The real story of the NBA lockout and the negotiations to reopen the stadium gates to basketball players and fans is lost somewhere between what is reported and what struggles to remain private between the players and owners. The complexity of the BRI and the dueling positions regarding player movement get short shrift as most of the commentators either empathize with the owners or chastise the players for believing they have at least a modicum of power in these negotiations.
Coverage of the battle between the owners and players is fraught with misdirection, misinformation and misunderstanding. ESPN is the leading culprit from the annoying, badly informed, hip-hopless faux-arrogance of Stephen A. Smith who waxes about the superhuman power of David Stern and the foolish opposition of players to the various sports anchors’ overemphasis on player infighting while the small market owners duke it out with James Dolan, Mark Cuban and their titanic ilk below the ESPN infotainment desk and out of public view.
Perhaps the biggest falsehood pushed upon fans by sports media is the notion that the owners’ offer (which has not been officially offered yet) of a 50/50 split of Basketball Related Income is a fair deal and the best offer the players, who are in a weak negotiating position, should expect. Let’s call this falsehood the “BRI Lie.”
The truth about the “BRI Lie” is a bit more complex, but worth getting a handle on if one really wants to know why the players should not agree to a 50/50 split and why the small market owners have been prepared for two years to lose most of a season to break the resolve of the group of nearly 450 players.
1. The BRI which is shared by the players and the owners is NOT, as stated in at least one ESPN report, all of the revenue received by the league. The BRI does not even include all of the basketball related revenue received by the league.
“BRI” is an artificial creation. The definition of BRI changes as the owners and players agree it should change and as sources of revenue change. In the most recent deal, the 2005 CBA, about twenty-five pages are devoted to defining BRI. In this agreement, the players are guaranteed at least 57% of basketball related income. Basketball related income includes the following non-exclusive list:
- Net regular season gate receipts
- Broadcast rights
- Exhibition game proceeds
- Playoff gate receipts
- Novelty, program and concession sales (at the arena and in team-identified stores within proximity of an NBA arena)
- Proceeds from team sponsorships
- Proceeds from team promotions
- Arena club revenues
- Proceeds from summer camps
- Proceeds from non-NBA basketball tournaments
- Proceeds from mascot and dance team appearances
- Proceeds from beverage sale rights
- 40% of proceeds from arena signage
- 40% of proceeds from luxury suites
- 45% - 50% of proceeds from arena naming rights
- Proceeds from other premium seat licenses
- Proceeds received by NBA Properties, including international television, sponsorships, revenues from NBA Entertainment, the All-Star Game, the McDonald's Championship and other NBA special events.
BRI does not include the following:
- 100% proceeds from the sale of team assets or property
- 60% of proceeds from arena signage
- 50% of proceeds from luxury suites
- 50% to 55% of proceeds from arena naming rights
- grant of expansion teams,
- fines and compensation withheld in connection with suspensions
- revenue sharing (e.g. luxury tax)
- 1.35 million complimentary tickets
- insurance recoveries
- interest income
- any thing of value received in connection with the design or construction of a new or renovated arena or other team facility
- proceeds solely related to the NBA Development League
- proceeds from the use of team physical assets (e.g., team plane)
- There is no indication that BRI includes WNBA revenues which are the result of the value of the NBA brand.
One report indicates that the owners start the BRI discussion with $600 million that is taken off the top and not split with the players. Hence, the NBA owners are not proposing a true 50/50 split as fans anxious for a season to start may see it.
2. For the players to accept 52.5% of BRI is a huge concession. In the 2005 CBA, the players were collectively guaranteed 57% of BRI for salaries. In 1995-96, players’ salary share of BRI was at 53%, the lowest it has ever been and according to figures in the Journal of Sports Economics, the number was actually as high as 65% in 2001.
For the new CBA, the players have already agreed to surrender 4.5% from the 2005 CBA, by accepting 52.5% of BRI. This has been calculated as a transfer of $180 million annually and 1.8 billion over six years to the owners. However, the owners want another $100 million annually to cover what they claim is $300 million in annual loses.
In the last meeting on October 28th, David Stern presented the league’s position as 47%, willing to move to 50%. This was news to the players and Billy Hunter since they thought the owners were at 50% at the last session. While the media blames Fisher and Hunter from walking out on 50/50. The truth is that the owners were being disingenuous as they negotiated system issues with a false notion that 50/50 was already their offer. Billy Hunter and crew rightfully walked out when the discussion started at 47% because there was nothing to talk about if the owners refused to move beyond 50%. Any counteroffer would leave players negotiating against themselves.
