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Posted on: October 20, 2011 12:01 pm

BRI, revenue sharing take center stage in talks

NEW YORK -- Setting up an important day in the NBA labor mediation Thursday, with BRI and revenue sharing in the spotlight:

* After more than 24 hours of federally mediated bargaining over two days, the two sides are right back where they were on Oct. 4 when it comes to the key issue of BRI split. Two people involved in the negotiations confirmed to Thursday that the owners are back to offering a range of 49-51 percent for the players, with the percentage varying based on where revenues come in. This is where things were when a crucial session broke down more than two weeks ago, and we all know how that ended: Depending on who you believe, the players either rejected that informal proposal or countered with a band of 51-53 percent, which the league rejected. Either way, the economic negotiation has settled in the sweet spot that it has been heading toward ever since.  The final number A) more than likely will vary based on revenue trigger points, and B) is expected to wind up with the players receiving a share of between 50-52 percent -- the midpoint of the range each side is comfortable with, which we told you on Oct. 4 meant the two sides were only about $80 million-a-year apart. 

* With the owners' planning committee presenting its recommendations on a new revenue sharing plan to the full Board of Governors, the next step will be for the owners' labor relations committee to share the results with the players' executive committee Thursday afternoon when mediation resumes. While the owners have kept their revenue sharing plans separate from the collective bargaining talks, Thursday is expected to be the day when those two crucial topics unite. Before making any further economic moves, the players have been eager to examine the owners' revenue sharing plan as a way to ensure that the union doesn't bear a disproportionate burden of the economic and system changes owners are seeking. Commissioner David Stern has said the plan is to initially triple the revenue-sharing pool and eventually quadruple it. Shifting money from high-revenue teams to low-revenue teams is viewed as a crucial aspect of fitting the league's vision of a flatter payroll disparity into a CBA that already has significant economic concessions from the players built in.  

* Finally, as I examined here, the most prominent sticking point in the talks remains the method by which a reduction in player salaries will be linked up with a new system that seeks to create more competitive balance. Two mechanisms that I didn't mention in that piece could help: an amnesty clause and the escrow system. The latter already was in place in the previous agreement, while the former is a new concept proposed by the owners. Under the league's amnesty proposal, sources say teams would be able to waive a player and have up to 75 percent of his contract removed from the cap and tax, with the remaining balance amortized against the cap over the number of years left on the contract. The player would still be paid 100 percent of the guaranteed money owed; this would be an NFL-style cap management tool to help teams adjust to the new system. The escrow, which evens out any underage or overage in the players' guaranteed share of BRI, also could be used to account for existing contracts that would make it difficult for teams to comply with the lower cap. But this is a tricky one, since any amount paid to the players that winds up exceeding their assigned BRI percentage would have to be refunded to the owners. Union officials may view this as a salary rollback by a different name.

* So, right on cue, sports attorney Matt Tolnick has written a thoughtful piece detailing other solutions to the problem of marrying lower salaries to a more restrictive system. Writing for, Tolnick suggests two remedies: 1) Instead of requiring teams to be under a hard or harder spending ceiling (be it a cap or tax level) every year, they would simply need to meet the requirement on average over the course of four or five years; and 2) a rollback of existing contracts commensurate with the players' overall reduction in BRI percentage. The union has flatly rejected rollbacks, and the owners have agreed to back off on the concept. But it might just be the most equitable and simplest way to make all these moving parts fit together without causing a certain class of players (i.e. draft picks or free agents) to bear a disproportionate burden. 

How all of this plays out at the bargaining table Thursday is anybody's guess. But there seem to be enough good ideas to go around.

Posted on: September 23, 2011 11:45 am
Edited on: September 23, 2011 12:28 pm

Sources: Owners' offer still below 50 percent

NEW YORK -- More details emerged Friday of a revised proposal from the owners on the split of revenues with the players, with two sources telling that the aggregate share offered by the league remains below 49 percent.

The number offered Thursday by commissioner David Stern and deputy commissioner Adam Silver was deemed "unacceptable" by representatives of the National Basketball Players Association, according to one of the sources familiar with the proposal. The two sides emerged from a five-hour negotiation with no deal and with full recognition that training camps would be postponed and preseason games would be canceled.

That inevitable and widely expected announcement came Friday, when the league postponed indefinitely the start of camps -- which were supposed to open Oct. 3 -- and scrapped 43 preseason games scheduled from Oct. 9-15.

The two sides are communicating Friday to schedule another bargaining session for next week, when the owners' gesture -- however small -- to move off the $2 billion-a-year players' share for the first eight years of a 10-year proposal is expected to accelerate negotiations on the economic portion of the agreement.

This is the first time the league has formally offered a number in terms of the BRI split since they proposed an annual guarantee of $2.01 billion as part of a 10-year proposal in late June.

