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NBA Lockout Update: Sides are closer than they’re saying

by

By Chris Sheridan

NEW YORK — Here’s the dirty little secret about the NBA lockout, despite what both sides — the owners and the players — would have you believe:

They are a lot closer to a settlement than most people realize.

I know this because I talk regularly with a bunch of important people who tell me important things, and I am going to explain why I believe a settlement will be reached that will not only save the season, but also enable the NBA to have an “all is forgiven” honeymoon period (similar to what the NFL just experienced following its labor settlement) in which the frenzy of free agents signings, trades, training camps and exhibition games will make everyone forget all of the doomsday talk they’ve been hearing all summer.

First, some background. If you only listened to union director Billy Hunter, as NBA players were doing in late August while Hunter was touring the country giving status updates to his locked-out membership, you’d think the sides are currently $8 billion apart in their stagnant negotiations. That is the party line from the union.

But it is not entirely true.

Yes, under the 10-year collective bargaining agreement the owners have proposed, the gap is indeed somewhere in the area of $7-8 billion range.

But if you look at the six-year deal the players have proposed, which includes $500 million less in annual revenue (than what they would have received under the old deal) over the six upcoming seasons, the simple math tells a different story:

Over those six years, the difference in proposed revenues that would go to the players adds up to $2.97 billion.

That is still a significant amount of money, but it is nowhere near as significant as what is being put out there publicly.

Moreover, if you look at years 1, 2 and 3 of the proposals, the sides are a total of $870 million apart. (The players are asking for $2.17 billion in salaries and benefits in 2011-12, $2.33 billion in ’12-13, and $2.42 billion in ’13-14. The owners are offering a flat $2 billion per year.)

Or to put it another way, in a business that brought in $4.2 billion in revenues last season, the sides are only $170 million apart for next season.

Does that seem like an insurmountable difference that would justify the cancellation of the season? No — especially given the fact that neither side has said it has put its “last and best” offer on the table.

The gap in what each side is seeking financially in Years 4, 5 and 6 is more significant, and what the owners are asking for in Years 7, 8, 9 and 10 is not completely germane to the equation right now because the players have not indicated they would be willing to do a deal for longer than six years, and history shows the sides traditionally have negotiated six-year labor agreements.

Owners and players are scheduled to reconvene Wednesday or Thursday to set in motion a series of meetings that will determine whether the lockout is settled in time to save a full 82-game season. If the owners come to the table with an offer that promises more money than the flatlined $2 billion in Years 1-7 that they have been proposing, they’ll be getting somewhere. So that’s the first thing to watch for.

Another major sticking point, for now, is the owner’s desire to transition from the current soft cap system to a hard cap system in Year 3 of the new CBA, which would necessitate an unprecedented giveback, perhaps through an unlimited escrow tax, perhaps from an across-the-board salary cut for every NBA player, that the players would simply not accept. (If Hunter put that proposal forward to his membership for a vote, it would be rejected, he would be out of a job, and the sides would go back to square one.)

Also, a transition to a hard team cap in Year 3 would almost certainly necessitate the breakup of LeBron James, Dwyane Wade and Chris Bosh in Miami. You think the NBA really wants that?

So the Year 3 transition that the league is seeking is actually a red herring. But if there were to be a transition to a hard cap (or a harder team cap through a more punitive luxury tax system) in Year 5 or Year 6, it would allow teams a half-decade of long-term financial planning to get ready for the new harder-cap system. This is one of the areas where it seems the owners have no choice but to soften their current stance.

But here is the key thing, the two most important words to keep in mind as this lockout plays itself out: Aggregate dollars.

Right now, the owners have offered the players slightly more than $12 billion in total compensation over the next six seasons. The players are seeking just under $15 billion.

Somewhere in between $12 and $15 billion lies the settlement number, and they’ll get there one way or another. Once that happens, it’ll take only a few days to tweak other aspects of the CBA — pensions, the anti-drug policy, the draft, the age limit, group licensing — that have barely even been touched upon in negotiating sessions thus far. It would then take approximately two weeks to put the agreement into writing, and then the business would reopen.

So what does that mean in terms of a deadline to save the current 82-game schedule?

Here is a projected timeline that pushes things about as far as you can push them:

Oct. 1: An agreement is reached on aggregate dollars.

Oct. 4: All remaining issues are settled.

Oct. 5-19: The agreement is put into writing.

Oct. 20: Free agency opens and players already under contract are allowed to report to their teams.

Oct. 21-31: Training camps are held, and each team plays two exhibition games.

Nov. 1: The season opens on time, with three games: Bulls-Mavericks and Thunder-Lakers in a TNT doubleheader, along with Rockets-Jazz. 

