Now for the hard part: the NBA lockout
Roy S. Johnson [ARCHIVE]
Special to ESPN.com | July 27, 2011
OK, that was easy.
Pretty soon, that's how we're going to feel about the NFL's collective-bargaining minidrama -- and maybe even the mind-numbing wrestling match between POTUS and Congress over the debt ceiling -- relative to what's going down between the NBA and its players.
I try to be an optimist. (Otherwise, why would I have been a New York Knicks season subscriber for nearly 20 years? Don't answer that.) So despite the feeling in the pit of my gut that the 2011-12 NBA season will be about, oh, 12 games long, I keep telling myself that these two old buddies charging toward each other like medieval jousters -- NBA commissioner David Stern and union head Billy Hunter -- can work it out.
Not without some pain. I understand that. For both sides. (And, of course, fans.) But I'm heartened when I hear sources for both the league and union confirm the two sides are trying to schedule their first negotiating session in weeks for mid-August. They know they're "on the clock."
If there's no deal by the middle of September, though, next season (at least as laid out in the could-be-fantasy schedule released last week) will be officially jeopardized.
And if those of us here in the Northeast are shoveling snow again before there's a deal, the sport just might be shut down for a season, just as it is enjoying its highest popularity in years.
My expert ESPN colleagues have already outlined the cruxes of the cavernous matters threatening your regularly scheduled tipoff: Hard cap. "Flex" cap. Exceptions. $2 billion (in salaries) or not $2 billion. Length of contracts. Length of the deal. Failing teams. Or not. Revenue sharing.
And on and on.
But the primary reason the dispute will not be easily or quickly resolved -- and why this negotiation in no way resembles the NFL's lockout -- is this: While Roger Goodell and DeMaurice Smith were essentially haggling over how to slice their league's well-publicized $9 billion pie, Stern and Hunter can't even agree on the pie.
Or at least its ingredients.
Maybe you've heard the term BRI. It stands for Basketball Related Income, and it includes 16 categories of revenue generated by everything from television rights fees (broadcast, cable and local), ticket, concession and program sales, sponsorships, arena naming rights fees and more. Those gross figures are decreased by expenses -- percentages of revenues also agreed upon in collective bargaining -- in 13 of the 16 categories.
The net figure is used to determine whether players are earning what they've negotiated. In the expired deal, players were required to receive 57 percent of BRI in salaries and benefits.
As salaries escalated like a torturous amusement park ride (16 percent over the last six years), that target was reached easily every season. Until this last one. After the audit of 2010-11 was completed, it was announced last Friday that players actually received 56.3 percent of BRI (or $2.176 billion in overall compensation), which required the league to return not only the $161 million (8 percent of player salaries) it kept in escrow as a hedge if compensation exceeded 57 percent but an additional $26 million in order to fully remedy the shortfall. (Those additional funds will be distributed to players at the rate of $80,000 for every $1 million in salary the player earns, according to a union source.)
It's been widely reported that the league says 23 of its teams are in the red (the union acknowledges only that up to nine teams "are having a tough go of it and may need help," said a source) and overall losses are $300 million. It wants to slash expenses and not be held to the 57 percent standard, or anything that ties player compensation to a percentage of revenues.
Stern has offered the union a guarantee of $2 billion annually for the first seven years of a proposed 10-year agreement, dependent upon hitting specified revenue targets, along with a 50-50 split of defined revenues above the targets.
The union has countered with a six-year deal and essentially thinks the $2 billion stinks. Not only because it's a slight reduction from the $2.176 billion the players received this past season, but primarily because the two sides now cannot agree on what exactly are defined as revenues.
Or much of anything else.
League losses? Well, the union argues, for example, that interest and depreciation should not be included in the calculation for league losses, which they currently are. By using EBITA (Earnings Before Deduction of Interest, Taxes and Amortization) instead, the union counters league losses would be closer to $100 million.
Even greater, though, is the disagreement over what's in the pie.
Right now, it looks like a shepherd's pie, featuring a mosh of ingredients and debates that range from whether the expense ratios for each category (essentially, the percentage of revenue that can be deducted as expenses) should remain as they are, to what exactly is "related" income.
For instance: The Boston Celtics recently reached a new local cable deal with Comcast SportsNet New England that reportedly increases their local rights fees to about $20 million annually, revenue that is certainly part of BRI. But as part of that deal, the team also reportedly received a 20 percent equity stake in the network. None of the revenues derived from the equity stake would currently be calculated in BRI.
Other franchises have similar deals, and there are numerous other complexities that are enough to douse even my optimism -- particularly relating to situations in which team owners also own the arena in which they play and/or other related businesses, and future revenues generated by digital and international operations, which all but didn't exist when the just-expired CBA was negotiated.
And yet I remain steadfast in my positivity, even as all the jousting points to an extended timeout for professional basketball at a time when it can perhaps least afford it -- a void that, thankfully, the NFL is set to fill.
Roy S. Johnson is a veteran sports journalist and media consultant. His blog is Ballers, Gamers and Scoundrels.