It is both curious and an inevitable function of the calendar -- the league is still three weeks away from having to cancel regular season games -- that the owners emerged from a series of productive bargaining sessions and a full Board of Governors meeting to present a BRI split that still has the players receiving less than half of the league's approximately $4 billion in revenues. After NBPA executive director Billy Hunter stated his intention to go below the union's previous offer of a 54.3 percent share for the players, Stern and Silver acknowledged that an agreement on the economics was within reach.

Stern told reporters last Tuesday that the players' gesture -- which was preconditioned on the owners dropping their insistence on a hard salary cap -- was "on the road" to a compromise on the overall dollars.

"The question is, how long is that road?" one person connected to the talks said Friday. "Is it the Road to Hana?"

Under the six-year CBA that expired July 1, the players were guaranteed 57 percent of basketball-related income.

Examining the owners' June proposal of $2.01 billion for eight years, the numbers work out to an average of 44 percent of BRI for the players. (Estimating 4 percent annual revenue growth, total revenues in the first eight years of the deal would be approximately $36.4 billion, reaching $5 billion for the first time in league history in the seventh year.)

So even though the players would get an estimated 51 percent of BRI in the first year of the deal ($2.01 billion out of $3.95 billion), with revenues increasing and salaries remaining flat, their share would decline to 39 percent in the eighth year.

The numbers offered by league negotiators Thursday amounted to an average share for the players that was still less than 49 percent and provided what one person familiar with the numbers described as a lesser decline in their percentage over the years.

So in estimating how far apart the owners and players are economically, my presumption that the league must have offered more than 50 percent on Thursday -- since that's what they'd offered in the first year of the June proposal -- did not take into account the declining percentage over time. Since the previous offer was 44 percent in the aggregate over eight years, what the owners came forward with Thursday had to have been in the the 45-48 percent range on average over the life of a new CBA.

So how far apart are they? It's hard to say for sure since so many of the proposals have been hypothetical and they haven't gotten around to negotiating what system they'd be tied to. But if you look at a six-year horizon -- the longest proposal the players have offered -- the difference between 53 percent for the players and a possible owners' proposal of, say, 46 percent, would be about $2 billion.

What's a couple of billion among friends? It's a lot of ground to cover in three weeks, but vastly less than the $8 billion over 10 years that separated the two sides three months ago.

Posted on: July 22, 2011 6:36 pm
Edited on: July 23, 2011 12:38 pm

Negotiated salaries declined $100 million

The NBA and National Basketball Players Association released their salary and revenue figures for the 2010-11 season, and the numbers were good: a 4.8 increase in basketball-related income (BRI), just one year after the league experienced essentially flat revenues in the wake of the worst economic downturn since the Great Depression.

But we're in the summer of lockouts, and each side will use the numbers to support their own negotiating positions. The joint news release from the NBA and NBPA made the point that player salaries and benefits also increased 4.8 percent, and that player compensation increased 16 percent over the six-year collective bargaining agreement that expired July 1.

A couple of points: Of course player compensation increased 4.8 percent to $2.076 billion. The CBA had a negotiated 57 percent guarantee to the players, which as part of bargaining for a new CBA they offered to lower.

UPDATE: Second, according to people familiar with the BRI meetings that concluded Friday in New York, the players will receive all of the 8 percent of salary that was held in escrow for the first time under the six years of the previous CBA. In fact, negotiated salaries declined by about $100 million to $2.02 billion last season, their lowest level since the 2006-07 season. 

The audit also confirmed what key figures on both sides have expected for months: salaries fell short of the players' designated percentage by more than the $162 million that was held in escrow. As a result, the owners owe the players money for the first time under the previous CBA's escrow system. They'll be writing checks totaling $26 million on top of the $162 million in escrow that will be returned, sources said.

So the entire 4.8 percent increase in player salaries was due to the negotiated 57 percent guarantee -- which the players have offered to reduce in a new CBA -- and the full escrow withholding being returned to the players, and then some. 

As part of the old rules, the league withheld a certain percentage of salary (8 percent last season) and would keep a portion of it or give it back so player salaries and benefits equaled 57 percent of BRI. In every prior year of the CBA, negotiated salaries -- the contracts offered by owners and signed by players -- rose and the owners kept most or (as in the case of the 2008-09 season) all of the escrow.

What does this mean? Well, to some degree, it means that owners became more judicious in the contracts they doled out. On another level, it means that many teams -- like the Kings and Timberwolves, who hovered near the league-minimum salary, and the Pistons, who did not make a single roster transaction last season -- simply folded up the tents in anticipation of the lockout, a looming ownership change, or both.

Neither league nor union officials would address the details behind the BRI numbers released Friday, but I can already tell you what the NBA's point about this would be: 1) negotiated salaries are irrelevant when the BRI guarantee gives the money to the players anyway, and 2) the costs to generate that 4.8 percent increase in revenues are so steep that the league can't do business anymore.

That's why we're in Day 22 of the lockout. A deficit reduction compromise and debt-ceiling deal almost certainly will come out of Washington, D.C., before a resolution to the NBA's labor impasse. Come to think of it, it better.

Category: NBA
Tags: BRI, lockout, NBPA
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