The real story of the NBA lockout and the negotiations to reopen the stadium gates to basketball players and fans is lost somewhere between what is reported and what struggles to remain private between the players and owners. The complexity of the BRI and the dueling positions regarding player movement get short shrift as most of the commentators either empathize with the owners or chastise the players for believing they have at least a modicum of power in these negotiations.
Coverage of the battle between the owners and players is fraught with misdirection, misinformation and misunderstanding. ESPN is the leading culprit from the annoying, badly informed, hip-hopless faux-arrogance of Stephen A. Smith who waxes about the superhuman power of David Stern and the foolish opposition of players to the various sports anchors’ overemphasis on player infighting while the small market owners duke it out with James Dolan, Mark Cuban and their titanic ilk below the ESPN infotainment desk and out of public view.
Perhaps the biggest falsehood pushed upon fans by sports media is the notion that the owners’ offer (which has not been officially offered yet) of a 50/50 split of Basketball Related Income is a fair deal and the best offer the players, who are in a weak negotiating position, should expect. Let’s call this falsehood the “BRI Lie.”
The truth about the “BRI Lie” is a bit more complex, but worth getting a handle on if one really wants to know why the players should not agree to a 50/50 split and why the small market owners have been prepared for two years to lose most of a season to break the resolve of the group of nearly 450 players.
1. The BRI which is shared by the players and the owners is NOT, as stated in at least one ESPN report, all of the revenue received by the league. The BRI does not even include all of the basketball related revenue received by the league.
“BRI” is an artificial creation. The definition of BRI changes as the owners and players agree it should change and as sources of revenue change. In the most recent deal, the 2005 CBA, about twenty-five pages are devoted to defining BRI. In this agreement, the players are guaranteed at least 57% of basketball related income. Basketball related income includes the following non-exclusive list:
- Net regular season gate receipts
- Broadcast rights
- Exhibition game proceeds
- Playoff gate receipts
- Novelty, program and concession sales (at the arena and in team-identified stores within proximity of an NBA arena)
- Proceeds from team sponsorships
- Proceeds from team promotions
- Arena club revenues
- Proceeds from summer camps
- Proceeds from non-NBA basketball tournaments
- Proceeds from mascot and dance team appearances
- Proceeds from beverage sale rights
- 40% of proceeds from arena signage
- 40% of proceeds from luxury suites
- 45% – 50% of proceeds from arena naming rights
- Proceeds from other premium seat licenses
- Proceeds received by NBA Properties, including international television, sponsorships, revenues from NBA Entertainment, the All-Star Game, the McDonald’s Championship and other NBA special events.
BRI does not include the following:
- 100% proceeds from the sale of team assets or property
- 60% of proceeds from arena signage
- 50% of proceeds from luxury suites
- 50% to 55% of proceeds from arena naming rights
- grant of expansion teams,
- fines and compensation withheld in connection with suspensions
- revenue sharing (e.g. luxury tax)
- 1.35 million complimentary tickets
- insurance recoveries
- interest income
- any thing of value received in connection with the design or construction of a new or renovated arena or other team facility
- proceeds solely related to the NBA Development League
- proceeds from the use of team physical assets (e.g., team plane)
- There is no indication that BRI includes WNBA revenues which are the result of the value of the NBA brand.
One report indicates that the owners start the BRI discussion with $600 million that is taken off the top and not split with the players. Hence, the NBA owners are not proposing a true 50/50 split as fans anxious for a season to start may see it.
2. For the players to accept 52.5% of BRI is a huge concession. In the 2005 CBA, the players were collectively guaranteed 57% of BRI for salaries. In 1995-96, players’ salary share of BRI was at 53%, the lowest it has ever been and according to figures in the Journal of Sports Economics, the number was actually as high as 65% in 2001.
For the new CBA, the players have already agreed to surrender 4.5% from the 2005 CBA, by accepting 52.5% of BRI. This has been calculated as a transfer of $180 million annually and 1.8 billion over six years to the owners. However, the owners want another $100 million annually to cover what they claim is $300 million in annual loses.
In the last meeting on October 28th, David Stern presented the league’s position as 47%, willing to move to 50%. This was news to the players and Billy Hunter since they thought the owners were at 50% at the last session. While the media blames Fisher and Hunter from walking out on 50/50. The truth is that the owners were being disingenuous as they negotiated system issues with a false notion that 50/50 was already their offer. Billy Hunter and crew rightfully walked out when the discussion started at 47% because there was nothing to talk about if the owners refused to move beyond 50%. Any counteroffer would leave players negotiating against themselves.
