The CBA and the Looming Lockout: A Primer
November 23, 2010
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Fellow Lawyer Guy over at Docksquad Sports put together this nice little primer on the CBA and how it is going to impact the league over the course of the next year. Abrar A. is a labor attorney, so I trust he knows what he’s talking about. It isn’t exactly in my wheelhouse, as I’m more of an attorney to the stars kind of lawyer* (and yet shockingly but ironically, I cannot get Angelina, George, or Conan to return my voice mails or Tweets).
Primer on the NBA Collective Bargaining Agreement
A few thoughts on this excellent piece:
- Nobody really knows how much money each team possesses, and how much each is making/losing. Stern claims he knows of this $400 million figure. Some professionals are dubious. However, I think it is more constructive to look at it from a macro perspective than a micro perspective. In the link above, the author notes that two franchises (Warriors, Pistons – two teams in areas that have well documented financial struggles) have been/are being sold at a premium. If they are truly in a sorry financial state, such financial structures would have accounted for them.
- Abrar uses the signings of players such as the Grizzlies’ Rudy Gay, Zach Randolph, and Mike Conley to illustrate teams signing players to outregeous contracts on one hand while holding out their other hand their empty bowl to Mr. Bumble for another helping of gruel. I think this is a valid way to look at it. Another way to look at it is to compare it to a venture capital firm that invests in young uncertain companies. The attitude is that sooner or later one of their risky endeavors is going to pay off and rake in the mother lode in the future, which will help extricate them from their previous misses. They are leveraging the present for the future. Of course the problem is a complete mismanagement of risk – in a declining economy, the likelihood of striking it big grows smaller and smaller, and in the end all you have in your hands is investments into little companies that want to make a better paper clip.
- It is a small note at the end, but one crucial difference between the NBA and NFL is that NBA contracts are guaranteed. These are the long term contracts that NBA owners keep hopelessly signing up for with marginal players, and it is from these that Stern is hoping to rescue them. They essentially cause a team to lock themselves into a position for 3-5 years with little to no opportunity to improve upon their state. In the NFL, guaranteed signing bonuses play a similar effect, but the difference is once the NFL team decides to cut a player, this dead money can be then amortized and they are free to pursue other players. It is vastly more flexible.
- Bill Simmons wrote this piece over a year ago. I believe him when he says he knows guys who “know things.” However, I have yet to see this crisis break open the way Simmons thought. I don’t know if it is a cresting wave or not.
- And yet, this piece of news from a year ago is not prognostication – it is a real and public debt offering.
- I don’t trust the numbers being thrown around. I don’t trust the panic that is being raised. But you know what? It may not matter. Stern is a master at dealing with labor relations, and he has two sides pitted against each other who are desperately lost without the other. The NBA is a player-marketed league, and as long as that is true, owners will continue to fall in love with average players like Rashard Lewis and leverage the franchise’s future on them. They will be their own worst enemy. On the other side of the coin, the 1998 player lockout proved that NBA players live a long-term unstable lifestyle. Lavish spending combined with bad debt and alarming numbers of children out of wedlock drain their ability to build equity and embrace uncertainty. Many live paycheck to paycheck. They can’t win. Stern will play them off of each other, and he is the only one who is going to win.
*note – I am not actually an attorney to the stars. And they still will not return my voice mails.