I have been saying all along that there is too much to be lost by having a work stoppage that extends into the fall and forces the cancellation of games. And with the NBA coming off a fantastic season in which attendance, ratings and merchandise sales all skyrocketed, there is too much risk of punishing the product to go too far down the bumpy road the owners have chosen to take.

At the end of the day, they have too much to gain by making a deal that gives them a significantly larger share of the pie that what they were getting under the old deal. And lastly, all of the principle players in the negotiations are reasonable and rational men. They are not interested in destroying what they’ve built up over the past several seasons, especially in 2010-11.

So a settlement is coming, and I am here to tell you that it’ll likely come a lot sooner than most everyone else has been predicting. It’ll take a lot of back-and-forth over the remainder of September, but it can certainly get done when both sides can identify the middle ground and move there simultaneously.

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  822. The better talent gets the treatment they are going to because we love the game everyone gets paid.Why want more that is already coming.Just think of those across the world that has nothing and would love to have just a dollar of the billions.why take from the fans your gift that in many ways we pay for it. Have a HEART and stop making the fans pay more mentally. Let the men play the game all of

  823. I’ts about time both the NBPA and the owners of the 30 NBA franchises got back together at the bargaining table and get something done productively. We saved the 2011-12 NFL season, why not do the same with the 2011-12 NBA season, as well as future seasons in ALL four major pro sports leagues. No more strikes. No more lockouts. Let’s get the NBA labor deal done and get the season on track.

  824. When the lockout first began, I believed there was not going to be a ’11-’12 season. Now, I’m optimistic the season will begin on time. I remember the ’98 lockout and how miserable it was with no NBA. I tried to watch more college basketball but that just doesn’t cut it.

  825. Insightful piece, Chris. Surprised at the negative barrage.

    I would expect the NBA already has contracts written for any number of contingent possibilities. When an agreement in principle is reached, both sides will be combing a near-final contract within hours.

  826. Nice to see that you are being paid what you deserve in the basketball journalism business, which is nothing. You are a nothing, and I hope you find another career to take care of yourself and family, because you are a terrible basketball writer…

    • chris is rolling on his floor in his multi million dollar mansion laughing his *** off right now reading your ridiculous comment

      • Million Dollar House? I guess you have no clue what your favorite sports journalist gets paid. Most get peanuts except for a few.

        Chris Sheridan is a blogger who for 2 years was paid by ESPN to be a glorified lobbyist in the “Lebron to NY” campaign. When he failed at that task, ESPN threw him out on his keyster.

        I’m sure that Sheridan has made some cash in his day (ESPN probably paid him in the low 6 figures), but trust me, he is no where near the tax bracket of a Bob Costas or Chris Berman.

        The damage Sheridan did to the journalistic integrity of ESPN was unrivaled. He should have just wrote, “Lebron, come to NY and I will **** **** ****”

        • Did you forget he worked for The Associated Press for 18 years!? Don’t know how much money he’s made (and I don’t care) but it’s unfair to classify him as a “blogger”.

  831. Congrats on the new website! Great piece and for a change.. shows optimism and that the deal can get done. I’m looking forward to reading the new website. NBA Blogosphere > Big media outlets

  832. Great article. Look forward to reading you regularly throughout the hoops season. Good luck with the site!

  833. I just think the NBA is doing this just to bring more anxiety and excitement for the league, I myself is excited and anxious to have this season start and find out what kobe can do with mike brown as his coach…GO NBA till I dies…

  834. You know what? until I don’t have to spend 150.00 to see an NBA game in seats where I can actually see the faces of the players I won’t be supporting it.

    The NBA is a joke. I’ll stick to baseball where I can spend 50 on a seat and sit closer then the top row of an NBA venue.

    The NBA is a joke. They have an referee crew that lets the Paul Pierce of the world get away with murder and their punishment is based solely on who they like and who they don;t.

    When KG pushed a ref 3 TIMES and didn’t get suspended that was my last game watching. He also punched a guy below the belt and wasn’t suspended because they were playing the Lakers that Sunday.

    the NBA is fixed and I hope it dies.

    • You hope NBA dies? What kind of person you really are? I mean its one thing you hate NBA which is fine, and all but wish nba die is another. You know what? I think you should go see a psychology go get some help.

    • you’ll be dead soon and the NBA will still rocks with your grand children playing in the league LOL! Even for free I’m not gonna watch live baseball….

    • Dude you have emotional issues … maybe the nba should hope you die…how do you like that!