In a recent tweet Glen “Big Baby” Davis encouraged the player’s to take 51%. ESPN reported the tweet as though it represented a break with the players’ union when in reality it could have been said that “Big Baby” was encouraging the hardline owners to come off their 50% proposal since the difference between 50% and 52.5% would put them roughly at 51%. The players never said that 52% was their final offer, they have said that they will not go to a 50% split which makes sense in light of the fact that BRI is a “net” concoction not gross revenues.
3. It is extremely difficult to arrive at the exact losses or value received for the NBA collectively and for each individual team.
The owners claim that they were $300 to $370 million in the red last year. According to the players the numbers from the league are fabricated between guesstimates and math magic. The NBPA has argued that if interest payments, depreciation costs and projected, not exact, declines in attendance revenue are taken out of the equation, the league should have at least broken even.
Arguably since the players do not participate in interest income, do not set loan terms for owners and receive no benefit from the sale of team assets, the players should not be held accountable for the owner’s financial management of those items.
Another wrinkle in determining owner losses and revenues concerns “related party transactions” in which NBA teams engage in a deal with another entity held by the same owner. This is most prevalent in situations where team owners also own regional sports networks. Team owners are notorious for undervaluing these related party transactions. It is not unheard of that RSN revenues are underreported by tens of millions of dollars.
For example, how much is the deal between MSG and the Knicks, both owned by Cablevision really worth? What is the revenue to the Knicks? Well, according to the past CBA, the deal must be valued at the same level of the Lakers deal with its local TV station? Isn’t that really less than the benefit the Knicks get from MSG which uses the Knicks as content constantly?
4. There is absolutely no proof that lowering NBA player salary shares will impact competitive balance.
The owners hard-line position at 50% is proof positive that they have little concern for the fans and small business owners impacted by a protracted lockout. The owners believe they will recoup whatever losses they sustain in the short-term in the over the course of a 10 year deal. They are certain, with the massive deal they have with ESPN, ABC and TNT, that the fans will return. However, as cover for this ambivalence towards fans, the owners contend that competitive balance will improve with a hard cap system or other system changes. To the contrary, studies have shown that cap systems do not have a greater impact on player shares of revenue than open systems, like that of MLB.
Perhaps the more important issue for owners seeking profitability is revenue sharing.
5. Generally, fans should not expect ESPN to provide, fair and balanced reporting on the NBA lockout because of its nearly billion dollar relationship with the NBA and reliance on NBA products and brand.
Do not be fooled -- ESPN/ABC Sports are primarily sports info-tainment organizations. They are not news organizations with a primary concern for accurate and factual reporting.
ESPN and ESPN.com have been extremely slanted in their reporting of the negotiations. Consistently big news has been reports of fissure within the NBPA with a focus on tweets and interviews critical of labor leadership. The reporting on dissension amongst the owners has been less personal and intense. Relative to reports of Derek Fisher allegedly cutting a side deal with the NBA, the $500,000 fine of Heat owner Arison has resulted in very little investigation into the split amongst owners.
The truth is that ESPN has its entire body in bed with the NBA owners: the league’s deal with ESPN/ABC and TNT expires in 2016 after they agreed upon a $7.4 billion extension. ESPN profits from exhibiting NBA content on 17 platforms including digital platforms which are seen as a potentially very profitable area of development. In 2009, ESPN secured the rights to show games, programming and classic content in the UK and Ireland which fits well with both organization's global expansions.
These deals, as described in James Miller’s and Tom Shales explosive book, Those Guys Have All The Fun: Inside The World of ESPN, were the result of tough negotiations where a forceful, loud and boisterous David Stern consistently succeeded in imposing his will on ESPN, in part because of long-time personal and business relationships with ESPN execs. With Mark Shapiro leading ESPN’s negotiating team, the deal was not wholly lopsided – Stern was unable to force Marv Albert on the station and the WNBA was relegated to ESPN2. However, Stern’s influence and oversight on how ESPN handles the NBA is in a word “omnipresent.”
It seems the truth of the ESPN/ABC-NBA relationship is lost on the players too as they do a lousy PR job of countering the owners' hold on the media. The notion that the owners are focused on anything other than money and exerting power over the players has been successfully countered by David Stern and the owners. Thus far the players are not only losing at the negotiating table, but they are being beaten in public relations with lies and more lies. Eventually, they will need to strengthen their position by clearly presenting the truth to the fans.
