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Sunday, November 23, 2014

Why the NBPA Is Playing Against a Stacked Deck

I thought now might be a good time to look into why a league that appears to be entering a renaissance is having such a difficult time reaching a labor deal.

THE PROBLEM

Consider the economic reality of the players. The NBA is often called a league of stars, and for marketing purposes it is. However the stars aren’t the only one voting, and when the players vote to ratify a CBA, the minimum-salary player’s vote counts just as much as Carmelo Anthony’s. The average NBA player salary is $5.15 million, but that number is skewed by a few players at the top making considerably more than the average hoopster. To compensate we can look at the median wage, which better represents the general NBA player. The median salary in the NBA is $2.3 million. $2.3 million might sound like a lot, but there are more factors to consider:

1) The Average NBA Career Lasts Five Years: Since most NBA players forego the years wherein they’d most likely be building a “normal” career, their earnings after their NBA careers are likely severely diminished. In other words a normal person would work into their 60s, but a basketball player is lucky to earn money in his 30s, and highly unlikely to still be getting a paycheck in their 40s. Yes, stars can go on to sell sneakers or underwear. And a few will be suited coach or work in broadcasting, but for most players, this is not likely an option. If we look at this median player’s salary spread out over the average worker’s forty years of income, that $2.3 million salary turns into a $287,500/year. That’s great money for most people, but it’s not filthy rich. In essence the average NBA player is more a six-figure salaried employee than millionaire.

2) Missing Games For a Better Deal Is Still a Net-Loss For Current Players: Let’s say you’re halfway through your five year NBA career. If you hold strong, the Player’s Association may finagle an extra 3% in salary, but that’s chump change compared to the 20% of your overall earnings you lose by not playing for a season. Almost without a doubt you are sacrificing income. Maybe it’s for a good cause, but how much is that good cause worth to journeymen NBAers?

3) One Season Constitutes 20% of the Average Player’s Career Earnings: That’s a huge sacrifice. Compare that to a person in an auto-worker union, who even if he strikes for a year only gives up 2.5% of his lifetime income (assuming a forty year career). To put that figure into context, losing a season drops the average yearly income of a player from $287,500 to $230,000.

4) Taxes: Because he makes most of his money in a short period of time, Mr. Median NBA Player will find himself in a higher tax bracket than the person with a longer career but the same lifetime earnings. He will send Uncle Sam up to a million dollars more than his dentist neighbor. Now his real-world salary is down to $200k/year. Again, that’s a good living, but not one on which you should be buying fourteen luxury cars

5) Poor Money-Management: As the article linked above explains, NBA players as a group are bad at managing money. This subject has been well-chronicled, but due to its importance to the current negotiations, it bears repeating. No matter how well the union has tried to prepare its players, many of them (Eddy Curry, take a bow) still live paycheck to paycheck and end up in financial trouble when the checks stop coming.

All these factors combine to put the NBPA at a huge disadvantage in negotiations. It is in a bargaining position that no amount of Dwyane Wade outbursts or Billy Hunter All-Star Game “soliloquies” can overcome. The owners know that the more checks the players miss, the more the union’s stance will soften. Issues like a hard cap and reducing bad contracts are mostly just smokescreen so that the owners can appear as though this lockout is “for the good of the game,” so that they can keep the pressure on the players until they’ve gotten the best deal possible.

THE SOLUTION

I am dubious about the claim that the NBA is losing money (1, 2, 3), but even if it is, the current offer from the players should more than make up for those losses. Moreover, with the renewed interest in the NBA due to the Heat’s big three; our Knicks’ acquisition of two stars; the rising careers of marketable players like Blake Griffin, Kevin Durant and Derrick Rose; and, as Mike Kurylo explained, the increased popularity of basketball among younger people, revenue has nowhere to go but up.

