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Stern says he’s working on revenue sharing
Published August 17, 2009
Before formal bargaining sessions began this month in the NBA, Commissioner David Stern said he had already begun trying to solve one of the stickiest problems standing in the way of a new labor deal: creating a plan for big-market clubs to share more revenue with small-market teams.
Stern acknowledged that increased revenue sharing among clubs, as well as financial disclosure — things that National Basketball Players Association Executive Director Billy Hunter has called for — were key to a new labor deal.
Not only is Stern willing to give the union all the financial information players have requested, “I have begun working … quite assiduously to assure that there is more revenue sharing,” Stern said. “I am going to reach agreement with my owners.”
Stern is willing to hand over the financial details in order to convince players that the current salary cap system, which guarantees them 57 percent of league revenue, isn’t working. Under that system, Stern said, fewer than half of the 30 NBA clubs are now profitable.
But as Stern was appealing to owners to share more revenue, Hunter was working on a plan of his own: to remind the NBA’s more tenured team owners about the 1998-99 lockout and to tell the newer ones just how painful it was.
“What we will make clear in the meetings … is the import of a lockout: what it really means and how people are affected,” Hunter said. “It took us, like, five years to kind of rebound.”
The NBA’s 11-member executive committee includes five owners or owners’ representatives who were not in the league, let alone at the bargaining table, during the lockout, which stretched more than 200 days.
Hunter, before the first bargaining session, was clearly wary of the owners’ claim that they needed a new deal. And the economic crisis was not a reason, not in Hunter’s mind.
“I would think in this economy, the last thing anyone would want to be talking about is a damn lockout,” he said. “Why? Because it could kill the business.”
Stern said, “The owners don’t want a lockout,” but did cite the economy as a reason for pressing for a whole new system. The players would see, too, there needs to be change.
“We are going to sit around together and say, ‘Look, guys, here are the facts. We have this great game. It’s very successful. It continues to be successful. It’s enormously fan-pleasing. There’s one little issue. It’s not currently profitable,’” he said.
Revenue is not growing at the same rate as the salaries of NBA players already under contract, Stern said. Gate receipts are softening and the NBA’s television contract is set to increase at 3 percent, at the same time that player contracts are increasing at 8 percent (for players going to new teams) and 10.5 percent (for those who stay with their old teams), Stern said.
Hunter says the real problem is that the NBA’s revenue-sharing model is the weakest of all the big leagues and that big-market clubs are making money while the small-market clubs struggle to keep up.
He has recommended the NBA adopt a revenue-sharing plan closer to the NFL model, in which visiting teams get a share of the home team’s gate. He also wants big-market clubs to share some of the money they get from local TV and radio deals.
“Our position is the players, they can’t be the fall person solely responsible for helping these owners in these small markets maintain viable operations,” Hunter said.
Going into bargaining, Stern seems to resemble an eager suitor, ready and willing to do anything for the players, including completely opening the NBA’s books. The players, Stern said, could actually be the party that comes up with solutions to the NBA’s current financial problems. We are so open to suggestions from players,” Stern said.
But at the same time that Stern is talking about openness and partnership, there have been shots fired across the bow by both sides, including a memo the NBA issued in July projecting a steep decline in the salary cap in 2010-11. Hunter returned the volley by publicly threatening the league with a collusion case. “If it turns out this is all a smoke screen, I intend to take action,” Hunter said last month.
Stern said that the league issued the memo, projecting a 2.5 percent to 5 percent decline for the season after next, something the league has not done before, “because teams were asking us what the story was going to be and we wanted to tell them, these are our best estimates.”
The rhetoric began in earnest this spring, soon after Stern and Hunter revealed at the All-Star Game that they had begun meeting privately to talk about collective bargaining.
Then in April, Stern made statements indicating that owners might be seeking a rollback in the 57 percent of revenue that players now get under the CBA. “I think even the 57 percent number is somewhat on the high side. So there’s tough negotiations coming,” he said then.
Hunter disagreed with Stern’s assessment that 57 percent was too high. “His position is that it is and our position is that it isn’t,” Hunter said. “The system works.”
In July, Stern did not want to talk about the 57 percent figure. Instead, he was touting the league’s willingness to be open in order to get a deal.
“The players will know more about the NBA’s finances than they ever wanted to know because we are going to complete disclosure,” Stern said.
Will the players have access to team’s profits and losses? “Absolutely,” Stern said. Will the players know NBA owners’ take? “Everything,” Stern said. Will the NBA fulfill the NBPA’s request for information in full? “Oh, yes.”
Because the NBA collective-bargaining agreement does not expire until June 2011, there is a question of what incentive the players have to meet owners’ demands for concessions now.
Stern said NBA players may want to consider a deal now, instead of two years from now, because now they could have what he calls “a soft landing.”
“They have the opportunity to consider changes that will allow a system change to be implemented over a period of time,” Stern said.