If you think the upcoming NBA lockout and potential work stoppage boils down to billionaires and millionaires fighting over who gets to make money off of a game, I wouldn't argue with you.
Despite more than a year of rhetoric from both sides, charges that the game's economic model is totally flawed and needs to be revamped and threats that an entire season could be lost, the labor situation facing the NBA boils down, first and foremost, to dollars and cents. NBA owners are looking for a larger share of the pie, less financial risk and a more equitable playing field; the players are mostly aiming to maintain the status quo, which includes a healthy share of league revenues, lengthy, guaranteed contracts and a soft cap system that helps prop up player salaries.
The league's teams are represented by NBA commissioner David Stern, deputy commissioner Adam Silver and an ownership panel. The players are represented by NBA Players Association Executive Direction Billy Hunter, NBPA president and Los Angeles Lakers guard Derek Fisher, and other board members.
To get an idea for what the two sides are arguing about and where they stand on each of the major issues, let's break it down item by item.
1. Split of Revenues
By far the biggest issue facing this labor situation is the division of overall revenues. In the NBA, revenues are referred to as Basketball-Related Income. Under the current system, the players take home 57% while the owners are left with 43%.
Over the last year or so, the owners have raised a number of reasons they feel their share should be bigger: costs associated with stadiums, additional expenses incurred through long-term debts, the rising costs of travel and so on. The NBA has claimed that 22 of its 30 franchises lost money this past season.
The easiest way to fix that problem, of course, is to drastically reduce costs associated with players. In other words, by cutting their salaries significantly. Options on the table: rolling back future salaries of previously agreed to contracts, reducing the length of contracts (less years = less money) and reducing the amount of guarantees in a contract (allowing an owner to get out of a bad contract more easily or more quickly). It goes without saying that the players are opposed to all of those ideas on principle, given that they represent major concessions to what they have previously negotiated for themselves.
2. The Type of Salary Cap
Unlike the National Football League, the NBA operates under what is called a "soft cap" as opposed to a "hard cap." In a hard cap system, there's a spending limit that you cannot exceed on player salaries. Once you hit the maximum salary amount, you can't add players without subtracting current players by trading or waiving them. In a soft cap system, teams are able to exceed the salary cap in a number of ways. In the NBA, the most common way to exceed the salary cap is to re-sign your own players to large contract extensions. The NBA also has salary cap exceptions which allow teams that have exceeded the salary cap to sign additional players. These include the mid-level exception, which allows every team over the cap an extra salary slot that is equal to the average player salary in the league, and the veteran's minimum, which allows a team to fill out its roster with low-dollar salaried players.
The NBA owners have proposed switching the league's salary cap to a hard cap system. This would have the effect of limiting spending overall, as owners would not have the ability to employ their exceptions or sign their star players to lucrative extensions without making cuts from the rest of their roster. Under a hard cap system, if you wanted to sign a star player to an extension, you would have to make room by getting rid of other players first. For example, if the Memphis Grizzlies wanted to sign Marc Gasol this summer, they would have to trade away some of their current players to make it happen.
A soft cap system is ideal for the players. It keeps salaries high, gives them good options in free agency and allows them to be rewarded for their loyalty if they decide to stay with their current organizations when they become free agents. It's worth noting that some teams -- especially big-spending teams -- are going to be opposed to a hard cap system. Star-laden teams with large payrolls like the Miami Heat, Los Angeles Lakers and the New York Knicks would be difficult, if not impossible, to build in a hard cap system. The Lakers have the highest payroll in the league, in part, because they have signed stars like Kobe Bryant, Andrew Bynum and Lamar Odom to big-dollar extensions.
The NBA has enjoyed booming popularity this season, in large part because of the success of the Heat, which was built on acquiring multiple, high-dollar free agents. Switching to a hard cap system could kill that golden goose. Still, many owners are pushing to level the playing field when it comes to spending because large-market teams are able to shell out significantly more dollars because their revenues -- in the form of television deals and the like -- are so much greater. One possible compromise that has been raised is a "flex cap" system, which would firm up the current system a bit but still allow for some exceptions.
A balance will need to be found between protecting the owners' ability to retain their own players while also protecting them from being able to spend so recklessly that they are not able to turn a profit. The players believe this boils down to the owners simply needing to exercise greater restraint. The owners believe the system needs additional measures because spending big -- way too big -- has become necessary to put together a winning team.
3. Revenue Sharing
There's no better way to illustrate the difference between large markets and small markets in the NBA than to look at the TV deals. In 2007, the Portland Trail Blazers reportedly signed a 10-year agreement with Comcast Sports NorthWest to carry their games for $120 million. In February, the Los Angeles Lakers announced a reported 20-year, $3 billion deal with Time Warner Cable. In other words, the Lakers will receive more revenue in the first year of their deal than the Blazers will over the duration of their decade-long deal.
Currently, the league has a system of revenue sharing that redistributes money from teams that exceed what is called the "luxury tax." When teams spend significantly over the salary cap, they pay a dollar-for-dollar tax to a league-wide fund that gets split up and sent out to all the teams that didn't spend significantly over the salary cap.
Generally speaking, small-market teams argue that the large-market teams couldn't succeed and profit as greatly as they do without the league structure and all of its teams. Therefore they believe large-market teams should share a great portion of their revenues. The large-market teams believe their organizations and brands are the ones generating the revenue and therefore believe they shouldn't need to share those revenues with small-market teams. By and large, the players are mostly indifferent on this issue. They care less about how the owners divvy up their money and more about what slice of the Basketball-Related Income pie they receive themselves.
NBA commissioner David Stern has said he wants to create an atmosphere where all 30 teams can compete for a title. That's been taken to mean that the NBA will expand its revenue sharing system. It's possible that the revenue sharing discussion would come after the first two issues mentioned above are resolved.
4. Tertiary Issues
Every time these two sides get together to negotiate, smaller issues arise. In the past, these have included things like the dress code, the institution of a one-and-done rule which mandates players attend college for at least one season, and the inclusion of an amnesty clause, which allows owners to achieve some financial relief on a contract that currently exists.
This time around, the owners could push for an expanded version of the one-and-done rule which would require two years of attendance in college. The players generally oppose that revision -- and the current rule -- preferring that high school players be eligible to enter directly into the NBA Draft pool.
Both sides could be in favor of an amnesty clause as the owners receive financial relief and the players would be paid in full and able to seek a new contract if it is used.
A franchise tag, which would increase a team's ability to keep its own high-demand free agents, has also been rumored.
