What owners, players want in new CBA
As we watch the sandglass of time expire in the existing collective bargaining agreement between the NBA and the National Basketball Players Association, there does not appear to be much hope of a resolution prior to midnight ET Friday. After negotiations between the two sides last week produced only modest concessions, the NBPA is awaiting word on whether the NBA will meet with it one more time prior to the agreement expiring.
Assuming no agreement, we await the possibility/probability that the NBA labor dispute will take the turn the NFL did: a lockout by the owners and an antitrust suit filed by the decertified players. To be clear, the NBA need not lock out the players upon expiration of the CBA on Friday and the NBPA need not decertify and file an antitrust lawsuit, although each has proved to be an effective tool in the labor law arsenal afforded the leagues and players.
Before getting to the issues at hand, let's look at what has gone on outside the negotiations:
On May 24, the NBPA filed an unfair labor practice complaint with the National Labor Relations Board as an opening salvo from the union, accusing the NBA of "surface bargaining": going through the motions of negotiating while planning on locking out the players regardless.
Interestingly, prior to the NFL lockout/decertification, it was the owners, not the union, who filed an unfair labor practice complaint, accusing the NFL Players Association of going through the motions of negotiation prior to their plan to decertify and file an antitrust lawsuit. On a track a few months behind the NFL, the NBA is dealing with the same arguments by different parties in a similar dispute.
Eyes on the 8th Circuit
The NBA and NBPA are obviously watching the legal and judicial proceedings of Brady v. NFL with great interest. So far, the 8th Circuit has ruled that the NFL lockout may remain in effect through the appeals process, and we are waiting for a ruling whether it would remain in place indefinitely. My sense is the 8th Circuit will continue to rule for the owners -- giving NBA owners a valuable precedent should they lock out -- but the court is standing down on its decision, as there is some momentum in negotiations between the NFL owners and players.
Although the NBPA could file in a different circuit than the 8th Circuit and have a much different result, a win for NFL owners would resonate with NBA owners.
NFL vs. NBA situations
In both disputes, the players are "playing goalie," trying to protect what they already had in their latest agreements and fighting off clawbacks from the owners. Both ownerships question the "bad deals" they made with the players several years ago, which is where these disputes are similar.
However, there are differences. The NFL has not said its teams are losing money, but that its teams are not as profitable as they once were. The NBA is saying its teams are losing money -- the league claims it is 22 of the 30 teams; the players claim that number to be less than 10 -- and has subsidized one of its franchises, the Hornets. And although the NFL salary cap is not a true "hard cap," as proration of signing bonuses creates extra cap room, the NBA salary cap is replete with "exceptions" that make it a very soft cap -- a yarmulke, if you will -- that the league is desperately trying to "harden."
There also are some differences in leadership. In football, Roger Goodell and DeMaurice Smith are negotiating their first CBA. David Stern and Billy Hunter have history and have been through this before. That doesn't necessarily make it easier, but there is a different dynamic.
Finally, although the NFLPA took the decertification route -- dissolving as a union to pursue an antitrust lawsuit (Brady v. NFL) as individual litigants -- it is unclear whether the NBPA will go that route, even though outside counsel Jeffrey Kessler is guiding both unions.
With that, here are summaries of the recent proposals and issues for each side in this negotiation that appears to be going nowhere.
• "Flex cap" of $62 million: This would raise the cap from the current $58 million, thus allowing teams to exceed the cap subject to certain (undefined) restrictions. The exact levels of the salary floor and ceiling, as well as which exceptions would be part of the new system, have not been detailed. However, the basic idea is that the flex cap is similar to the current system but incorporates a firm upper limit (and thereby eliminates the luxury tax).
• $2 billion-a-year guarantee: Owners are proposing to guarantee players $2 billion a year in salary and benefits for the duration of a proposed 10-year CBA. This represents a modest decline from the current $2.17 billion but allows owners to capture most of the gains from a growth in income expected over the course of the next 10 years, especially when new television rights deals are signed in the next five years. This would net the players a declining share of basketball-related income (BRI), estimated (by the players) to go from the current level of 57 percent to about 40 percent in 10 years.
