SBJ/October 17-23, 2011/Labor and Agents

NBA, players stuck on ‘system’ elements

Nearly four months ago, NBA Commissioner David Stern and his top lieutenant, Adam Silver, sat stoic in front of a press corps as they announced their intent to declare a lockout just a few hours before the league’s collective-bargaining agreement was set to expire.

“We had two goals in this process,” Silver said on that last day of June. “One was to create an economic system where all 30 teams could compete for a championship and … No. 2, that we would create a system in which every team, if well-managed, had the opportunity to be profitable.”

Fast forward to last week, when Stern glumly echoed the same message as he announced that the league was canceling the first two weeks of the regular season, the second time the league has lost regular-season games to labor unrest in the past 12 years.

“The issues on the competition side, in order to have 30 teams be as competitive as they can and … compete for a championship if well-managed, have separated us greatly,” he said.

Unless there is a breakthrough soon, expect to hear the same drumbeat from the league as the labor battle threatens to cancel even more games on the heels of what was one of the NBA’s most compelling season in years.

League officials said that the most recent talks focused on “system” elements of a new deal, not on the economics of how to divide $4 billion of basketball-related revenue that dominated the negotiations up to last week. Specifically, negotiators on both sides set aside the revenue split and as they tried to bridge major differences that have the NBA pushing to create a new structure to curb player spending while the union looks to keep the current soft cap system mostly intact.

“We have discussed the system and the system and the system … but we can’t close the gap,” said Stern said after last week’s labor talks failed to bring the sides closer to a new deal.

So now that the league has doomed the first fortnight of the NBA regular season, will the structure, rather than the economics, of any new deal remain the focus of further negotiations? Even those with history in such negotiations aren’t so sure.

“This is not about religion, it is about money, and the structural issues exist only as a way in deciding on expenses,” said Russ Granik, former deputy commissioner of the NBA who was at the bargaining table during the 1998-99 lockout, which caused a truncated 50-game NBA season. “There are dozens of different things you can do about the structure of a deal.”

It’s a key question that stands to shape the labor battle, marked by months of full-committee bargaining and small group meetings between the owners and the players. So wide is the gulf that both sides now have agreed to bring in a federal mediator to help bridge the differences.

Mark Bartelstein, a prominent NBA agent and founder of Priority Sports & Entertainment, said the focus on more on a basketball-related income framework during earlier negotiations was a way to create a sense that a deal was near, which he said would have helped the league push through structural CBA changes.

“The strategy was to get the BRI done and that would be the be-all end-all for a deal,” he said. “But you can’t have [the economic deal without a system deal].”

According to Stern, the league first proposed a hard cap similar to the NFL’s and the NHL’s salary cap structures. Then the league proposed a salary cap tax system that imposes a harsh financial tax penalty on teams that spend above a salary cap.

All were dismissed outright by the union as a version of a hard salary cap — the “blood issue” labeled by NBA union leader Billy Hunter.

“It is the league’s insistence on tax rates and restrictions which have the same adverse effects as a hard salary cap,” said Jeffrey Kessler, lead counsel for the National Basketball Players Association. “Unless and until this system issue is resolved, there cannot be a deal. The parties were much closer on the economic split, although still apart.”

For now, the economic split of the $4 billion in league revenue has the players proposing they receive 53 percent of basketball-related income, which represents a 4 percent drop for the 57 percent the players got in the expired CBA deal. Owners are proposing to the players a 47 percent share of the basketball-related income. Owners did float the idea of a 50-50 revenue split, but it was never formally proposed.

Owners also initially proposed that players re-signing with teams at a maximum salary, known as the “Bird exception,” would see big drops in annual increases from the 10.5 percent annual contract increase in the expired CBA while cutting the length of deals.

Owners have also proposed cutting the length and value of midlevel exception deals, which allow teams to exceed the salary cap to sign free agents based on the average NBA salary, which last season was $5.1 million.

But owners have backed off other early demands, including the elimination of guaranteed player contracts and the rollback of existing salaries in a new CBA. The owners have also modified their earlier proposal of a 10-year new CBA with the provision that players be allowed to opt out after seven years.

But as the lockout rolls on, both sides have hardened their stances as players begin to lose paychecks and owners begin to lose millions of dollars as games go unplayed.

“You have the situation where the lines are drawn publicly on both sides and to now give in will be very difficult,” Granik said.

Staff writer Liz Mullen contributed to this report.

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