NEW YORK, NY - SEPTEMBER 05: Kevin Garnett of the Boston Celtics attends Day Eight of the 2011 US Open at the USTA Billie Jean King National Tennis Center on September 5, 2011 in the Flushing neighborhood of the Queens borough of New York City. (Photo by Nick Laham/Getty Images)
Thousands of jobs are on the line as the owners and players can't take their egos out of the equation and decide how to split almost $2 billion in profits.
Lost amid the mudslinging, finger-pointing and chest pounding from both sides in the NBA labor talks is some simple, simple math. Before we get around to assigning blame to the owners or the union, let's make it perfectly clear both sides should be ashamed of themselves. Nearly 14 million Americans are unemployed, there are protests on Wall Street, our government is being torn to bits by partisan shenanigans. Meanwhile, a group of billionaires on one side of the aisle and a group of largely millionaires on the other side can't agree on how to split up a $1.87 billion pie.
Here's the math: this past season, Basketball Related Income (or BRI) was $3.8 billion. The players were guaranteed 57% of that, or $2.16B. The owners were left with $1.63B. According to the owners, their share left them with a collective $300M in losses. The players contend those losses are closer to $200M, though they're careful to never phrase it that way. So the conservative measure has the league turning a profit of $1.86B. The players contend that number is closer to $1.96B. It breaks down like this: The players, collectively, made $2.16B in profit. The owners, collectively, lost $200M-$300M.
The union will say the problem is mismanagement on the owners' part, which is a problem, but has absolutely nothing to do with the macroeconomics of the situation. Teams making bad decisions on who to sign has a whole lot to do with the competitive balance of the league, but no bearing whatsoever on the owners ability to turn a profit. This past season is a perfect example. Player salaries did not equal the guaranteed 57% of BRI, so the owners had to pony up enough cash to reach that number for the players. Take a second and think about that. Forget about Mark Cuban and LeBron James, and look at the entire NBA as one company. This company has tremendous sales, but it's still losing about 8% of total revenue per year. If this was a normal company, they'd have several courses of action at their disposal. They could declare bankruptcy, which isn't an option for the NBA. They could take a look at different parts of their business, realize certain parts were wildly profitable, while others were not, and trim the fat. In the NBA's case, that would mean contraction. The teams losing the most money would be shut down. The union will never let that happen. The third option is to sit down with the union and work out a deal which allows the workers and the company to make money, or replace the union altogether with cheaper labor. The cheaper labor option being replacement players, which no one wants to see (and few would actually pay to see). Which leaves us with the labor negotiations.
The best reported revenue split offered by the owners has been either 49% or 50% guaranteed to the players. By last season's numbers, that would mean somewhere between a $4M profit and a $34M loss for the owners. The players' response to that offer was, "We had a chance to back down, but we stood strong." A revenue split where the owners would be lucky to break even and the players would be paid in the neighborhood of $1.9B was seen as a joke by the union. That's where we stand, and that's where we're going to stand until the members of players' union who haven't made $270M in their career, like Kevin Garnett, start feeling the pain of losing paychecks.
We've lost two weeks of this season so far. How the BRI pie is split isn't the only issue on the table, there are several other blood issues for both sides, and this is where the owners' culpability comes into play. Nothing is going to change the economic picture on the grand scale. They need to be able to explain that in the simplest terms possible to the union. If the split isn't X we simply cannot turn a profit. The split should be the only point the owners won't budge on. Hard cap? Forget about it. Luxury tax, maximum contract length and exceptions like Bird Rights? Leave them all as is. Get the guaranteed split down to 50/50, get the agreement written so that it allows the owners to collectively make money, and from that point it's up to them to manage their teams efficiently. The owners don't need a CBA which guarantees them a profit. They don't need a foolproof system which prohibits them from making any mistakes. That's asking too much. That's being greedy. What they need is a system set up to reward smart teams with profits and a chance at contention, and punish teams who make stupid decisions with luxury tax payments and irrelevance.
David Stern and his team need to get Billy Hunter and his team in a room tomorrow, forget about everything else and take a look at this number: $3,800,000,000. That's the amount of revenue their game generated last season. Then look at this number $0. That's how much the players will make this year if this thing isn't worked out. Stern needs to put the 50/50 split back on the table, give Hunter enough wins on the other issues to be able to go back to his union members and get this thing voted on and approved. It's downright shameful they've come to the point of losing games before either side was willing to blink. If they don't wise up and come to an agreement over how to split up their billions of dollars soon, not only will the fans be losing a season's worth of needed distraction this year, but thousands of people will be losing their jobs, and I'm not talking about Dwyane Wade and Kobe Bryant, I'm talking about the ticket sales agents, janitors and equipment managers in arenas all over the country.