Blog Entry

Economists: Lost season 'insane' for NBA players

Posted on: October 31, 2011 11:38 pm
Edited on: October 31, 2011 11:41 pm
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Posted by Ben Gollivernba-lockout

Tuesday is November 1, meaning the NBA lockout will officially enter its fifth month. We've now officially reached the stage where we find out how much "principle" is worth to the NBA's players.

Why? Because paychecks will finally be missed. Because each wave of cancellations brings with it a known cost. Because the National Basketball Players Association will soon reach the break even point where it will be more beneficial -- purely in their financial best interest -- to cave to the NBA's revenue demands rather than to hold a hard line.

Put simply, the money lost in salary will soon surpass the potential money to be saved in continuing negotiations. Once that happens, this whole thing becomes about principle. 

Two economists writing on Grantland.com assert that the nuclear option -- a completely lost 2011-2012 season -- would be a financially "insane" eventuality for the players, even given the penny-pinching offer currently offered by the league's owners.
The split on BRI (Basketball Related Income) is supposedly the biggest point of contention. Players want 52.5 percent (down from 57 in the previous contract). Owners are “adamant” on 50 percent and started with an initial lowball offer of 37. Take the NBA’s 2009-10 BRI estimate of $3.6 billion; 2.5 percent of that is $90 million. Let’s say the life of the contract is 6 years. The total value of that over six years, with reinvestment, is around $500 million.

Is it economically worthwhile for the players to hold out for $500 million?

No. Total NBA salaries last year were over $1.5 billion, about three times the amount they are fighting over. Canceling a third of the current season would wipe out the gain of winning the extra 2.5 percent of BRI over the life of the new collective bargaining agreement. Canceling the whole season over 2.5 percent of BRI is insane for the players.

Can the players stop the owners from getting a deal that is much worse for them than the previous Collective Bargaining Agreement? No. What the players are willing to agree to is already materially worse than before. The only question that remains is how bad it will get. Does the players’ line in the sand over 2.5 percent of BRI make economic sense? No, not if they miss many games to achieve it.
The NBPA is being advised by a leading economist, so the union is not blind to this reality. In fact, despite all of their rhetoric about being willing to lose multiple seasons to preserve their achievements in previous negotiations, the example set by the financial overhaul of the NHL surely is fresh in their minds. The players will come down off of their current position. It's only a matter of when, and, also, how painful.

If the NBA makes anything more than a modest concession on the revenue split in the next two weeks or so, there's a solid chance this thing gets done. If not, things could get even uglier. The important takeaway point here though is that the NBPA's decision-making is still, after all these months, being guided by rational thought and not emotion. If we're still having this same conversation on Dec. 15, with no substantial movement from either said, then emotion will have won out. That would be terrible, horribly frustrating news for all involved. 
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Category: NBA
Comments

Since: Nov 4, 2011
Posted on: November 4, 2011 2:49 pm
 

Economists: Lost season 'insane' for NBA players

It's only insane if the players are acting purely in their own self-interest.  However, these players are also acting in the interests of all the players that will come after them.  They are doing this because past players, like in '98, sat out and lost salary so the cirrent players could earn more.  Try adding future players' losses in salary in before you call these players insane.  What the players are doing should not be scoffed at, it should be respected.



Since: Sep 26, 2011
Posted on: November 1, 2011 6:51 pm
 

Economists: Lost season 'insane' for NBA players

The best part of this whole thing is that the players will now be like approximately 20% ofAmerica. Jobless and not drawing a paycheck. Welcome to the real world you greedy bastar&%,




Since: Nov 9, 2008
Posted on: November 1, 2011 5:24 pm
 

Economists: Lost season 'insane' for NBA players

NBA PLayers are without question the stupidist athletes walking upright on the planet. I hope the league craters and they all go broke as I'm sick of 'em! 



Since: Mar 30, 2008
Posted on: November 1, 2011 5:01 pm
 

Economists: Lost season 'insane' for NBA players

This artical talks about break even.  The owners should keep pulling their offer back as time passes. They should not give the players a free option.  They take all the financial risk. Do not give an inch.  The only risk the players are taking is oppertunity cost,  a risk we all take. Granted most people are not turning do job that pays millions of dollars a year unless they have better oppertunity. The players are free to pursue other oppertunities like flipping burgers at a fast food restaurants.  I do not think most could get that job.