In a recent tweet Glen “Big Baby” Davis encouraged the player’s to take 51%. ESPN reported the tweet as though it represented a break with the players’ union when in reality it could have been said that “Big Baby” was encouraging the hardline owners to come off their 50% proposal since the difference between 50% and 52.5% would put them roughly at 51%. The players never said that 52% was their final offer, they have said that they will not go to a 50% split which makes sense in light of the fact that BRI is a “net” concoction not gross revenues.
3. It is extremely difficult to arrive at the exact losses or value received for the NBA collectively and for each individual team.
The owners claim that they were $300 to $370 million in the red last year. According to the players the numbers from the league are fabricated between guesstimates and math magic. The NBPA has argued that if interest payments, depreciation costs and projected, not exact, declines in attendance revenue are taken out of the equation, the league should have at least broken even.
Arguably since the players do not participate in interest income, do not set loan terms for owners and receive no benefit from the sale of team assets, the players should not be held accountable for the owner’s financial management of those items.
Another wrinkle in determining owner losses and revenues concerns “related party transactions” in which NBA teams engage in a deal with another entity held by the same owner. This is most prevalent in situations where team owners also own regional sports networks. Team owners are notorious for undervaluing these related party transactions. It is not unheard of that RSN revenues are underreported by tens of millions of dollars.
For example, how much is the deal between MSG and the Knicks, both owned by Cablevision really worth? What is the revenue to the Knicks? Well, according to the past CBA, the deal must be valued at the same level of the Lakers deal with its local TV station? Isn’t that really less than the benefit the Knicks get from MSG which uses the Knicks as content constantly?
4. There is absolutely no proof that lowering NBA player salary shares will impact competitive balance.
The owners hard-line position at 50% is proof positive that they have little concern for the fans and small business owners impacted by a protracted lockout. The owners believe they will recoup whatever losses they sustain in the short-term in the over the course of a 10 year deal. They are certain, with the massive deal they have with ESPN, ABC and TNT, that the fans will return. However, as cover for this ambivalence towards fans, the owners contend that competitive balance will improve with a hard cap system or other system changes. To the contrary, studies have shown that cap systems do not have a greater impact on player shares of revenue than open systems, like that of MLB.
Perhaps the more important issue for owners seeking profitability is revenue sharing.
5. Generally, fans should not expect ESPN to provide, fair and balanced reporting on the NBA lockout because of its nearly billion dollar relationship with the NBA and reliance on NBA products and brand.
Do not be fooled — ESPN/ABC Sports are primarily sports info-tainment organizations. They are not news organizations with a primary concern for accurate and factual reporting.
ESPN and ESPN.com have been extremely slanted in their reporting of the negotiations. Consistently big news has been reports of fissure within the NBPA with a focus on tweets and interviews critical of labor leadership. The reporting on dissension amongst the owners has been less personal and intense. Relative to reports of Derek Fisher allegedly cutting a side deal with the NBA, the $500,000 fine of Heat owner Arison has resulted in very little investigation into the split amongst owners.
The truth is that ESPN has its entire body in bed with the NBA owners: the league’s deal with ESPN/ABC and TNT expires in 2016 after they agreed upon a $7.4 billion extension. ESPN profits from exhibiting NBA content on 17 platforms including digital platforms which are seen as a potentially very profitable area of development. In 2009, ESPN secured the rights to show games, programming and classic content in the UK and Ireland which fits well with both organization’s global expansions.
These deals, as described in James Miller’s and Tom Shales explosive book, Those Guys Have All The Fun: Inside The World of ESPN, were the result of tough negotiations where a forceful, loud and boisterous David Stern consistently succeeded in imposing his will on ESPN, in part because of long-time personal and business relationships with ESPN execs. With Mark Shapiro leading ESPN’s negotiating team, the deal was not wholly lopsided – Stern was unable to force Marv Albert on the station and the WNBA was relegated to ESPN2. However, Stern’s influence and oversight on how ESPN handles the NBA is in a word “omnipresent.”
It seems the truth of the ESPN/ABC-NBA relationship is lost on the players too as they do a lousy PR job of countering the owners’ hold on the media. The notion that the owners are focused on anything other than money and exerting power over the players has been successfully countered by David Stern and the owners. Thus far the players are not only losing at the negotiating table, but they are being beaten in public relations with lies and more lies. Eventually, they will need to strengthen their position by clearly presenting the truth to the fans.
Update: See the latest NBA Collective Bargaining Agreement Proposal or NBA Collective Bargaining Agreement Proposal 11-10-11