Update: See the latest NBA Collective Bargaining Agreement Proposal or NBA Collective Bargaining Agreement Proposal 11-10-11
I had the distinction of representing "Smoking Joe" in a legal matter in Somerset New Jersey. I was helping out a friend who needed co-counsel. I first met him right before the hearing. With many folks staring at him, my friend introduced us. What a little man I thought. He was no taller than me. Perhaps Ali and just plain boxing had beat him down was the first thing that went across my mind. Well, he must have read my mind because when he took my outstretched hand to respond to my silent sign for a handshake, I felt as though my fingers were being crushed in a vise as he smiled knowingly. I may have been in a nice suit with shiny shoes, but he made it known that he was not intimidated by the situation nor me. And man did my twisted fingers hurt for the rest of the day.
This morning, Steven A. Smith was ranting on the Players how they should just give up. I sense that what Lives says about ESPN and the NBA being in bed together is very much true. The short news clips presented the NBAs offer in a favorable light. But all I have gathered is that the Flex cap and flex percentage of BRI is really an illusory offer not readily obtainable by the players or in their interest to accept.
Well... looks like the entire season is gonna be a goner now soon. These updates are very, very bad:
@LINJLNY thanks for the retweet. have a great sunday and keep up the great work!
Owners made a new offer and ultimatum. The offer was supposedly 49 to 50.2 percent and a flex cap. If the deal is not taken they would offer a worse deal later.
Deron Williams Tweeted that he does not understand why it took so long to get to decertification, he was ready in July.
I understand Dwill's frustration, but the Union's decision to try its hardest to work out a deal before hitting the courts is a good one. When the opposition has such a hard stance you must take them to the brink, where there is a sense of urgency that they could also lose. The owners will not believe they can lose until the league is in court and the first set of playoff games and finals is gone.
The season should soon be lost.
Good read Lives. Folks, hook me up with the links or let me know where I may get them for how BRI is determined. Very nicely done Lives.
“Give, and it shall be given to you. For whatever measure you deal out to others, it will be dealt to you in return.”
Great article Lives, worth waiting for.Can capitalism and christianity coexist?Hell no!There's the rub.Honorable men can be fair to one another.If you are fair then people walk away from the table without the resentment that brings on the next hateful episode.You say that is not human nature.Well, maybe that is why we have to work on our nature.Whatever happened to men making a handshake deal?First you have to have men and then the deal has to be fair.What is fair?Check yourself, it ain't a mystery.Remember how a sporting event has to begin with men shaking hands?Why is that?Remember how a sporting event should end with men shaking hands?Why is that?What is a fair deal lawyers?Something about a meeting of the minds isn't it.Do you give a hungry man half a piece of bread because he owes you money?If you have been in business with someone for a long time and you've done well, very well, but now it is time to sell.How do you dissolve your bond in an honorable way?The problem with wealth today is unbridled greed and no honor.Arguing about how much your split is when people are jobless and hungry is dishonorable.Yeah, we know about the bones you throw, your publicists make sure of that.Frankly you all make too much money and your bickering clearly shows it.But the biggest problem is that there is no honor in your argument.One side cannot live without the other.Sound like a marriage doesn't it?Shake hands, divide all your shyte in half, 50-50 and be happy.You will be missed less than you know.But that's another story.
Wishful thinking that because today's meeting in Manhattan was "under hyped" it may surprise us all if the lockout ended... once again wishful thinking.
I'm laughing at myself thinking...if the lockout happened in the past two years
I wouldn't be so upset due to the Knicks being the league's "doormat"
@CollegeWolf Thanks for the promo my man. #NBA #TWolves #Knicks
Wow Lives, this is fantastic! I'm soooooo happy to see something like this being written. You nail the facts here, and really get down to the nitty-gritty. This lockout blows, but screw those greedy-ass hardline Owners for what they are trying to do here. They definitely are NOT trying to "fix the NBA" or "get a fair deal" or anything like that. They are NOT negotiating in good faith, and are simply trying to mercilessly crush the NBA Players Union out of pure greed. It's ridiculous and sickening.
Unfortunately the Players are going to have to cave in eventually. Because that's how these things always end. And it's sad because of all the concessions they have already made, compared to basically none by the Owners. If the Players don't cave, they are going to lose a ton of money and potentially TWO seasons could be cancelled. Lose-lose.
I am very glad you are mentioning the BRI split and the $600 million the Owners take off the top as their credits first before splitting it. People don't seem to understand this, and it saddens me. That is why 52% to the Players is more than fair. At this point I think they Players will be lucky to get 50% of BRI, which is actually like 46% of Total Revenue. So much ignorance out there on the interwebz with people calling the Players greedy and other such insults, when they don't even know any of the facts.
This entire thing saddens me, and my hatred for the Owners grows by the day.
@CollegeWolf if I'm rich enough to buy an NBA team shouldn't I have the sense not to give mid-level talent max contracts?
Thanks for the info... wow.. Jordan can't play anymore so he'd like no one to play.
