Official CBA/Labour Talks Discussion Thread

[Fairview4Life]

I think where this is getting confused is that you think I'm saying that loaning yourself money or claiming interest as a cost is somehow cheating or shady. It isn't. Asking the players to pay for that is, according to me. In the case of interest on a loan used to finance the purchase of the team, for example, the players get nothing from the franchise fee, relocation fee, or purchase of the team. Owners are more often than not recently purchasing teams on a lot of credit. Since the other owners want franchise values to be as high as possible, they don't care. So instead of limiting who can purchase a team and an acceptable debt ratio or whatever on the purchase price, they are asking the players to pay for it. That is something I consider to be not the players problem.

It is also perfectly fine for one of your businesses to loan money to another. In my opinion, it is not ok to then turn around and ask the players to pay for the difference in interest because the loaning team borrowed the loaned money at a higher rate.

These are just a few examples I have with the types of issues in the owners $300 million/22 teams lost money claim.

[BorisDK1]

I think where this is getting confused is that you think I'm saying that loaning yourself money or claiming interest as a cost is somehow cheating or shady. It isn't. Asking the players to pay for that is, according to me.

And how much of NBA's team's debt is actually held by other interests owned by the owners? Next to none. NOH's situation was borne out of desperation, where the team had to go to the league to get a loan just to pay its expenses. Here's a news flash: you don't want to borrow money just to pay the bills. Borrow money to buy a team? Sure: it's an investment. Borrow money to build a stadium, or a new practice facility? Great. Those loans are used for capital acquisition, and expansion. But when you have to borrow money to pay your bills while adding nothing to the value of your team, that's bad. That's like having to use your credit card to buy groceries because you can't cover it with cash: that's bad. Using your credit card to buy a higher-efficiency furnace for your house? That's good: that increases the value of your house and saves you money on your heating bills. But borrowing just to pay the bills is a huge no-no, and it was an unavoidable situation for New Orleans. Oh, and it wasn't caused by the egregiousness of the interest charges from their purchase of the team (and therefore "mismanagement").

In the case of interest on a loan used to finance the purchase of the team, for example, the players get nothing from the franchise fee, relocation fee, or purchase of the team.

Except for the fact that the franchise, which would otherwise not exist, employs them.

Owners are more often than not recently purchasing teams on a lot of credit. Since the other owners want franchise values to be as high as possible, they don't care. So instead of limiting who can purchase a team and an acceptable debt ratio or whatever on the purchase price, they are asking the players to pay for it. That is something I consider to be not the players problem.

Oh, you think so? Try going into your employer's office tomorrow and demanding a raise, and tell him or her not to bother wasting your time talking about the costs of having borrowed to build their business because that's their problem, not yours. Tell me how that goes for you.

You cannot pull an ostrich act on interest. Whether you think it's right, wrong or indifferent that people have to borrow to buy a multi-hundred-million dollar sports franchise, they do. Those costs exist, and have to be paid. You can't just say "not our problem, owners: you figure it out" and let them loose money. Collective Bargaining Agreements have to work. Look at what the Big Three Car manufacturers signed in the late 90s. Maye those unions argued that the costs of purchasing parts weren't the employees' problem back then: it sure as hell became their problem when they all collapsed a few years later because their costs soared due to the no-outsourcing agreements in those CBAs.

It is also perfectly fine for one of your businesses to loan money to another. In my opinion, it is not ok to then turn around and ask the players to pay for the difference in interest because the loaning team borrowed the loaned money at a higher rate.

These are just a few examples I have with the types of issues in the owners $300 million/22 teams lost money claim.

And the entire context of why New Orleans had to do that has been missed. That loan wasn't obtained to buy the franchise, or to move it, or to build anything helpful or even to add another player: it was to cover losses. Period. Borrowing to cover debt is never a good thing. But then again, it's what we're doing in Ontario right now in our provincial government, and we obviously don't get the importance of that here because we just re-elected the goof who's been doing that for 8 years.