• Keep escrow money: Owners want to keep 8 percent of 2010-11 salaries that has been escrowed in case the players' BRI share went over the 57 percent limit. Players view this as unreasonable, since they consider it money already earned.
• Reduced contract length: Owners are proposing a maximum contract length of three years for players signing with new teams (reduced from five today) and four years for players remaining with their current teams (down from six today). This might be more palatable to the players now that the owners have backed off their demand for unguaranteed deals; the deals will be less crippling with fewer years.
• Removal of sign-and-trades: This is another measure aimed at keeping players on their current teams. Presently, players can take advantage of "Bird rights" by signing with their current team and leveraging a trade, allowing them to receive the six-year deal with 10.5 percent increase from their current team.
Furthermore, the team losing the player usually receives some sort of compensation. For example, both Toronto and Cleveland received late first-round picks and large trade exceptions from Miami for Chris Bosh and LeBron James, respectively. And New York received three players, a second-round pick and a trade exception from Golden State in David Lee's sign-and-trade. With a hard cap, there is no use for this.
• Reducing rookie contracts: This is a lower priority for the owners and certainly not the issue that it has become in the NFL. Owners will seek lower rookie contracts, most notably for first-round picks, but probably not push this too hard.
• The expensing of franchise acquisition costs in teams' operating budgets: The dispute over the fundamental state of the league is principally over how much of the league's claimed $380 million loss is a result of acquisition costs, debt service, etc.
• Length of the agreement: The owners want a 10-year deal, while the players want only five -- which would coincide with the league's new TV deals.
• $500 million pay cut: Players are proposing a reduction of their income by $100 million a year for the next five years. They have made this concession to reduce the percentage of BRI that is guaranteed to them. However, they do not want change to the fundamental features of the current system: a soft cap, long contracts and fully guaranteed deals.
• Enhanced revenue sharing: The players believe the owners' concerns about competitive balance can be addressed by reforming the revenue-sharing system. This is the age-old issue in labor disputes: Players believe that looking within, not at themselves, can solve a lot of the owners' issues.
Currently, big-market teams (such as the Knicks, Lakers, etc.) keep all the revenue from their ticket sales and local broadcast deals. The gap between the big and small markets is so large that players believe it undermines the stability of the league and the competitiveness of many of the teams.
• Enhance sign-trade flexibility: Currently, teams over the cap can trade players only when their salaries are within 125 percent and $100,000 of each other. Players want this amended to a range of 250 percent to make player movement easier. To ease this transition, the players are proposing a change to base-year compensation (BYC), a designation awarded to players who receive large raises after their rookie deals. BYC players' value in trades is halved, which makes trading them more difficult. As with the 125 percent rule, players are pushing to eliminate this rule because it impedes trades.
• Reduce the age limit to 18: Players want to revert back to the pre-2005 rules, where players only had to be 18 years old to declare for the draft. As of now, they must be 19 years old and one year removed from high school graduation.
• Restructure restricted free agency (RFA): Teams currently have one week to decide whether to match RFA offer sheets. Players believe this length paralyzes bidders during a frenzied free-agency period and provides disincentives to pursuing RFAs.
• Change/create exceptions: Players will not support a hard cap, but they are willing to make changes to various exceptions. They will shorten the length of the mid-level exception (MLE), the source of many misguided deals, from five years to four, in exchange for adding a second MLE for each team.
• Deduct arena/construction expenses from BRI pool: This is another concession by the players, who agree that they should take some part in the expenses of building and maintaining state-of-the-art arenas. This is also a key issue in the NFL labor negotiations.
• Provide a neutral arbitrator for all on-court discipline matters: Currently, players can appeal to a neutral arbitrator only when they have received suspensions longer than 12 games.
Notable topics not being discussed by either side: length of season/training camp/playoffs; retired player benefits; draft order; playing rules.
Andrew Brandt, a former NFL executive and agent, is a sports business analyst for ESPN.
Follow him on Twitter @adbrandt.
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