CBA Lockout Series: Part 2

The Metta Chronicles is back. Here we bring part 2 of a three week CBA Lockout article. The “CBA Lockout Series” will discuss everything from the salary cap to the interests of the owners and players.

Main Points

Salary Cap

Owners want a hard salary cap ($62 million), which would be the NBA’s first hard salary cap.  In addition, owners demand to roll back salaries by approximately 33% ($800 million annually).  Players want nothing to do with the hard cap, aiming to continue with the current soft cap in place (current cap is $58 million), which allows teams to exceed the salary cap when resigning their own players.  They, however, have offered to take $100 million in annual costs.

Dividing up the pot

Players currently get a 57-43 split of total revenue.  Owners want that to be cut to at least 50-50 split, but players argue that the owners’ proposal leads to a 61-39 advantage for the owners at the end of the 10-year agreement. Players like the split now, and want it to continue in a 5-year deal.  Under the owners’ proposal, players would receive the same $2 billion (salaries, benefits); owners note that players’ proposal would give them another $3 billion.

Guaranteed Contracts

Initially, owners wanted to get rid of guaranteed contracts altogether.  They have calmed down from such demands, and are looking to reduce the 6- and 5-year deals to 5- and 3-year deals. Players want to continue the current model: 6-year deals for re-signing with their own teams, 5-year deals for joining a new team.

Annual Raises

Players now get 10.5% if they re-sign, and 8% if they go to a new team.  Owners would like to see those numbers slashed to 5 and 3 respectively.

Seems like NBA is doing well…?

From a cursory glance at the league, the NBA seems just right.  The league has an abundance of talent, the right amount of superstars the fans can hold on to, and enough story lines to be its own reality TV show.  From a fan’s perspective, the NBA is doing just fine.

A step deeper, however, shows that the NBA is, in fact, struggling financially, claiming that the current business model has led to 22/30 teams claiming a loss.  That’s a ridiculously high number. Owners say they lost hundreds of millions in every season since the last agreement in 2005. Despite a three-hour meeting Thursday and a final proposal from the players, the sides could not close the difference.

Let’s quickly look at the last four NBA champions: Dallas, LA (x2), Boston.  These are some of the league’s biggest markets and highest payrolls. On the other hand, the past few winners of the Super Bowl has been smaller markets like Indianapolis, Pittsburgh, New Orleans, and Green Bay.  When the Orlando Magic went to the finals in 2009, the team actually filed losses of $2.2  million. Good season? From a fan and player perspective, yes.  From a financial standpoint, not at all.