Since: Mar 26, 2011
Posted on: November 1, 2011 4:47 pm
 

Economists: Lost season 'insane' for NBA players

My estimate is that the median NBA salary is about 4.5 per. If the average career is about 6 yrs and we are truly $100 million apart per on the overall salaries; that means that the players are risking 4.5 of a 6 yr career for another $250K per year. Forget about the #'s for a minute, would you risk an entire year of pay in your prime for a 5.5% raise? Thought so.



Since: Oct 2, 2006
Posted on: November 1, 2011 4:40 pm
 

Economists: Lost season 'insane' for NBA players

No one cares if the NBA plays or not.  They do not play hard or real basketball anymore.  They make too much money and the Globetrotters look better.  Most players do not live in the towns that they play in so the fans have no attachment to them in the offseason which is similar in baseball, also.  Professional teams should look at the NFL.  You play, live and workout in the town that you get paid millions of dollars to play for.    Most teams are not even in the playoff chase and the fans know it.  Only one draft pick counts and if it is not a top ten pick it's an iffy pick at best.   I say lose the season and start the entire league over.  Have tryouts and new draft of new and old players.    Have a strict salary cap and a few more players on the roster.  Enforce basketball rules that you see at the HS and college level.   You have to go back to the 80's when Larry Bird and Majic Johnson played that the games looked real.   Maybe I am wrong but I will never miss an NBA season.  The top sports in general to see are HS sports-all, College sports-all, Olympics, NFL, MLB, NASCR,  NHL, Soccer, Boxing and then the NBA.    All fans is all sports want to know the game is fair and the event is real.



Since: Jul 8, 2011
Posted on: November 1, 2011 2:36 pm
 

Economists: Lost season 'insane' for NBA players

Aldridge's report was yesterday on NBA.com.  I'll give you a couple quotes:<br /><br />"In the next Collective Bargaining Agreement, the league is going to get, at minimum, a 50-50 split of Basketball-Related Income with the players, and a system with severe restrictions on teams that exceed the luxury tax threshold, from not being able to use many (if any) cap exceptions to being limited in their ability to make trades. Or the new CBA will allow teams over the threshold those exceptions, but take 53 percent of BRI to the players' 47."<br /><br />"This is what  the union's executive director Billy Hunter meant Friday afternoon when he said the league "moved" back to 47. Those were the choices the league laid out to the union in Friday's disheartening session, according to numerous sources. Fifty-fifty with almost nothing for the tax threshold-breakers, or 53-47 for the league with the negotiations the two sides had worked out all week."<br /><br />A lot of people in the media haven't had time to absorb it yet.  But yes, the gap is 5.5%, not 2.5%.




Since: Sep 19, 2011
Posted on: November 1, 2011 12:47 pm
 

Economists: Lost season 'insane' for NBA players

Interesting thought, the owners "lost" 300 million last year yet are looking at an amnesty clause where they pay certain players not to play for them anymore.  Am I the only one that sounds flawed to? You lost xx million dollars but are going to pay the entirety of Rashard Lewis' contract for him not to play for you and not count against the salary cap? The money the league is going to pay to amnesty the 20 or so players that will be hit will be roughly 500 million dollars.  Add another 500 million to replace them and that totals 1 billion dollars.  Owners are lining up to spend roughly a billion dollars when they "lost 300 million"? hmmmmmmmm


maskxing
Since: Nov 1, 2011
Posted on: November 1, 2011 12:33 pm
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Since: May 17, 2008
Posted on: November 1, 2011 12:12 pm
 

Economists: Lost season 'insane' for NBA players

So is it "not" insane for the owners? Is it "sane" for owners to cancel the whole season for 2.5% of BRI? With the owners having the deeper pockets here, it would make more sense to note the pettiness of the owners in holding out over a "mere" 500 million. They can absorb it better than the players. They make more than the players from a season, which means they are losing more. Makes less sense for them to allow 500 million dollars to hold up the season.
Again...Owners lost $300million last year.  If there is no season they save $500 million in expenses just in player salaries -- in other words, while they do not make a profit (as there is no income) they do not lose any money, they essentially break even.  So, no season means the players LOSE $500million while the owners, lose nothing, a $300million GAIN from the 2010 season.  Makes a lot of sense for the owners to stick to their guns and hold up the season. 



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