Understanding the NBA lockout

For the second time in 13 years the NBA has imposed a lockout on their players. The decision by NBA Commissioner David Stern comes on the back of serious differences in the views of the NBA owners and administration and the NBA Players Association (NBAPA).

To fully understand the issues facing the two sides we must first have an understanding of the history of CBA negotiations in the NBA and of the previous deals signed by the two sides.

History:

Compared to the other major professional sports in the US, basketball has had a relatively quite history with CBA negotiating. Prior to 1998, the NBA had never lost a game due to issues with Collective Bargaining.

In 1998 the CBA of the current day expired and the players and owners began negotiating on a new deal. The two sides could not come to an agreement before the expiry of the previous deal though, and owing to the severe differences between the two sides, the NBA decided to impose a lockout.
Unlike previous lockouts, which all ceased before the start of the regular season, this one was much longer.

For 204 days between July 1 1998 and January 6^th 1999 the league was without its normal activity. This of course meant that no games were held in the early months of the season and as result the season was shortened from 82, to 50 games.

The deal that was eventually agreed to in 1999 lasted until 2005 and a new deal was promptly signed thereafter.

That deal, the last effective one, contained some of the following basic agreements.

• The players would receive 57% of all Basketball Related Income (BRI) (equates to about $2.1billion in 2010-11)
• A “soft salary cap” system was used in which could spend an unlimited amount of money over the cap with the use of a few crucial “salary cap exceptions”
1. Bird exception- Teams may exceed the cap to resign a player that has not changed club via free agency in the last 3 years.
2. Mid level exception –during free agency each team over the cap is allowed to spend up to 5.8 million dollars on acquiring new players.
3. Bi-Annual exception – every 2 years teams receive a $2 Million exception fro the use of signing free agents mid season.

• The “Luxury Tax” is a point in which a tax of $1 for every dollar spent is enforced. This occurs above the current cap. (currently sits at $70.3 million)

• Player salaries are capped depending on their league experience. For veterans this cap is around the $17 million mark for the first year of a multi year deal.
• Player contracts could be no longer than 6 years for a player returning to a club and 5 years for a player joining a new club

Negations today: What the league wants

The previous deal for league expired at the end of last month. Commissioner Stern acknowledged that the two sides are extremely far apart on some serious sticking points in the negotiation and so decided to impose another lockout.

The league claims that 22 of its 30 teams have lost a combined $300 million in the last season alone. It’s claimed that most teams outside the major cities of New York, Los Angeles, Chicago, Miami and Dallas have a disadvantage in the current system, losing money while also having a significantly smaller shot at maintaining a quality roster and competing for championships.

According to the commissioner, the league’s major aims are to secure a guaranteed profit for all franchises and increased competition between all 30 teams.

It’s primary way of reducing costs? Cut the players income.

The league hopes to reduce the current 57% BRI share of the players by up to a third, in turn reducing max contracts from around $17 million to a much more modest $11 million in the first year.

Teams also aim to remove or reduce guarantees on contracts, making it so payment by the team is contingent upon month by month and year by year performance of the player, a concept that hasn’t been used in the NBA in decades.

On top of all this the league hopes to put a firm cap in place, effectively ending the age of guaranteed contacts and many of the current exceptions. Under the current proposal, teams would get up to 3 years to get below this hard cap figure.

A major way they would do this could be the introduction of an Amnesty Clause.

With this in place teams could pay off the remaining money due to a player immediately and remove them from their cap figure. This rule would be great fro teams burdened with bad deals like Orlando (Gilbert Arenas), Washington (Rashard Lewis) and Los Angeles (Ron Artest).

Most analysts are doubtful a true hard cap will come into effect though, considering the amount of change that would occur to every team.

What the Players want:

Compared to what the owners want, the player’s demands are quite simple, yet no less difficult to achieve. The players essentially want the same deal, with very little concessions on their part.

They want a 5 year deal that will ensure they get a good a shot at negotiating for money from the new TV deal that will come into effect in 4 years time. They want to keep the current soft cap system, enabling them to keep their current guaranteed contracts an most of all they want no less than 53.5% of BRI (a concession of 3.5%).

How long will it go:

Compared to the league imposed lockout of 1998, this year’s lockout is many times worse. The owners are completely unwilling to budge without achieving nearly every one of their goals.

The majority of players only get payed between November 15^th and late January and so their wont be much financial toll for them until November.

If the lockout extends to August the league will seriously consider cancelling pre-season games and if it comes to September or October, we could miss regular season games. Most likely the earliest their will be an agreement is late November. We’re likely to see a serious number of games lost and perhaps, a whole season missed. I don’t think that this is the likeliest of scenarios by any means however.

The only thing we can be sure of is that until the players and owners come to an agreement on the % split of income, there will be very little movement on other issues surrounding the CBA. As fans of the game, we can only hope that negotiations continue to move well and an agreement comes quickly.