[Schad]

You cannot pull an ostrich act on interest. Whether you think it's right, wrong or indifferent that people have to borrow to buy a multi-hundred-million dollar sports franchise, they do. Those costs exist, and have to be paid. You can't just say "not our problem, owners: you figure it out" and let them loose money. Collective Bargaining Agreements have to work. Look at what the Big Three Car manufacturers signed in the late 90s. Maye those unions argued that the costs of purchasing parts weren't the employees' problem back then: it sure as hell became their problem when they all collapsed a few years later because their costs soared due to the no-outsourcing agreements in those CBAs.

But it won't work. An owner-friendly cap will simply lead to much higher franchise sale prices, and thus more debt financing, leaving the whole endeavor right back where it started.

[S.W.A.N]

You cannot pull an ostrich act on interest. Whether you think it's right, wrong or indifferent that people have to borrow to buy a multi-hundred-million dollar sports franchise, they do. Those costs exist, and have to be paid. You can't just say "not our problem, owners: you figure it out" and let them loose money. Collective Bargaining Agreements have to work. Look at what the Big Three Car manufacturers signed in the late 90s. Maye those unions argued that the costs of purchasing parts weren't the employees' problem back then: it sure as hell became their problem when they all collapsed a few years later because their costs soared due to the no-outsourcing agreements in those CBAs.

But it won't work. An owner-friendly cap will simply lead to much higher franchise sale prices, and thus more debt financing, leaving the whole endeavor right back where it started.

Owner friendly Cap, New TV deal in couple years and revenue sharing means that no team should be in financial peril again.

[BorisDK1]

But it won't work. An owner-friendly cap will simply lead to much higher franchise sale prices, and thus more debt financing, leaving the whole endeavor right back where it started.

If it were the costs of debt servicing that were causing the kind of losses that we see in the NBA, I'd agree with you. The data we have says otherwise. When two notorious loss-producing teams have their interest costs as a tiny fraction of payroll (well less than 10% in the case of both the Nets and the Hornets), I think the obvious concern there has to be players' salaries and benefits.

[Parataxis]

Out of interest, does anybody know if the capital gains from rising franchise values are included in the profit-loss statements?

[EventHorizon]

By franchise value do you mean growth in goodwill or increased valuation because cash flows have increased? The later would be automatically included in the income statements while some teams won't even have a goodwill account so no. If they do it would be at their discretion whether to write it up/down and when, usually upon sale of business as that's when you will realize the capital gain/loss.

[knickerbocker2k2]

My question to owner supporters. In the early 80s players/owners agreed players would get 53-57% of basketball related revenue. In the early 90s that number was closer to 50%. In the current agreement that was originally agreed upon in 1999 and ratified in 2005, the owners agreed, and it was widely accepted players capitulated that maximum players would get would be 57% of BRI (51% is the current salary cap).

So my question, what is the new cost in the system, that forces the owners to offer players 46% of BRI? At one time the offer was a flat $2B and with projected growth in revenues, share of BRI would be eventually be closer to 40%. If there is no new cost, there are only two explanations. One is that the league has being losing money for most of the 30 years and owners were stupid or not interested in this (although they just ratified the agreement without any problems in 2005). Or the more logically explanation is the owners just want larger piece of the pie and they think they can get the players to capitulate just like every other time.

[Indeed]

Out of interest, does anybody know if the capital gains from rising franchise values are included in the profit-loss statements?

As much as I know, it is not a basketball related income (RBI), basically not an income that would affect the sharing between players and owners.
But I think it ("branding") is not included. Since I never include those in my investment (stock) until I sell them, and I don't think it is neither an income/revenue nor an expense.

[Indeed]

My question to owner supporters. In the early 80s players/owners agreed players would get 53-57% of basketball related revenue. In the early 90s that number was closer to 50%. In the current agreement that was originally agreed upon in 1999 and ratified in 2005, the owners agreed, and it was widely accepted players capitulated that maximum players would get would be 57% of BRI (51% is the current salary cap).

