Lost in Billy Hunter's statement this week that he's "99 percent sure" there will be a lockout next summer was another guarantee that was far more important. It's a guarantee the National Basketball Players Association acknowledged for the first time it is willing to give up -- the 57 percent of NBA revenues the players receive under the current collective bargaining agreement.
After all the rhetoric about reducing max contracts, rolling back player salaries across the board, and imposing a hard salary cap, Hunter revealed Tuesday -- to little fanfare -- what strikes me as an important concession in collective bargaining. And while I'm not ready to say I'm off the lockout bandwagon just yet, Hunter's revelation is an important step toward averting what would be a debilitating work stoppage.
|Union chief Billy Hunter predicts a '99 percent' chance of a work stoppage next summer, but there's a way out. (Getty Images)|
The players' position is that salaries have declined for three straight seasons while revenues are projected to increase for the second straight season -- about 3.5 percent, by the league's own estimates. When the decline in player salaries is raised with ownership and league sources, their response comes straight out of the bargaining script: Salaries never decline under the current agreement, because the players get 57 percent no matter what we spend.
It would be a game-changer -- or should be -- if the players were able to negotiate an elimination of that guarantee. Such a change would fairly reflect the business environment at any given time. In a down economy, owners would pay less without being forced to write a huge escrow check at the end of the season, thus defeating the purpose of pulling the purse strings tighter. When times are good -- as they are now, based on rising revenues, robust season ticket sales and renewals, and healthy TV ratings -- the owners would be free to pay more. It would be just like a real business. Imagine that.
What would the provisions be for such a dramatic concession on the part of the players? First, it would incentivize the owners to relax their stance on forcing a hard cap and salary rollbacks on the players, which one person familiar with the NBPA's strategy said will "never happen." (Just because NHL owners were able to cut existing contracts after a season-long lockout doesn't mean it's good business for the NBA.) Eliminating the 57 percent guarantee wouldn't give owners cost certainty, per se, but it would give them more control over their books.
Second, sources say the players would insist that owners meet certain criteria for the elimination of the guarantee to kick in. While the specifics are subject to negotiation, the model would be similar to what the owners have in mind as they bargain among themselves to create a better revenue-sharing system -- one that gives low-revenue teams a better chance to be competitive and make a profit. If the owners can get the cost reductions they're seeking simply by negotiating more responsible contracts in the future -- and if struggling teams can meet certain performance markers to qualify for enhanced revenue sharing -- it's a win-win.
|More on lockout|
|Facts & Rumors|
In fact, team management sources who have analyzed the structure of recent contract extensions signed league-wide agree that owners are doing a better job of policing themselves. Not only that, agents and GMs appear to have already begun pricing in the reduction in player salaries and guarantees that everyone involved in the CBA talks can clearly see coming. After the initial flurry of spending on top-tier free agents like LeBron James, Dwyane Wade, Chris Bosh, Joe Johnson and Amar'e Stoudemire -- and low-tier talents like Drew Gooden, Amir Johnson and Darko Milicic -- the CBA uncertainty has had a clear chilling effect on contracts.
Even if you ignore veterans like Paul Pierce and Richard Jefferson, who opted out of $21.5 million and $15.2 million, respectively, and took short-term pay cuts for the security of long-term money, the trend is clear. Tony Parker, only 28, signed a four-year, $50 million extension with San Antonio that reduced his salary from $13.5 million this season to $12.5 million in 2011-12 -- the first year of a new CBA. The fourth year is only partially guaranteed, perhaps an acknowledgement by the parties involved that fewer guaranteed years are coming in the new CBA. There will be no need for the league to roll back Parker's contract; he's already done it.
Jared Dudley's four-year, $22.5 million extension with the Suns led one management source to wonder, "Is that the new mid-level?" Kevin Durant got a max extension with the Thunder, because whatever the max is in the new CBA, he's worth it and everybody knows it. But 2007 draft picks Al Horford and Joakim Noah signed five-year, $60 million deals rather than become restricted free agents and find out in two years what the new max-level contract is. As one management source said, maybe five years, $60 million is the new max -- or perhaps a "junior max" in the form of a new pay scale for second-tier stars under the new CBA.
The bottom line is that nobody knows for sure what the new agreement will hold. But I'm paying close attention to what smart agents and smart executives are doing, sort of the way investors pay attention to what stocks Warren Buffet buys and sells. High-powered agents like Arn Tellem (Horford) and Dan Fegan (Noah) will play a prominent role in how the new CBA is structured. When they agree to accept less than the current max for their clients, it means something against that backdrop of uncertainty.
And the line often repeated by aspiring GMs -- be Sam Presti -- applies here, too. Presti, the shrewd GM of the Oklahoma City Thunder, this week negotiated an extension with Nick Collison that positions the team perfectly for the uncertain pay structure ahead. Picking up on a trend started by the Wizards with Andray Blatche's extension, Presti took advantage of a clause in the CBA that allows teams that are under the cap to renegotiate the current year of a player's deal. So Presti increased Collison's salary this season from $6.75 million to $13.3 million. Next season, the first year of the extension, Collison's salary plummets to $3.3 million and continues to go down every year until he makes $2.2 million in 2014-15.
So in the first year of a new CBA, the Thunder will have an important role player like Collison on the books for roughly half the current mid-level salary. It's roughly the same story with Miami and Udonis Haslem ($3.7 million), and with Phoenix and Dudley ($4.4 million).
"You can make the case," one management source said, "that the numbers are coming down."
Yes, they're coming down -- even as the rhetoric is going up. But for the first time in this lengthy bargaining process, which has resulted in mostly doomsday predictions, there is reason to believe in progress. Follow the money, not the rhetoric, and you can at least see the path to that 1 percent chance of avoiding a lockout.