The problem is the owners benefit by making the lockout longer and even canceling games, up until a point. For instance if the players are clinging to an extra 3%, and the owners cancel 15% of the games this season, that means the common NBA player has gained absolutely nothing. (Common player plays 5 years and 3% * 5 = 15%). The biggest stars and players who are likely to play multiple years will gain by such a hold out, but not those on the short end of the spectrum. Hence among the players there isn’t consensus, which weakens their position, since some would take a lesser deal than others.

The owners know this & therefore are operating from a hard stance. (Steve Nash Tweets: “Why are people saying the players are asking for more money?” and “The players are negotiating to take less money & let’s be clear that’s not going to lower ticket prices, it just lines the owners pockets.”) And at this stage the owners are all together on this issue, because their interests are all being met here.

But the owners can only push so far, because the players have one tactic they can use to strengthen their hand: decertify the union. In the NFL labor dispute the players disbanded the union, and after some legal wrangling both sides negotiated a deal in time to save the season. By breaking up the union, the players can sue the NBA using class action lawsuits & challenge everything including the draft, the salary cap, restricted free agency, etc. Obviously this is something that could hurt the owners severely, if they had to openly bid for rookies and free agents without any restrictions. (see: The Dollar Auction for why owners would inevitably pay more than a player’s worth.)

Billy Hunter may not like what decertification suggests about his negotiating abilities. However, the hardline stance of the owners, even after the players have conceded to the owners a higher revenue percentage than that in any other professional sports league, is proof that the owners are trying to rig the game. The only way for the players to get their fair share is if they move the game to a casino where the league isn’t dealing the cards.

12 comments on “Why the NBPA Is Playing Against a Stacked Deck

  1. DS

    Jim Cavan (@JPCavan): edit was due. I am, however, totally willing to part with half the $50 for the story that’s left over after the registration fee and hotel room. That, or you can name the next assignment, and I have to do it, no matter what — with full, due credit.

    But seriously, thanks for planting the seed!

      

    (Quote)

    Hey Cavan,

    I can name the next assignment and you have to do it no matter what, right? Get a group together and “occupy” 34th St.

    Again, I’d do it, if it weren’t for the work thing.

  2. Jim Cavan (@JPCavan)

    Great stuff, latke — great breakdown of a very complex situation.

    Listening to Stat yesterday, I’d be lying if I said the though of a kind of renegade, players-run league wouldn’t be appealing. Not sure what that would mean in terms of leverage, but it would certainly put a lot of NBA writers back on the beat!

    DS: I can name the next assignment and you have to do it no matter what, right? Get a group together and “occupy” 34th St.

    Again, I’d do it, if it weren’t for the work thing.

    Wow, comin’ out guns-a-blazin’, huh? That’s oddly tempting. Although I’d be more inclined to “occupy” the NBA offices than MSG per se. “Occupy Ball Street?”…

  3. Jim Cavan (@JPCavan)

    To continue:

    Unfortunately, I think decertification is a legitimate option at this point. Now I haven’t read too much into what exactly qualifies as unfair labor practices in the eyes of the NRLB, but you’d have to think at least some of the league’s behavior — not releasing more detailed financials, bargaining in bad faith, etc. — might warrant action.

    Obviously, although that might result in a long-term fix for the players (and arguably the league as a whole), the months-long litigation process would likely end up eliminating the entire season.

  4. latke Post author

    Yeah, it’s true that for the entire situation to be resolved through litigation would take a long time. However, as has been pointed out (no time to find the link right now), players could sue owners for lost wages due to their unfair practices, so in the long run there’s a possibility that players wouldn’t lose any salary at all, although it would take them a while to receive it.

    I see decertification kind of like the NBPA’s version of a doomsday device ala Dr. Strangelove. If you have it and you speak convincingly of your willingness to use it, in spite of hte fact that it will cost everyone big time, it is an excellent deterrent and would keep the owners from acting as though they could walk all over the players. Billy Hunter refuses to even threaten decertification. My guess is that’s because were the union to decertify, he wouldn’t have a job anymore.