So my question, what is the new cost in the system, that forces the owners to offer players 46% of BRI? At one time the offer was a flat $2B and with projected growth in revenues, share of BRI would be eventually be closer to 40%. If there is no new cost, there are only two explanations. One is that the league has being losing money for most of the 30 years and owners were stupid or not interested in this (although they just ratified the agreement without any problems in 2005). Or the more logically explanation is the owners just want larger piece of the pie and they think they can get the players to capitulate just like every other time.

Honestly, the percentage doesn't really matter to us fans.
No matter it is 5%, 30% or 60%, the system is the same, players will join forces to create super teams. Small market teams (luckily we are not) is still gonna suffer.

The problem with the system is how do we pay tier 1 players, tier 2 players and etc. And how would players sign and stay with small market teams.

Really, its nothing to do with players vs owners, its just the percentage between players themselves and the determining which tier the player is in.

[Parataxis]

Out of interest, does anybody know if the capital gains from rising franchise values are included in the profit-loss statements?

As much as I know, it is not a basketball related income (RBI), basically not an income that would affect the sharing between players and owners.
But I think it ("branding") is not included. Since I never include those in my investment (stock) until I sell them, and I don't think it is neither an income/revenue nor an expense.

Yeah, I imagined it probably wasn't included. Which is funny, but not really ha-ha funny.

Sports teams are generally like houses - they may cost you money in the present, but you make money from them based on the increase in worth over the time you own it. (eg: it's fine to take a $10,000/annum loss on a property (though interest charges, etc...) if you're going to sell it 10 years later for $200,000 more than you bought it.

[Fairview4Life]

But it won't work. An owner-friendly cap will simply lead to much higher franchise sale prices, and thus more debt financing, leaving the whole endeavor right back where it started.

If it were the costs of debt servicing that were causing the kind of losses that we see in the NBA, I'd agree with you. The data we have says otherwise. When two notorious loss-producing teams have their interest costs as a tiny fraction of payroll (well less than 10% in the case of both the Nets and the Hornets), I think the obvious concern there has to be players' salaries and benefits.

No one suggested it's just the costs of debt servicing causing the losses we're seeing. It's amortization and depreciation. It's some debt servicing. It's paying your children millions of dollars to be executives in your organization. There are all sorts of little (and big in the case of amortization and depreciation, at least for the Nets in 05 and 06) ways to nickle and dime your way to big losses. All management expenses the players have no say in, yet are being asked to pay for.

Are players the largest single expense? Yes. Does that mean they should give up more than 160 million/year (to start with) in order to pay for everything else? No. They are the main reason there are record revenues. They offered to drop 4% of BRI back to the owners. The owners wanted them to come down to a 50/50 split, which isn't really a 50/50 spilt since they also wanted $350 million/year off the top of BRI for non player expenses and expanding the game in China or something.

That's not even getting into stuff like why the players should care about Mark Cuban losing money last season, since Cuban doesn't care. Or Ratner and now Prokharov with his 20 or 30% share making hundreds of millions of dollars on the Atlantic Yards project that will never show up on any BRI calculation, but required the Nets to facilitate.

[dhackett1565]

My question to owner supporters. In the early 80s players/owners agreed players would get 53-57% of basketball related revenue. In the early 90s that number was closer to 50%. In the current agreement that was originally agreed upon in 1999 and ratified in 2005, the owners agreed, and it was widely accepted players capitulated that maximum players would get would be 57% of BRI (51% is the current salary cap).

So my question, what is the new cost in the system, that forces the owners to offer players 46% of BRI? At one time the offer was a flat $2B and with projected growth in revenues, share of BRI would be eventually be closer to 40%. If there is no new cost, there are only two explanations. One is that the league has being losing money for most of the 30 years and owners were stupid or not interested in this (although they just ratified the agreement without any problems in 2005). Or the more logically explanation is the owners just want larger piece of the pie and they think they can get the players to capitulate just like every other time.