Selfish Basturd! No surprize about Stren though.
@LINJLNY Michael Jordan is claimed to be a leader of the small owner group.
@Lives That's some good stuff Lives.
RIP Smoking Joe @Peaceman
@Lives Yep... season will be lost soon enough. Discouraging and sad. It didn't need to be this way. :-(
@Orange_and_Blue I will try to figure out how to put the pdf in the above story by tomorrow. Otherwise you can look on this site under IGM Resources and check out Larry Coons Salary Cap FAQ. You can also find the full CBA on the NBAPA's website.
The money line in that one T'Man is "The problem with wealth today is unbridled greed and no honor."
Capitalism w/o ethics or morality is what we've been witnessing. Do you get the sense that some T' Baggers and their Rethuglican Ilk are trying to transform the U.S. into China?@Tman
@LINJLNY Anytime homie. Seriously though, great article! #NBA #TWolves #Knicks
@CollegeWolf Thanks man!! Felt good to write a little something about this fiasco. I was getting tired of the ESPN spin. Unfortunately, I agree that the players are in a very tough position. If they have resolve to do the necessary and painful they can come up with a victory, but how do you get 450 odd guys and their agents to agree to suffer a little just to kick some ass -- not even kick ass, but to prevent from totally being buried by the big bullies. I'm hoping the players have the balls, but that would mean missing at least 50% of the season.
@Yaksaddle darn good question, but apparently the demand is greater than the supply of talent. Are the max mid-level kts the problem?
@Yaksaddle You'd think so.
@Peaceman Thanks bro.
@Peaceman I understand Jordan's position. after having Falk as his player agent and cheap ass Bob Johnson as one of his business mentors, you know Michael is going to do whatever he can to make that cash. His real enemy are the other owners who won't share sufficient revenue to make it viable for the small market owners who want to make a little profit before the huge one they will get selling the team.
@thediylawyer I know dude, it blows.
@Lives I hope the Players have the balls too. I mean, it's.... just RIGHT. They are getting screwed, and it hurts to see writers and normal people pile it on. The hard-line Owners are the real villains here, and it truly pains me that anyone could agree or side with them.
Unfortunately missing half the season would mean missing the entire season, because they wouldn't have a 40 game season. So let's see if the Players have the stones to miss the entire year. I'm guessing no. At least, not the majority of course.
@CollegeWolf and if the players don't I have to look at these mid-level guys stealing money and oxygen and allow contraction?
So the Lakers and Knicks can bring in $150+ million per year, yet teams like the Kings and TWolves are making about $10 million in their advertising? What a total joke. No offense to you guys, of course. There are other teams out there making a shit ton of revenue as well.
Just absurd. The NFL definitely has that one correct.
@Lives Well said my friend. Couldn't agree more.
@CollegeWolf Man, ESPN was the only "news" show that I watch on a daily basis. Before the end of last season, I had ESPN on 18/7 whether I was near the Telee or not. That tells me that there is a great opportunity for some real good sports content and reporting. ESPN is nothing but a money machine and they are not coy about it.
I will watch ESPN because I need my highlights adn scores, but for news? Troll the net for some good analysis and opinion.
I do like Broussard and Aldridge's coverage, but it is strong for reporting info from sources, not necessarily from an analytical view point.
@CollegeWolf Right now, I'm guessing no too, but if 130 players agree on decertification, that's a new ball game.
@Yaksaddle I don't know, but truthfully NBA owners have been poor money managers forever -- remember those broke Boston Celt teams w rings.
@LINJLNY no you brought it up - I just pointed out if owners can't make money now - what makes them think adding Europe is the answer
@Yaksaddle -- did someone @ NBA say there is no interest intaking NBA Global?
@Yaksaddle -- but the truth is they are going where the numbers make sense and that cd be on the other side of the oceans.
@Yaksaddle Now that was Funny -- Eddie Curry in Turkey.
@LINJLNY the only way owners and stern want a league over there is so there will be new gm's dumb enough to trade for Eddie curry
@Yaksaddle It may look a little different than what u think but the NBA and ESPN/ABC are counting those international and digital $$
@Yaksaddle Stern disagrees with you. The ground work and investment has already begun. 100% fact.
@LINJLNY zero possibility for overseas expansion - sterns pipedream he is selling it doesn't make sense from a travel standpoint
@Yaksaddle I'm betting contraction does not work for the owners. They are looking at international expansion.
@CollegeWolf and a team in Seattle and KC - and college players must have 3 years, and a hard cap with no incentives for salary
@Yaksaddle Works for me. Too many teams and games as is. 24-26 teams would be ideal.