players will just walk away from the NBA and go to Europe and China to make a tenth as much(or less) while NBDL players are hired as replacements and get paid and the draft starts the process of getting in new NBA players?

They will if all they're offered is the onerous terms you were suggesting.

As for the owners, most of them don't own their arenas, so many will be sitting on a $300-400 million investment, paying interest on the money they had to borrow in order to buy the team, and losing a whole lot more than they say they're losing under the current system.

Bottom line, they're not going to be just able to dictate terms to the players as you assert. An agreement will be reached through negotiation where each side gives up more than they would like. That's the only way either side can make money.

Actually they lose money when they only have 10k fans a night and pay a 60m payroll. They are better off going on strike and shutting out the players. They will also lay off everyone in their teams offices. U would have to be crazy if you think that the owners didn't already think this out. ANd also the players have an education of a turtle laying on its back. They would have no idea what to do with their lives without basketball. Probably be on the streets or locked up.

[killbuckner]

They would have no idea what to do with their lives without basketball.

I think they would have a pretty good idea about how to decertify the union so they could sue the owners... I guess thats what I don't get about all this. People are talking about how restrictive the new CBA will be for the players. But this is a CBA of the owners trying to protect themselves from themselves. Even under the current restrictive rules the owners still throw piles of money at the players. If the new CBA gets even more restrictive I don't at all see why the players wouldn't just decertify as opposed to locking themselves into a bad contract for several years.

There is a lot more in the press about what union decertification would mean for the NFL than what it would mean for the NBA so I could be missing something.

[Three34]

So I think in the next CBA they should definitely make it legal for teams to offer non-guaranteed contracts.

With the exception of rookie scale contracts, and the first year of a sign-and-trade, this exists. No one has to sign or offer only guaranteed contracts. They just all do this for obvious reasons.

[giberish]

Revenue has gone up, and more tellingly, franchise values continue to go up. Reguardless of the creative accounting used by Stern, NBA teams aren't in any real financial danger.

Still, NBA owners want to make more money and have their franchise values go up even faster. They think the players can't hold out against a serious lockout and will cave, perhaps even from the threat of one. If they can reduce average payrolls by $5M/yr, that's an extra $5M/yr in their pockets (and arguably an extra $50M in franchise value). If they can reduce average payrolls by $20M/yr that's even better. This isn't about survival, this is about wanting more money and believing they can get it.

I doubt that a hard cap actually happens. It isn't necessary for the owners primary goal of paying the players less. That can be done just as easily by lowering the cap and tax levels in the current system. The Players are going to lose the negotiations (in the sense that the next CBA will be more owner-friendly than the current one). The league might get an agreement without a lockout that lowers payrolls by $5-10M/yr if the players association can save face on some minor side issues. If the owners insist on adding big 'screw you' provisions like a hard cap in addition to lowering payrolls overall than it will take a year-long lockout without yielding any better long-term setup for owners.

[ranger001]

It seems like some of you are drinking the NBPA koolaid by the bucket. For instance, the Pacers have been losing money 9 of the past 10 years.

Why do you believe the NBPA and not major sports news outlets like ESPN? Why do you believe audited accounts filed to the government are fraudulent and that the NBAPA is right? Surely if every team was filing fraudulent accounting statements the IRS would have found out by now. Or maybe its all a giant conspiracy between the NBA, NBA teams, the IRS and major news outlets.

[Three34]

No one said fraudulent. But it's no great mystery that accounts can be interpreted and represented in different ways. The NBA will exaggeare them one way, the NBPA will exaggerate them the other. The loss figures also fail to incorporate those teams who spend beyond their means on purpose. If Orlando claim a loss after committing $15 million on just their backup shooting guard next year, then that's not the fault of the system. That was their own choice.

[ranger001]

Even if thats true about Orlando then the same system causes teams like the Pacers to lose money on their multimillion dollar investments. That's a fault of the system. You're talking about it like its simple for teams to just say "I'm losing money so I'll unload salaries". Fans leave in droves when a team starts losing, that causes the team to have even less money for salaries which causes more losing and less fans again.

[killbuckner]

Its not a fault of the system that the Pacers choose to waste their money on Dahntay Jones. Your article explicitly states that the Pacers owner doesn't want to sell. In fact he wants the team to get passed down to his heirs. He just wants the city to pay more of his operating costs. If he really thought that the system was broken and he faced a future of perpetual losses then he would be trying to give the franchise away. Once I start hearing owners say things like "I have TRIED to sell the team. I TRIED to give the team away. This is an impossible situation and I just want out" then I'll start to believe that the system is broken. But as long as people are happy to be owners and people are still happy to buy teams I have a very tough time seeing the system as broken.

[ranger001]

He, and other owners have two choices. Sell the franchise or CHANGE THE SYSTEM so they can make money. If you have an investment worth hundreds of millions in something then you want the probability of making money to be more dependent than "just make the right draft picks, sign the right free agents and make the right trades".

Your opinion and that of the NBPA is that its the owners fault, its their opinion that the system needs changing. Guess who's opinion they are going to follow?