Blog Entry

NBA relaxes stance on hard cap

Posted on: June 21, 2011 5:55 pm
Edited on: June 21, 2011 11:29 pm

NEW YORK – Negotiations between NBA owners and players reached a critical juncture Tuesday when commissioner David Stern went public with the league’s offer to relax its stance on a hard salary cap and guarantee the players $2 billion a year in compensation as part of a 10-year collective bargaining proposal.

“We think this is virtually the best shot we think we have to both demonstrate to the players our good faith (and) our desire to go as far as we can to avoid a lockout,” Stern said after a 3 1-2 hour bargaining session among members of the owners’ labor relations committee and the players’ executive committee.

Stern stopped short of saying this was the owners’ final offer, but added, "The cupboard is getting barer and barer." The two sides agreed to meet again Friday in Manhattan.

“We wanted to make sure that we laid it all out there,” Stern said. “It’s all out there. The owners, to a person, feel that this is what we have to give and since we’re getting very close to June 30 – the last time I looked, it was about eight days away – that it was time.”

Billy Hunter, the executive director of the National Basketball Players Association, union president Derek Fisher of the Lakers, and executive committee member Chris Paul of the Hornets, however, minimized the owners’ gesture as simply another version of a hard cap – which Hunter reiterated was a “blood issue” for the union.

“We agreed that we would come back on Friday and present them with a response to what they presented us with,” Hunter said. “We want to go back, crunch some numbers, look at the system, and then we’ll respond on Friday. … We have an obligation to respond to what they gave us today.”

The essence of the system described by Stern was an NHL-style cap system with a targeted salary of $62 million per team and a to-be-negotiated range from a minimum to an amount above $62 million that teams could spend up to through various exceptions currently in place – such as the Larry Bird exception and mid-level exception. An escrow-like system would be used to adjust for teams coming in below and above the $62 million target. Unlike the current escrow system, through which 8 percent of players’ salaries is withheld and paid back if negotiated salaries fall short of 57 percent of revenues, Stern said owners would keep the escrow under the new system – making this, in effect, an 8 percent pay cut for the players in Year One.

In terms of the owners’ initial proposal of a $45 million hard cap, the latest offer from the league amounts to a $650 million move from their initial position. The basic structure of a 50-50 split of revenues – based on a modified formula with about $900 million in expenses deducted before sharing with the players – remains intact. The luxury tax would be eliminated under the owners' proposal.

NBA Labor
UPDATE: In another fire-and-brimstone analogy, Hunter dismissed the owners’ offer last Friday to relax their insistence on banning fully guaranteed contracts, essentially accusing them of burglary.

“We’ve had guaranteed contracts for almost 40 years,” Hunter said. “It’s almost like somebody walks into your house and they take something that belongs to you and then they want to sell it back. And you say, ‘Well, hell, it was mine from the get-go, so why the hell should I pay for it? And I didn’t authorize you to take it. And I never said it was available for you to take or use or abuse.”

A day that Stern had billed as an important moment in these labor negotiations began with the “modest” $500 million salary reduction proposal from the players. In addition to reducing their share of BRI from from 57 percent to 54.3, the players also enhanced their proposed formula for the revenue split on future revenue increases. The players previously proposed giving the owners more than 50 percent of revenues beyond the 2010-11 level of approximately $3.8 billion, and on Tuesday raised the ante and agreed to a more owner-favorable split on additional revenues.

Upon receiving that offer, the owners convened for a lengthy private meeting during which Stern said they agreed to put forth “what we think is a very significant offer to the players in order to avoid a work stoppage.” The new system, Stern said, would result in an average salary in the NBA of $5 million.

“Since we had one more move to make, we thought we would make it and let them know where we were prepared to go,” Stern said. “… I think that the players know where we are. The owners have decided to give what they possibly could.”

The committee was unanimous, Stern said, including members who were not present but gave their approval – Glen Taylor (Timberwolves), Mark Cuban (Mavericks), Clay Bennett (Thunder), and Wyc Grousbeck (Celtics). The members present were Robert Sarver (Suns), Dan Gilbert (Cavaliers), James Dolan (Knicks), Jeanie Buss (Lakers), Larry Miller (Trail Blazers), Bob Vander Weide (Magic), and committee chairman Peter Holt (Spurs).

In addition to the players’ executive committee members in attendance, also on hand were Tony Parker (Spurs), Al Horford and Zaza Pachulia (Hawks), and Sebastian Telfair (Timberwolves).

Deputy commissioner Adam Silver denied a report that there were different agendas and priorities among owners based on market size and revenue. But the flex cap offer made by the owners Tuesday seemed to be a victory for high-revenue owners and the trend of forming superteams. Both would’ve been reined in by the original (and highly unrealistic) $45 million hard-cap system that owners initially proposed in January 2010.

The sliding salary band for teams, which essentially sets a league-wide cap with flexibility to deviate on a team-by-team basis above and below the $62 million target, also would put the onus on teams that have been reluctant to spend much above the current minimum payroll to spend in the hopes of enhancing their ability to compete.

“We believe as a league that there’s no question the data shows a correlation between salaries and success on the court,” Silver said. “And what we’ve said to them is we want a league in which all 30 teams can compete for championships. As another byproduct of that, it will raise more revenue, because greater competition will mean better business, for us and the players.”

But the players clearly view the owners’ latest proposal as little more than nuanced hard cap, which they adamantly oppose.

“It’s been characterized in different ways, but essentially they want to create a hard salary cap in our game, and we just don’t see it,” Fisher said.

Asked if there can be a deal with a hard cap, Fisher said, “No.”