  5. Jim Cavan (@JPCavan)

    latke: Billy Hunter refuses to even threaten decertification. My guess is that’s because were the union to decertify, he wouldn’t have a job anymore.

    More than likely. Problem is the only critical mass you have on this front is from the agents, who aren’t exactly going to be win any PR battle themselves.

  6. taggart4800

    I have always questioned Sterns stance in all this. he has put an awful lot of work into cultivating the league and I can’t begin to believe he would be happy throwing this away by losing a season. I understand that he is technically an owner now but I am not sure his heart is in these negotiations. Maybe I am very wrong.

    Secondly I always thought the league were playing a dangerous game when they were pushing so hard that the agents got involved. Negotiating with sportsmen is one thing but negotiating with fellow business men is a totally different ball game, especially when they possess a nuclear option such as desertification.

  7. iserp

    http://espn.go.com/new-york/nba/story/_/id/7088249/amare-stoudemire-new-york-knicks-says-players-talked-starting-own-league

    This levels the field. If the top tier stars decide they are being pushed too far by greedy owners, they just can decide to start their own league. They would probably lose money, but so are the owners of the profitable teams by locking the season. A 8 / 12 league team with the top stars would attract lots of attention and TV interest; and the owners would face that they are killing the golden goose. At this point, it is more about pride than about money, since all the quantities disputed are pocket cash in the hands of millionaires (billionaires).

  8. rooster_douglas

    @3 not releasing detailed financial statements is not a ULP. Bargaining “in bad faith,” i.e. not bargaining in good faith, is almost impossible to prove. Legally, two sides can “bargain” for eternity, with neither side conceding a single issue, and still be negotiating in good faith. You literally have to be brainless to in order to commit a ULP by not negotiating in good faith. Outside of explicitly stating you will not negotiate over a mandatory bargaining subject, it is literally impossible to not bargain in good faith. A party can take what they’ve already offered and tell the other party circumstances have changed and offer them LESS and exceed their duty to bargain in good faith. Filing a ULP with the NLRB is exclusively a stalling mechanism for both sides. They never, ever are upheld, except in the most egregious of circumstances, and in the rare cases they are, nothing meaningful happens. Also, if the union decertified, they would lose their right to file a ULP in the first place, unless the NBA acted to thwart the players; attempt to unionize, or something similar. At this point in time, the NBA has a much stronger case for filing a ULP against the players than vice versa (based on their implicit threat to decertify if their demands are not met).

    The threat of decertification is real because it would force the NBA to negotiate with the players individually, rather than collectively, and it would threaten their antitrust exemption, but the NBA could delay this with litigation for at least 2-3 years, minimum.

  9. rooster_douglas

    And @4 the nba hasn’t committed any ULPs so the NBAPA won’t be getting any payments for lost wages. Not even close. The NBA could even take this a step farther and legally hire replacement players with impunity.

    And finally, decertification is not exclusively beneficial to the union. The second that the players decertify, the NBA can begin negotiating with individual NBA players, not just for the right to hire them to play but also for their merchandise and licensing rights. It is definitely a nuclear option; it would shake things up for sure, but it is definitively unclear which side would benefit more.

  10. rooster_douglas

    @ 10 highly, highly unlikely IMO. The main advantages to voluntary binding arbitration are that it is quick (compared with litigation or negotiation) and that it is cheap. It is hard to see the NBA owners, given their leverage and general attitude, taking the decision out of their own hands and letting a third party decide the outcome of the next 6-10 years of “their” league for either of these reasons, especially with how well the NBA is playing the PR game. Anything more than a cursory look at the dispute and the NBA’s demands don’t seem so reasonable. Further, the NBA would have to reveal most, if not all, of the financials they have been hiding.

  11. Brian Cronin (@Brian_Cronin)

    Yeah, and that’s the rub, right?

    What the players are asking for is closer to a “fair” deal and yet the owners are doing a fine job painting the players as the unreasonable ones.

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