  835. Sorry, but in short you have no idea what you are talking about, Mr. Sheridan.

    It never fails to amaze me how lifelong sportswriters who have never been within shouting distance of a business deal in their lives feel they are the least bit qualified to opine on business matters.

    {Well, there is the desire to bring in some traffic for a new site, and there is the fact that traffic is probably going to be better generated by an article that provides hope to basketball fans who are desperate for good news, but naw, that wouldn’t have anything to do with it.}

    Mind you, I have no doubt that you talk to some folks who are important in this transaction, but (a) I highly doubt that you would be able to understand anything that might be conveyed to you in detail, and (b) I doubt that you would be able to discern when or how you are being used by the parties to get a particular view out there (assuming you were even interested in finding out when or how you are being used).

    The NBA CBA is as complex a document as exists in this particular sphere of collective bargaining. THe NHL CBA rivals it in some respects, but the plethora of exceptions and loopholes in the system, coupled with the haphazard manner in which they have been piled on top of each other over decades, has resulted in a dog’s breakfast of an agreement. The “aggregate dollars” issue is little more than a method for the parties to
    simplify the negotiation for sportswriters with no ability to understand the real issues. It is a red herring. The “aggregate dollars” are based on projections which may or may not happen, depending on a highly unstable economy.

    No, what REALLY, REALLY matters is the structure of the system. THe owners need a new one. The current one is and always has been unsustainable, plain and simple. The players’ challenge will be to try to maintain as many pieces of the old system as they can, and they will fight for each part, one exception and loophole at a time. When the time comes to re-write a new CBA with a vastly altered system, that will take months (a minimum of two), not a matter of weeks.

    As well, I would suggest that your expectation of a six year agreement is as weak as the rest of your “analysis”. With the general economic uncertainty, the trend is for parties to try to lock in a system for as long as possible and create as much certainty as they can in an uncertain overall environment. This is particularly the case when one is creating a deal which contains both certainty and flexibility (as is provided by a cap-system CBA). This is pretty standard business practice, and you would know that if you had ever done a deal.
    My advice to you, Mr. Sheridan: stick to basketball, and stay away from the world of business affairs. Basketball matters are your strength.

    • lol. maybe they should hire you. absurd that you took the first 2/3rds of the article to tell someone what they dont know instead of just saying it. loser.

      • Chris, his argument was poorly constructed AND did he ever attempt to tell what HE KNOWS, since apparently you do this for a living and Rapsfan does…Rapsfan, please never use the word “aggregate” again…thanks.

        • Mr. Sheridan does WHAT for a living? He is secretly a labour negotiator? He is secretly a businessman of any kind whatsoever?

          Thanks for the detailed response of a “poorly constructed” argument. Wow.

    • I’ve been privy to quite a few high level deals in the business world. I find it hard to believe it would take a minimum of two months to write a new contract in any industry given that they already have traded proposals.

      • Believe whatever you want. One need only look at the length of time it took to finalize the NHL CBA, once the parties began to negotiate. Two months is not unreasonable.

        Incidentally, one of my larger deals took 18 months to negotiate. I am currently in month 13 of another. Neither are collective agreements, mind you. It depends on the industry.

    • Rapsfan, your entire argument is built out of conjecture. You even start off with an insult built solely on conjecture. You would have people believe that because you know a thing or two about business that means that you have more knowledge of the proceedings than someone who is being fed inside information? You the basis for your entire comment is, well, baseless.

  837. Chris,

    You are the man. Thanks for the heads up. I’m booking my auction date for fantasy hoops at the usual spot. Good luck with the new site. I know you’ll continue to post incredible insights about the NBA.

    Eddie Buzz

  838. Do you really think the “system is broken” as the owners claim? It seems to me like their financial problems are a result of the recession; just like everyone else’s. They were already locked into many of these contracts with the players, but then when the economy tanked, their revenue base of sponsorships and ticket sales fell off and they still had the same level of expenses.

    • No, you’ve got it backwards. Revenues have increased over the past few years in the NBA. It wasn’t the growth they expected, but revenues did increase. The reason the model is considered “broken” by NBA owners is that expenses have dramatically increased, and revenues have only increased slightly. Whenever we consider NBA revenue, we have to remember that if it takes $.50 to make $1, the NBA will lose $.07.

  840. The owners in No way should give in on the hard Cap or even extending it to after 5-6 years and the guaranteed contracts need to go also. The Nba has to stand for as long as it takes to get those things done. No more players like Alan Houston, Eddy curry, and many others getting paid for not doing anything., and Currently Gilbert Arenas getting 17million plus for 6 points a game.

    • who limits Gilbert Arenas?

