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The New CBA: A Shotgun Wedding on the Horizon

One of the hot topics around the virtual water cooler this weekend (at least if you could get anybody to talk NBA in the face of the Superbowl) was the proposal submitted to the Players' Union by David Stern on behalf of the owners.  Ric Bucher has the story and Chris Sheridan the off-the-cuff response from union vice-president Adonal Foyle.  Points in a nutshell:

  • Maximum salaries for vets could be slashed down to around one-third of what they are eligible for under the current bargaining agreement.
  • Maximum salaries for those under rookie contracts would also be reduced significantly.
  • Pre-existing deals would be revised to conform to the new standards.
  • Contracts would be limited to four years in length.
  • Contracts would no longer be fully guaranteed, with the target assumed to be less than one-half of each contract subject to guarantee.
  • Bird Rights, mid-level-exceptions, and other cap-bending provisions would be abolished, in effect creating a hard cap.

Sheridan has Foyle describing the proposal as "ludicrous" and "far-reaching", though I'm comfortably sure that off the record players aren't using 9- and 10-letter words in their reactions.  Given the gravity of the proposals I'm thinking four-letter words liberally repeated is more the norm.

Let's take a look at what's probably going on here as well as some of the implications of the proposals.

First of all, one has to expect that any proposal submitted 18 months before the expiration of the current deal is going to be wholly one-sided.  Nobody is going to be accepting that proposal, or even seriously debating it.  It's meant to set a baseline from which to start negotiations.  Everybody knows the two sides will be meeting somewhere in the middle.

However the starkness of these proposals shows that the owners do mean business and are probably more committed to getting what they want than they are making their opponents happy.  They have a couple things going in their favor.  The economy is in the pits.  And as the players found out during the last lockout, it's far easier for the owners to remain close to their standard of living without basketball than it is for the players to remain close to theirs.  The last time work stopped the players all but capitulated.  That started a slippery slope that has culminated in them fighting to keep a CBA that they once fought to avoid.  

Between the momentum and the economy the owners are swooping in for the kill this time.  They intend the players to come a long way and they've just raised the war flag to communicate those intentions.  No matter how much the players end up salvaging, the NBA we've known for the last couple of CBA cycles is going to change.

As far as the specific changes, the lowering of the maximum salary is a provision we've discussed many times in this space.  They want it not just for the money they'll save on superstars but for the trickle-down effect it will have on salaries league-wide.  Hardening the cap will reinforce the provision.  I don't know that the cuts will be as draconian as proposed or the cap as impermeable as desired but the owners are likely to fight hard for these provisions. 

Lowering the max salary is an issue that will receive popular support (in general terms at least) as the overpaid athlete is a universal cliché.  Cap laws remain arcane to most fans and limiting exceptions should receive some support as well.  The hidden consequences of these moves may not be as popular.  Though the financial peril of small-market teams will likely be a selling point on the owners' side in practice these moves will probably disadvantage those same markets when it comes to attracting or re-signing stars.  The more basketball income is limited the more non-basketball income (read: endorsements) becomes attractive.  If a player makes $20 million then a $2 million endorsement deal represents a 10% raise.  Cut that player's salary to $10 million and the same $2 million becomes 20%.  Getting that extra 20% in Los Angeles but not in Sacramento becomes a significant incentive.  If Sacramento can no longer use Bird Rights to exceed the cap and offer the player more than the Los Angeles team its negotiating power is gone.  The first time a home-town franchise's superstar departs for the big city while the front office chases after him with a useless check people are likely to start screaming.

As far as the retroactive provision, I'd need to know more about the specific wording to understand how big of a sticking point it's going to be.  The headline of the Bucher article indicates that the agreement would affect contracts signed in 2010 which leads one to presume it would affect all existing contracts.  Would the provision only affect the max contracts that exceeded its limits or would the hard cap take effect and require everybody's contracts to be scaled down?  Either way it's an incredibly problematic proposal.  Imagine, for instance, a player who signed a contract which had its max payout in its final years...a guy who had perhaps taken less in the early years of the deal in anticipation of that later payout.  Now he's given his services below cost and seen the promised payoff scooped back into the owners' coffers.  If the proposal flies I'd imagine there would be severe limitations regarding how long ago the contract was signed and how much it was reduced.  Even that is so odious that I don't believe the owners will be able to get their way on this one.

The real negotiations will probably come in the area of contract length and guarantees.  It's going to be easier for the owners to get concessions on the former than the latter.  A short contract length could be advantageous to players as well as owners, giving the former more opportunities to negotiate as it gives the latter the security of not being on the hook forever for a bad decision.  When push comes to shove most players will probably believe they'll be worthy of a better contract in four years anyway. 

The guarantee issue will scare the players silly, especially with the rash of injuries we've seen this year around the league.  They're not going to want to budge but it's unlikely they'll be able to hold their position without giving up significant ground in other areas.  The owners will probably say, "Either make our contracts cheaper overall or make them non-guaranteed."  The knee-jerk reaction would be to guarantee most but not all years, perhaps omitting the final year of every contract from guarantee.  The problem there is that most contracts are based on raises, which means players would be losing the most attractive years of their deals.  Also if the maximum contract length is shortened to four years then each contract really covers only three.  Perhaps they will allow five-year contracts with the fifth year non-guaranteed.  Or perhaps they'll try to define mutually-agreeable circumstances in which a team can void a contract, circumstances which are looser than the current setup but have to do with situation rather than contract length.  Whether that's possible remains to be seen. 

One way or another contract amount, contract length, and contract guarantees will be scaled against each other.  The players will buy concessions in one area with their own concessions in the others.

The billion-dollar question on most people's minds is whether there will be a work stoppage.  The opening salvo looks ominous but I'm still hopeful that in 18 months this can be resolved, though the actual resolution is not likely to occur until the final moments.  Lockouts and strikes benefit nobody in the end, save maybe some European teams that might inherit a player or two.  The players will never recoup the money they lose.  The owners have to know that interrupting play will hurt the league.  Most fans don't care what the two sides agree to as long as the games continue. 

The players will have to take a long, hard look at history and their current situation and decide one or two points they feel are most critical to their viability.  They'll have to bend with the wind on the rest.  Even a $1 million per year job is impossible to find outside of the league, let alone one that pays you multiple millions.  At the end of the day, that's going to tell the story. 

--Dave (