Victoria Sports Online

by Christian Suessenbacher

NBA commissioner David Stern recently announced that the NBA is on pace to lose $400 million this season, and up to 1.2 billion over the next three years. The sheer weight of these numbers has caused many people to reevaluate their perception of the NBA as a virtual money printing machine. This is, after all, a league that is currently blessed with the largest influx of young talent since the Michael Jordan glory years in the 80’s. Many of the current stars are household names, even if you don’t follow basketball: Lebron James, Dwayne Wade and Kobe Bryant to name a few.

I can’t help but wonder if all this crying is a theatrical negotiating tactic by Stern to pressure the NBA union to accept a new collective bargaining agreement. That being said, the US is suffering through its worst economic drought since the great depression. During a recession citizens are quick to cut costs and eliminate spending they consider non-essential. This is big trouble for the NBA as floor-side tickets do not fall into the essential spending category. Well let’s look into Stern’s plan to revitalize the NBA. If it seems like he is playing hardball with the union; it is because he has to.

The current collective bargaining agreement is laughably outdated and inadequate to deal with the current economic climate. As a result, Stern is proposing radical reductions in salaries, a cut of the percentage of league revenue dedicated to salaries, reduced contract terms, and most significantly, a hard cap that would eliminate most exceptions to the current salary cap rules. The NFL and the NHL both have hard caps, and the NBA clearly needs to follow suit. The NBA soft cap means that a team has the option to exceed the cap. In theory, if a team decides to go this route they are required to pay a luxury tax as punishment. The luxury tax money is then, again in theory, distributed evenly throughout the league. Unfortunately, due to the staggering number of salary cap exceptions (Mid-Level Exception, Larry Bird Exception, Rookie Exception, to name a few) very few teams are actually required to pay the luxury tax—even though they are exceeding the salary cap. These exceptions are all grandfathered, and the union isn’t going to give them up without a fight.

Now, some people may ask why the league would even care how much owners are paying their players. It is the owner’s money, right? Well, it isn’t really that simple. A soft cap gives the big market teams (New York, Los Angeles) an unfair advantage in that they can simply bid the most for top talent. While the small market teams (Oklahoma, Memphis) remain unable to match these offers. As a result small market teams are unable to provide their already recession-weary fans with a competitive team worth paying money to support. During the past few seasons, arenas in small markets have too many empty seats. This is precisely what the league doesn’t want to continue.
To be financially viable, the NBA fan base has to be spread throughout the country. This is something Stern, who has been commissioner of the league for over 20 years, is acutely aware of— and as a result, is planning to push for further increased revenue sharing among NBA teams.

To stop the financial hemorrhaging, it is crucial that the NBA lower salaries right across the board. Stern argues that the current economic reality is that player’s earnings are far too high and are hurting the overall strength of the league. Stern is proposing cutting the percentage given to players from basketball-related income, from its current level of 56%, to around 43% (more cash flow to the league). To the chagrin of the union, Stern’s new proposal will put an end to the days of players making in excess of $20 million a season. Maximum contracts would plummet from an average $18 million per season to around $11 million per season. Boohoo right? Granted, to the average person, $11 million is enough money to last a lifetime, but the average person would also surely oppose a 39% pay cut. A cut that deep is significant no matter who you are or what you earn. Unfortunately, the reality is that sacrifices like this will have to be made if the NBA ever wants to become profitable again.

Naturally, the player’s union is against a hard cap and the lowering of salaries because their primary function is to protect the interest of their members even if it is detrimental to their own organization. Sometimes unions will even strike to ensure they get their way. However, the ability to shutdown the organization goes both ways. In 1998-99, Stern locked out the owners and players, until he ultimately got the agreement he was looking for. This reduced the season to 50 games and created significant dissent within the league and with their fans.

The general public is rarely fully educated on all the issues involved within an organization and doesn’t really care. They just want their product. This can lead to long-term resentment towards an organization, particularly an organization such as the NBA which has enough image issues as it is. Just recently, Gilbert Arenas of the Washington Wizards was publicly maligned by the media and public alike for bringing guns into his locker room. It is situations like this that cause the public to stereotype professional basketball players as overpaid gangsters. And, in the arena of public opinion, overpaid gangsters garner very little sympathy. Gaining the sympathy of the masses is crucial to the success of a strike. This is the reason union members picket outside their organizations with signs; they are attempting to gain the support of the public and in turn are hopeful the public will pressure the organization to make a deal. Given that it is extremely unlikely we will see NBA players picketing around their respective stadiums anytime soon, the union will have a tough fight on their hands if they decide to go that route.

The inescapable reality is that if the NBA wants to compete in an already saturated sports market, they have to implement a hard salary cap so their small market teams can slowly recover from the losses they have incurred. Drastic times call for drastic measures, and if the player’s union is opposed to reform, Stern will have to force them to. He has done it once, and he can do it again. Real fans of the game naturally hope it doesn’t come to this, but if it does, when all the issues are taken into account, they will see that it is a short term-loss to realize a long-term gain.