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I previously posted some optimism about the NBA lockout because the sides seemed to only be off by about 5%, a number which seemed quite reasonable. However, I put in the caveat that, if the owners were not going to use a flat percentage of BRI, but rather give a flat dollar amount, that things would be scary bad.Apparently, that's exactly what happened. Piecing together the basic information from both sides, the present owners proposal appears to look like this.
| Year | Total BRI | Player Share | Owner Share |
|---|---|---|---|
| 1 | $4,280,000,000 | $2,000,000,000 | $2,280,000,000 |
| 2 | $4,451,200,000 | $2,020,000,000 | $2,431,200,000 |
| 3 | $4,629,248,000 | $2,040,200,000 | $2,589,048,000 |
| 4 | $4,814,417,920 | $2,060,602,000 | $2,753,815,920 |
| 5 | $5,006,994,637 | $2,081,208,020 | $2,925,786,617 |
| 6 | $5,207,274,422 | $2,102,020,100 | $3,105,254,322 |
| 7 | $5,415,565,399 | $2,123,040,301 | $3,292,525,098 |
| 8 | $5,632,188,015 | $2,144,270,704 | $3,487,917,311 |
| 9 | $5,857,475,536 | $2,165,713,411 | $3,691,762,124 |
| 10 | $6,091,774,557 | $2,187,370,545 | $3,904,404,012 |
| Total | $51,386,138,486 | $20,924,425,082 | $30,461,713,404 |
| Old Way, | $29,290,098,937 | $22,096,039,549 | |
| Difference, | -$8,365,673,855 | $8,365,673,855 |
The owners have said they guaranteed a minimum of two billion to the players every year. The players have said they wouldn't hit 2.17B until year 10. I tried starting off at two billion with one percent raises to create this grid which is fairly close to the 2.17B number they claimed.
I assumed that the league would grow revenue at approximately 4% per year which has been what has happened over the past decade.
These two assumptions give us this table which yields a loss of 8.36 billion over ten years which is fairly close to the players claim.
When expressing some optimism over the idea of making a deal, I thought the owners might want to just split BRI on a near 50/50 basis. and keep that going for the next 10 years.
Such an agreement would cost the players a bit over three billion over 10 years, but the number would be somewhat manageable over the course of the agreement and would resolve the owners claimed 300 million loss.
Of course, the owners don't want to make up their losses and break even. They want to rake in money. However, it's widely believed, even by sources on the owner side, that the 300 million number is a flat out piece of BS.
The owners present offer would put the players at about 40.6% of BRI over the 10 years and at just a shade under 36% in the final year. 36% is simply way out of bounds of what exists in any other player/owner revenue sharing plan of any major sports league. The owners are trying to take the players to a place no other owners have done.
The owners' claim is that they're spending 76 million in non player expenses per team, per year to run their franchises. It's certainly possible this is true, I can't say I have a strong estimate on how much it costs to run an NBA season, but I will say this, the NHL manages to turn a profit of an average of 5 million per team on around 40 million in expenses according to Forbes.
If the NBA really can't turn a profit on nearly 76 million per team in revenue with what should be similar operating expenses then that sounds like a big issue in the way the NBA is spending its money more so than the amount of money they are taking in. [note Forbes also says the NBA is generating 6 million in revenue per team not -10 as well].
The NHL gives the players 57% of the revenues (with about 70% of the revenue of the NBA), the NFL is around the same in percentage with vastly more money coming in. The owners desire to push this down to 36% by the end of the CBA is simply patently ridiculous relative to any similar situation in sports.
If this lockout continues, fans will generally walk away. They won't care who is wrong and who is right, and in terms of negotiations, maybe there is no right and wrong. There's only what you can negotiate. However, that being said, we tend to look at similar deals to set precedence, and the precedence is that the players are right and the owners are wrong.
Of course, that doesn't mean the final agreement will end that way.
The real problem gets back to what the players said. The real problem is revenue sharing. If you take the Knicks, Bulls, Rockets, and Lakers out of the equation, the rest of the league is combining to lose an average of 600k or so a team.
The poor teams want more money, the rich teams aren't willing to give them any, the solution has been to take it all from the players. The rich owners wouldn't own anything without the poor owners, so they should be kicking something far more substantial here.
Granted, if I'm a rich owner, I'm not voting for that solution either. However, if I'm a poor owner, I'm arguing very strongly for some enhanced revenue sharing. Do they have the power to make it happen? Well, there are a lot more teams that would benefit from revenue sharing than would be punished.
We'll see what happens. We're not privy to what's going on in the owners meetings regarding revenue sharing, but until the owners agree to make up some of this gap themselves, it's very unlikely this thing gets done. Their stance of taking it all from the players isn't viable.
27 Jun, 2011
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Source: http://www.chicagonow.com/blogs/chicago-bulls-confidential/2011/06/so-the-owners-really-are-trying-to-destroy-the-players.html
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