Well, the original 53-57% was meant to be a hard cap on player salaries - with them guaranteed 53% and limited to 57%. This limit was enforced only through the salary cap. Of course, over time, the exception clauses to the cap led that to grow. Seeing thIs, the percentage was lowered to 50ish to help keep the rising costs in check. It then kept on rising due to the soft salary cap, up to the mid-60s by the middle of the 99 agreement. This kept driving up the negotiated BRI split to 55, then 57% in each agreement. And this was even with the escrow system in place. And the effective percentage will just keep on rising. That's why with each go round, the owners have to ask for a lower BRI split. This time around, they are looking to win back the money lost in the last couple decades, as the split kept rising and rising. That's why their first serious offer was 46% - they need to get it back down to 50% to control costs AND growth of costs.

I've got a series of blog posts going on about the topic over at raptorsforum.com/blog

[YogiStewart]

in the end, I see it as something simple:

owners own.
i couldn't care less that we're paying to see players and they deserve a cut.
owners take the greater risk, they've put down money to own and they run the show.

pwned, the players are.
if they don't like it, go earn your "millions" in Europe or Asia. or better yet, run your own league.

[Fairview4Life]

in the end, I see it as something simple:

owners own.
i couldn't care less that we're paying to see players and they deserve a cut.
owners take the greater risk, they've put down money to own and they run the show.

pwned, the players are.
if they don't like it, go earn your "millions" in Europe or Asia. or better yet, run your own league.

So the owners are really just a cartel.

[Laowai]

Out of interest, does anybody know if the capital gains from rising franchise values are included in the profit-loss statements?

You don't get capital gains until a franchise is sold because the value of the franchise could and does vary greatly. Just a example Cleveland with Le Bron and Cleveland without Le Bron.

I believe the value of the Detroit franchise was lower than the value a few years before when it was recently sold.

[Indeed]

Out of interest, does anybody know if the capital gains from rising franchise values are included in the profit-loss statements?

You don't get capital gains until a franchise is sold because the value of the franchise could and does vary greatly. Just a example Cleveland with Le Bron and Cleveland without Le Bron.

I believe the value of the Detroit franchise was lower than the value a few years before when it was recently sold.

All teams have been over estimated, until they got the sale (for Detroit at $350m, while previous estimate was $490m). However, you don't know if the owner withdraw, or exclude assets (such as Rogers does not want the arena from MLSE), and etc.

This page showed the last 10 years:
http://www.forbes.com/lists/2010/32/bas ... 20844.html

http://www.forbes.com/lists/2007/32/biz ... 20844.html (read the comment for this one)

http://www.forbes.com/forbes/2002/0204/nba_10.html

[YogiStewart]

in the end, I see it as something simple:

owners own.
i couldn't care less that we're paying to see players and they deserve a cut.
owners take the greater risk, they've put down money to own and they run the show.

pwned, the players are.
if they don't like it, go earn your "millions" in Europe or Asia. or better yet, run your own league.

So the owners are really just a cartel.

Take a look at most non-sport businesses. I don't care if its a restauarant paying a star chef, a pharmacy, a car dealership...
The owner puts himself in the position to profit the most, either by taking a large financial risk, having the brains and balls to be owner, or seizing the opportunity.
But if the poop hits the fans, the owner, not the employee, stands to lose the most.

Simple analysis, but it applies to every friggin business out there. You may be the star at your job, but there is a reason why you aren't the owner.

[J-Roc]

So what's the latest threat of the day? Did Stern say a deal had to be made today?

[theonlyeastcoastrapsfan]

So what's the latest threat of the day? Did Stern say a deal had to be made today?

No each side meets with the mediator today, then the mediator meets with both sides together tomorrow. Then the owners have board of governors meetings Wed andThurs. I suspect if things are pleasing Stern, they could push back the BoG meetings, but for some reason Stern hasn't moved them back since the meditation date was set.

Stern never said that they had to have a deal Tuesday. He said that if they couldn't come to an agreement on a deal, his gut tells him they may not be able to play by Christmas or longer. It's rhetoric with a purpose to ratchet up the pressure on the union, and it hold no actual weight. He didn't say he would cancel the games, and he didn't games would have to be cancelled, he explained further to Aldridge that he would be pessimistic on the potential to get a deal if given where they are.