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NBA Lockout: Get Comfortable, This Might Take A While

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This lockout boils down to the owners wanting a greater share of the profits and the ability to recover from their own mistakes. Odds are, they're going to get both before all is said and done.

The deadline for the NBA and the players' union to sign a new collective bargaining agreement came and went without much movement from either side. The league and the other 29 owners (the New Orleans Hornets are currently owned by the league) wasted no time in locking out the players. No paychecks will be cut, no player movement will take place, teams will have no contact with players, players will not be allowed to use team facilities, basically the NBA as we know it has gone into a state of suspended animation until the sides can agree to a new CBA.

For the casual fan, this lockout doesn't mean a whole lot right now. It's your typical billionaires vs. millionaires fracas, with both sides crying poverty and paying a bunch of lawyers to sit down for intense negotiations. It's a necessary evil that's taking place in a time when the casual fan really doesn't care too much about the NBA anyway. This lockout won't become real for the casual fan until actual games are lost. The public outcry won't come until we reach that point, and honestly, it might take that outcry to cause serious movement because right now, the sides are extremely far apart on major issues. 

Forget about the players for now, they aren't looking to gain anything in these negotiations. For them, this lockout is about keeping as much of what they already have as possible. The owners are the ones looking to make serious changes to the way things work in the NBA. There are two major issues here: (1) The owners want a bigger slice of the pie. They currently take about 43% of BRI (Basketball-Related Income), they want that number to jump to 55%. (2) They want the new CBA to make mistakes less damning. Essentially, the owners want this new agreement to protect them from themselves (They want a means to avoid mistakes like Gilbert Arenas' $111M contract, or Elton Brand's $82M contract if you want an example that hits closer to home.) The simplest way to accomplish these two goals is to institute some form of a hard cap, and either do away with fully guaranteed contracts completely, or at the very least, reduce the amount of guaranteed money in contracts, probably in terms of years. For example, teams could sign players for up to five years, but only the first three could be guaranteed.

Every other issue which is brought up in relation to this lockout is window dressing. If you're following along throughout the summer, keep a close watch on the owners and players' stance on these two issues, if neither side moves, nothing is being accomplished. If you see the gap narrowing on these issues, then we're moving closer to a resolution. If one side makes a big deal about "bending" on any other issue, it's a publicity play. None of the ancillary issues will keep us from watching basketball in late October.

Most likely, this is going to be a battle of the wills, and both sides know that. The players desperately want to hold onto their share and they don't want to give up guaranteed contracts, in any way shape or form. The owners, on the other hand, want to make more money. And we're not just talking about greed here, teams are legitimately losing money (though perhaps not quite as much as they claim). Also, the dirty little secret you won't hear anyone on either side of the aisle admit to is that most front offices are littered with inept managers. Just about every team has succumbed to either bad information, faulty logic or market influences and made moves that have either crippled or hampered their ability to compete. Teams continue to recycle failed general managers, and coaches for that matter, then act shocked when these repeat-failures make a bad $100M decision for them. Instead of addressing the problem by hiring smarter people to run their teams, the owners are now looking for an institutional solution to this problem that has plagued them for years. And you know what, odds are they're going to get it.

Right now, most of the players in the NBA aren't getting a paycheck (some teams spread out their player salaries over the entire calendar year, but most condense their payroll to coincide with the regular season only). Once these players start missing paychecks, the union is going to start feeling a squeeze from the bottom up. With each missed paycheck, the pressure will mount. This is just a fact. You may think these millionaires have planned ahead, and they'll be able to withstand a few missed paychecks, and most will be able to, but not every member of that union is making eight figures per year, in fact, most aren't. On the other side, we've got a group of extremely wealthy business men who own the teams. These aren't men who got rich from owning the team, these are men who made their fortunes elsewhere, and continue to make their fortunes elsewhere. Think about it, billionaires vs.millionaires, whose safety net is going to run out first? Especially when the vast majority of the millionaires don't have other significant sources of outside income? Now here's the kicker, there's a certain percentage of owners who are losing money when their team plays. Their operating expenses far outpace their income. It's almost perverse, but some owners will actually be saving money if the lockout bleeds into the regular season. 

Add all of this up and you've got a group of highly motivated owners looking to make wholesale changes to how the NBA works with all the motivation in the world to break the union, versus a group of players fighting an uphill battle with a serious deadline on their hands if they care at all about the livelihood of their dues-paying members. Caught in the middle somewhere is the thousands of people who depend on the NBA to make a living and the fans who seemingly live and die for their favorite teams. Public opinion may wind up being the most effective negotiating tool the players' union has at its disposal, if they can get the public on their side. The NBA experienced a bit of a renaissance this past season which culminated in through-the-roof ratings for the finals. The fear of throwing away that momentum and goodwill may just be the biggest motivating factor for the owners to get a deal done before games are lost, but that type of motivation only goes so far.

Over the coming days/weeks/months, each side will do its best to paint the other as the villain. They'll leak details which show how reasonable their latest offers are. They'll call the other side every name in the book. When the dust settles, though, the next CBA is going to be much, much more favorable to the owners. There's just no motivation on their part to settle for much less than what was contained in their original proposal. There's absolutely no indication that the players hold any cards right now, and you don't need to look any further than the looming sale of the Philadelphia 76ers for proof. Joshua Harris made a fortune in Private Equity by evaluating companies and pouncing when the he saw the opportunity to buy an undervalued company. He saw the Sixers, he read the tea leaves of this lockout, and he's pounced because he knows when the new CBA is signed, owning a team in the NBA is going to be far more profitable than it was under the previous CBA. It's a certainty at this point. The only question for Harris right now is how long he's going to have to wait.