      His arthritic knees or Stan Van Gundy?

      6 points a game?

      He’s a scorer, utilized as some kind of ersatz point guard, limited by a neurotic nail biting ‘master of panic’ in SVG.

      Not saying that Agent Zero is the next (or even the last) Micheal Jordan, but there is a lot more to player production than ppg will indicate.

      Your post seems more based on bitter envy than logic.
      I can assure you, the player salary does not equate to how much it costs to watch it on tv or go to a game.
      Sorry.

      If money is such an issue, try asking your supervisor for a better shift, or ask to be transferred to fries.

    • No one put a gun to the owners head to sign those bad contracts. Just because a player asks for a certain amount, that doesn’t mean he has to get it. If the owners doesn’t want to pay as much as the player is asking for, then the player goes somewhere else. It’s that lack of self-control (and bad decision making in general) that has ballooned contracts to where they are today and regardless of whatever comes out of the new CBA, those bad businessmen will still be there to keep making bad choices so for them, nothing is really going to change.

      To me, this whole situation is similar to the bailouts for Wall Street. They made bad choices and then turned around and blamed someone else, letting the little guy take the fall. Granted, 5 mil a year isn’t exactly “the little guy” but millions compared to billions, the players are the “little guy”. Employees always take the blow whenever businesses get into trouble.

    • Owners CAN and do give non-guaranteed contracts now. They can have 2 years with a team option for the 3rd. It happens all the time. GMs will make bad decisions all the time. What do you want an idiot rule so a team can take back a stupid contract? If you are stupid you should pay the price. Gotta love these Nanny Capitalists.

  841. Your post makes plenty of sense Chris and hopefully the NBA Season will start on time come November. There is just one little crack in your logic, however. if the league ad its players were so close numbers wise, why did they put a lock out in place? Couldn’t it have been settled before it camer this far? That’s the way I see it. BTW, why did u leave ESPN? And for a big time sports reporter, I would expect a much better looking site.

    • Go read up on Bruce Feldman. While you’re at it, go read up on ESPN’s hypocritical policies and draconian-like censorship of their journalists. Then you might start to understand why people leave ESPN. Of course, things could have been different with Chris, but considering all of those before him in similar positions, it’s feasible to think ESPN’s policies may have had something to do with it. Also, don’t knock the presentation style. Why focus on the style when the information that could come out of the site is very likely going to be top-notch information.

  842. You said the same thing back in June about avoiding the lockout before July 1. You were wrong then, why should we believe you now? You’re speaking/reporting like a fan, I can go to any other blog and read a fans opinion. SMH

  843. Very well written piece. I have been optimistic from the beginning for basically the same reasons you spell out here and without the in depth number crunching you have done: There are just too many smart people on both sides that know how much is at stake to blow this.

  844. Personnally, I don’t believe either side. It’s simple, if their lips move they are probably lying.

    The one thing I will guarantee anyone is that if the season is cancelled it will hurt the players much more than the owners. The players are getting 57 % of the BRI and with no season there are many costs that the owners won’t have to pay. Also, many players will lose service time which counts towards their retirement. Yes, I know, with the money the players make, they should be set for life, but most aren’t because they spend like drunken sailors.

    For the owners any savings that can be negotiated would be amortized over the length of the contract, the players don’t have that luxury.

    Lastly, I keep hearing about breaking the union, but that is BS. The draft, salary cap, luxury tax and many other CBA rules are absolutely needed by the owners or they violate anti-trust laws.

  845. Bottom line: “there is too much to be lost by having a work stoppage that extends into the fall and forces the cancellation of games. And with the NBA coming off a fantastic season in which attendance, ratings and merchandise sales all skyrocketed, there is took much risk of punishing the product to go too far down the bumpy road the owners have chosen to take.”

    WELL SAID.. and that’s exactly why they need to solve this thing!

  846. “Good article but please change the background picture……..”

    Install Firefox as your browser
    Run Firefox and go to Tools, Add ons.

    Search for Adblock, install it.

    Right click on the background picture and choose “adblock this image”

    voila!

    …../off topic.

    As for the article itself, I believe it misses the point.

    The point is not where we are NOW (or next year) it is where the owners want to be in 10 years.

    NBA Franchises are low mobility vehicles (low rate of liquidity).

    It is hard to buy, hard to sell, and hard to move.
    Not saying team owners are in for the ‘long haul’, but their ownership picture is a lot different than a player’s for example.

    By careful accounting, they can shift the ‘losses’ from the lockout year to another year and thus avoid the tax hit (if any)

    The key thing is their expected windfall re: the new Tv deal.

