Today the NBA announced that the earth has shifted on its axis.
The long-awaited new TV deal has been disclosed. Although it has been anticipated for a long time, it still makes the eyes water to think about a $24 billion dollar deal. It makes deep-pocketed people all over America think one thing today: Why didn’t I buy a team 5 years ago when I could have paid only $200 million?
With the disclosure of the details of the contracts, many things become clear. First and foremost, we can see that the last CBA negotiation was not about recouping claimed losses of $300 million. It was about lowering the players’ share of revenue in anticipation of this rocket ship blasting off. The lockout was timed perfectly in a recession, allowing the league to cry poverty by securing the largest givebacks in league history.
This new agreement makes the current CBA obsolete and GUARANTEES that the deal gets blown up by the players in a couple of years. There is no way that they can sit by and let all of the new revenue flow into the owners coffers while salaries and benefits are stunted by a deal made during a period of cutbacks aimed at helping the owners reach profitability. That much is certain.
The flip side of all this is the creation of new problems caused by this embarrassment of riches on both sides. I had the good fortune to sit down with NBPA Executive Director Michele Roberts today. I found her to be a delight to speak with. She is very sharp and is committed to strengthening the union by bringing the players together. We discussed the new deal and the impact that it might have on that effort.
Historically when the league has a jump in revenue, many new questions come up.
• Should some of the money be put into a forced savings for the players?
• How much should be peeled away and put into increased benefits?
• What about a piece for retired players programs like lifetime health care? After all, every player will retire someday.
In the past when revenue increased markedly for the players, the concept of sharing went out the window as players and agents positioned to get theirs.
Michele is very focused on the “good problem” of too much money. Bringing the players together means minimizing the opportunities for infighting. Clearly increasing revenue by such a large amount has the potential to cause a big rift between the players currently under contract and the free agents-to-be. It is a time bomb waiting to go off as certain players see their salaries leapfrog other players’.
Michele is very aware of this fact and will be also spending a lot of time examining the CBA, figuring out how the players lost so much ground over the last 15 years. Be prepared for the players to look for an increase in their piece of the pie for the first time in about 5 CBA’s. So she is facing two direct challenges arising from the new deal. The first is how to ensure that the players get the appropriate share of the revenue while also making sure that the group doesn’t become divided chasing after the money. That is the surest way to weaken negotiating leverage.
Is the public ready for a league with an average salary approaching $10 million dollars a year? It hardly makes the players sympathetic figures in the public’s eyes. That makes it all the more important that the union portrays a united front. They won’t have much in the way of public opinion sympathy.
Michele has her work cut out for her. That’s for sure.
MORE COLUMNS FROM DANNY SCHAYES
Danny Schayes is a Director of Business Optimization at Intensity and a leader in the business of professional sports. Schayes frequently advises sports organizations in complex business matters that include contract negotiations, pricing strategy, marketing optimization, and executive leadership. Follow him on Twitter.