It will be interesting to see if the players come back with a counterproposal within the flex-cap framework. Don’t bet on it. But for the sake of argument, while it may be intuitive to think the players would want a wide salary range, a smaller range actually would be better for players – because more teams would be willing to exceed the target than exceed the minimum. That’s the part of the problem that changing the cap formula won’t address without more revenue sharing, which owners have thus far refused to collectively bargain.

In order for there to be a deal by June 30, Hunter said, “Someone someone has to make a big move.”

Otherwise, the room will go dark again and the next move will be a lockout.

Since: Jul 26, 2009
Posted on: June 22, 2011 1:50 am

NBA relaxes stance on hard cap

The players are getting greedy here. This seems to be a fair proposal. The owners need to have a profit or why own the team. I see this squarely in the players court. One thing I hope is included is the ability to void one contract. Bye Bye Brandon Roy.

Since: Aug 11, 2006
Posted on: June 22, 2011 12:27 am

NBA relaxes stance on hard cap

In the NFL lockout, the owners are to blame.  In the NBA's potential lockout, the players are to blame.  The NBA lost a collective $300 million this season, not to mention 22 of 30 teams lost money.  And this was supposed to be the best NBA season in 15 years.  The NBA's business structure is completely broken and a very real competitive disadvantage exists for 3/4 of the leagues franchises.  A hard salary cap is the only way to infuse more parity into the game.

Since: Mar 31, 2011
Posted on: June 22, 2011 12:05 am

NBA relaxes stance on hard cap

I agree with your comment on NBA teams losing 10M on 350M spent. But earning 20% in various mid-sized business opportunities??? The way the American economy is right now I dont think there are a lot of those opportunities either!! If you could invest and make 20% per year America would be a different place than it is right now!! 

Since: Mar 31, 2011
Posted on: June 22, 2011 12:05 am

NBA relaxes stance on hard cap

I agree with your comment on NBA teams losing 10M on 350M spent. But earning 20% in various mid-sized business opportunities??? The way the American economy is right now I dont think there are a lot of those opportunities either!! If you could invest and make 20% per year America would be a different place than it is right now!! 

Since: Oct 2, 2006
Posted on: June 21, 2011 11:26 pm

NBA relaxes stance on hard cap

"The cupboard is getting barer and barer" is literaly meaningless, but that absurdity is a symptom of owner B.S.  Owners getting richer and richer from labor of players, who are right to demand their share and, most of all, the minimal flexibility they currently have in bargaining their labor.  Fans are also getting savvier; though many don't give a crap about players and just want them running up-and-down the floor for their entertainment, many now understand that players have rights and should battle for them.

Since: Mar 26, 2011
Posted on: June 21, 2011 11:01 pm

NBA relaxes stance on hard cap

The players have all sorts of options to them. They can go to Europe and make 1 third of what they making now collectively. They can find other work as coaches, TV personalities and the like which will pay them on average maybe 1/10th of what they make. They can retire and start a new career. Or, I guess they could take 1 third less than what they are making now. For the players, it's all about pride and saving face.

For the owners, the issue is whether or not they want to continue to be involved in a "vanity" asset. We will see how much $$$ they are really losing by how and if they crack. The NHLPA found this out the hard way in 2005. I say bring the brass knucks out and let's see who's left standing. 

Somehow, I get the impression that the NBA player rank and file have not saved up and have been as organized as the NFL players have. So, this will be an interesting situation.

The major problem here is that the owners are never on the same page, so they want to take their internal grievances out on the players. 

Since: Dec 5, 2006
Posted on: June 21, 2011 10:46 pm

NBA relaxes stance on hard cap

MistaP - The NBA attendance in 2010-2011 slightly was up from 2009-2010. The TV audience in 2011 was the best ever for the playoffs. The NBA is not in decline. For indoor sports the NBA attendance is the best of any league in the world (Wikipedia).

The players appear to be in a danger zone with the owners. Their public comments still indicate they are not taking the owners seriously. The concessions offered have been substantial for a depression-era labor contract. The players still think we all own our houses and have annual raises and bonuses. I do want to see this contract come together. The publlc stances appear to make that highly unlikely. Lawyer time? Here we go again.

There seems to still be a lack of understanding about profitable businesses. Frankly the vast majority of owners are financially better off with the league shut down. Losses should decrease in most cases. Ask yourself: if I had $350M to invest would I invest it in a business which returns $70M per year or would I invest in one which loses $10M per year? The first option is available throughout the USA in various mid-sized business opportunities. The second option is what the NBA owners are actually experiencing.

Since: Jun 25, 2009
Posted on: June 21, 2011 10:21 pm

NBA relaxes stance on hard cap

I'm no expert but based on what I've read over the last few months I'll be blown away if there is an NBA season next year.  It's the only professional sports league that's losing money.. that doesn't bode well for the players.  And if the NBA can show on paper that 23 teams are losing money... heck if they can prove that 13 teams are losing money there isn't a court in the country that would ever force the NBA to lift a lockout.  NFL players are struggling with the courts and the owners are making money... this is gonna get ugly.

Since: Mar 29, 2011
Posted on: June 21, 2011 9:47 pm

NBA relaxes stance on hard cap

I really dont care if the NBA plays another game or not, but wouldnt be funny if they settle this thing before the NFL.

Since: Mar 2, 2008
Posted on: June 21, 2011 9:28 pm

NBA relaxes stance on hard cap

What are you talking about?  The NBA is the only peo league where attendance has slipped the last few seasons.  Who are these higg paying non-paying NBA attendees that exist?

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