    With players (hopefully) relegated to a flat amount (vs a BRI %) then this money would be all reaped by the owners, and it is SIGNIFICANT.

    In short, I think this article while optimistic is rather shallow.

  848. No, I really do think they want to break up the big 3 in Miami. They will win a ring next season or the year after, then the drama over the LeBron haters mostly goes away and the ratings behind it go away. LeBron frankly should have left before his second contract with the Cavs. Let me repeat that: He should have left that hellhole Cleveland and their ungrateful fans before he signed his SECOND contract with them. I think he gets 3 rings when it’s all said and done.

    I don’t think the owners are rational at all, they get taxpayer-paid-for facilities, charge insane ticket prices, get to basically control their venues, yet lose money? Sorry. Not buying the new “rational” ploy of His Holiness Stern.

    The age limit issue is actually a potential deal-breaker, fewer players in the NBA means they can’t just disregard the future like the NFLPA can. The rookies already make low wages in comparison. Also, there’s the factor of what happens with the D-League. There SHOULD be a one-team per requirement to help finally move the D-League to a true farm system, but that will take union blessing.

  849. If the sides are so close, why wouldn’t they want to publicize this and build goodwill with their fans, instead of constantly pushing the doomsday scenario?

  850. I had gotten the impression that the owners were the greedy, delusional ones, asking for way too much in negotiations. Then I heard Stern on the B.S. Report and he make it sounds like the players are completely irrational and unwilling to compromise.

    Thanks for your steady voice on the matter!

  852. Good news if it happens… I’m feeling a bit insulted that The NBA Players & Owners have only met twice since the lockout.One would hope that both sides seriously want a deal done, but it doesn’t seem that way. Let’s just hope that this is just a ploy to capture our attention and not just both sides being to stubborn

    • the figures add up even for a not mathematical person such as myself….makes sense to me…..the NBA would be stupid simply put if the agreement would not come forthcoming….I am talking on all sides as the bottom line , if there is no agreement period, then no monies coming in. All lose then.

  853. Great to finally see some optimism on the CBA talks/ lockout. Nice start to the new site.

    What do you see the agreement looking like? (Not just the revenue split but the actual CBA rules)

    I say we see some sort of bi-annual amnesty clause, a stricter soft cap (with a super luxury tax?), shorter contracts, a smaller MLE and looser trade rules (instead of the 125% rule, something like 170-200%).

  854. I’d agree that the owners are rational — at least insofar as their self-interest is concerned. I’d be a lot more comfortable about having a season if it was clear that no amount of absurd concessions the owners could gain from breaking the union would make up for the loss of a season.

    The fact that the owners have so wildly out of touch with their initial and subsequent demands doesn’t lend much confidence to a belief that they aren’t seriously looking at this situation and trying to measure out how much money they can possibly squeeze out of it.

    Basically, I could only come to your conclusions if I flatly ignored absolutely *everything* ownership is saying about their impoverished plight.

    But as odd as that seems, considering that their claims appear to be oversimplified, misleading nonsense, I guess you’re probably right.

    I wish they didn’t have to be so manipulative about it.

  855. I have said all along the owners have to forget that $2billion flat proposal which denies the players a % of the league’s revenue which has grown 40% over the last nine years. If the owners allow the players a deal where they continue to benefit from the league’s growing popularity, the players will no doubt compromise the 57% of revenue they are receiving today. So I definitely agree with the article if the owners accept the responsibility that they have to compromise their 2billion/year offer as well as the hard cap, at least for the foreseeable future. However your article did not address the owners issue with revenue sharing amongst the large and small market teams which I understand is also a significant issue.

  859. Thanks . . . this gives me hope for what should be an exciting season ahead. TX for keeping us in the loop!

  860. well i will belive it when i see it and feel it ,, right now for me , i dont think the owners care one way or another just like they been all but saying all along ,, and all the fans out here need to remember what the owners mostly this time around have been doing and saying ,, i have read and heard some owners say that if NO season happens that s fine by them because they will have NO payroll to pay for an entire year or more and for the fans ,,,, oh well they will come back to us in the long run !!!! thats the part that stays with me in my mind every time i hear these greedy owners and how they really feel about the fans ok !!! i love the nba but i dont like the way all of us fans are looked at by them ,,, without the FANS they would have NO league and NO money like they make now !!!

  863. This by far ….BY FAR…is the best article this BLAZER fan has read…and it comes from someone in the know….THANK YOU!!

  864. Thanks for the Input….Its sad how Billionaires and Millionaires are arguing or can’t come to an agreement on issues regarding Salaries….it leaves me wondering whats important in this world to many and that is $$$$

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