Owners don't want to deal, want to destroy players

So first, let's start off with the initial owners proposal:

According to NBA executives familiar with the league’s strategies, once the lockout is in place, the owners will push for a hard salary cap of $45 million, the elimination of guaranteed contracts and ask that the players swallow a 33 percent salary cut.

Yeah, so rollback of 33% of presently guaranteed salaries, roll back of 40% of money in the future, and no more guaranteed deals. That's making things reasonable. The players response?

“They’re asking for a deal that is worse than hockey’s, which is considered to be the worst collective bargaining deal in sports history,” Bonner said. “If that’s their best offer, we don’t have much choice but to fight for something better.”

Can't blame them there, this IS the worst CBA in sports history of the players agreed to it. It's completely ridiculous relative to any precedent. I know many of you will argue that the owners deserve a profit. Who am I to argue against this? However, the losses the owners are experiencing are generally not operating losses, but they are grossly exaggerated by a bunch of accounting tricks.

Besides mixing in player depreciation which is a way to double count salaries on the books, the owners are also throwing in loss on interest on their purchase price of the franchise as well as deducting a percentage of purchase price of the franchise on the books each year..

This you have another massive paper loss which isn't a real loss, combined with a real loss, but one that is derived purely from the owners debt to purchase the franchise and not from the operating income of the franchise itself.

In other words, the owners are completely full of shit in the way they are portraying the financial state of the league.

This would be like if I purchased the Bulls for a billion dollars that I borrowed from a bank and had to make payments of 100 million a year on. Then I charged that 100 million to the Bulls franchise and claimed they were losing 50 million a year even though they were making over 50 million a year in operating profit for the past decade.

That's what the owners are doing, and it's a load of crap.

Forbes has the actual operating profits of the NBA, and the 2009-2010 season had operating profits of an average of 6 million per team, not a 10 million dollar loss per team after the NBA's BS crap they are trying to sell to consumers while crying poor. There are many teams still with operating losses, but they are small in nature and would be resolved largely by revenue sharing with the behemoth teams that are banking massive money.

Essentially, the players stance about what the owners are trying to do is completely right. That doesn't mean they'll win though. In the end, the players lose far more than the owners by holding out. They have a very limited shelf life in terms of career, and if they lose a year of that it will hurt far more than the owners losing a year of business.

The best thing the players could probably do is decertify, sue the owners, and start up their own league that will last as long as the lockout is going on. The decertification may or may not work, same as the law suit. They'll generate a small fraction of the total money the NBA does in their own league, but they can probably generate enough money to keep the players out of the poor house and withstand a more lengthy lockout as well as provide a threat to the NBA if things go particularly well.

There are enough agents involved with the players to set the wheels in motion of a secondary league plan, and if for some reason the owners don't come back down to Earth, the best basketball players in the world playing against each other would still be fun to watch, and the threat of a rival league taking off while the NBA locks out its talent will force the NBA back to the negotiating table.

In the end, I doubt any of us care how much players or owners make. I know I don't. However, this lockout is caused by the owners. They are grossly, grossly exaggerating the negative state of the league in a sympathy play about not making money. They've chosen to take basketball away from us. I will root to get it back by whatever agreement can get done the fastest, but I won't forget which side caused the fight with their lies, negative media campaign, and bs.

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  • Unbelievable. Their greed knows no bounds. They've got good thing going, a successful, profitable league. Are they really going to jeopardize this to get even more money?

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    In reply to John Arguello:

    @john, yes, because the reality is when LEbron, wade and bosh came to miami, miam made over 14% increase in profits. This is what every big team wants, but the little teams know they can not get, so they want the players to be in a salaried situation that forces them to accept being on bad teams in bad markets so small team owners can make more profits

    but, moreover, what is your solution to this problem or at least an idea?
    here is mine
    http://www.associatedcontent.com/article/8186519/economic_divisions_and_extra.html

  • I thought they were just starting high so they could come down to meet the players half way, get a good deal for themselves and appear like they were being reasonable. But it's starting to look like the owners don't even care about appearing reasonable, they've decided to go all out and get everything they can.

    Only bright side is every game we lose is a game the Mirotic pick wins on, no downside of your guy being in Europe if there are no games on.

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    While people may not care about the owners, or players profit, the problem is that people are asking the players to pay the price for owners inefficient accounting and ownership. And, people are not offering ideas that are radical and actually solve things. Here is my solution, what is yours?
    http://www.associatedcontent.com/article/8186519/economic_divisions_and_extra.html

  • Is this the first time in America that accounting tricks have led to layoffs? Check with Enron or GE or Walmart. I am not a specialist in Accounting but there is probably a software( similar to what TurboTax does to take care of every kind of tax break) to use every loophole to show losses.

    I am sure the players are lying too. Worst CBA in history...that's an opinion(look at NFL's non-guaranteed contracts). The economy sucks and is probably one of the worst times since the Great Depression. And you are a season ticket holder. You know most of these games are over-priced. The players have to be realistic. The salaries are way too much for most of these guys. As much of a big basketball fan I am, I am not making any money from the NBA. If they end up striking for an year, they are going to definitely lose a lot of casual fans.
    But , the players actually might be lucky..if the economy improves by the time they come to an agreemnt, their bargaining stand might improve.

  • In reply to schaumburgfan:

    Schaumburgfan,

    I agree that it's a bad economy, and I agree as a society we pay athletes too much. However, the players in the NBA are paid fairly relative to the money they generate.

    I don't really care if the players get cut to smithereens in the CBA if they agree to it quickly, but the owners demands have made it so that we'll lose basketball. The owners are being unreasonable, that's why we won't have a season.

  • BTW, if there is a season for only 50 games...that's a dream come true for Thibs. He can play Deng and Rose for 48 min every game.

  • 45 million dollar hard cap? Wow, isn't that the big 3's salaries alone? Who the hell is running this circus? And no its not David Stern. In the NFL its Robert Kraft, Jerry Jones, and a few other outspoken pocket heavy owners, the Bears joke ownership not included. Looking at this situation from the outside I can't help but think there must be some capillary power struggles within the NBA owners camp. I can tell you right now, Mark Cuban isn't for a 45M cap, Micky Arison has three guys at 45M. JR? Buss? Dolan? Hell, even OKC's ownership might object. So who's running this show?

  • In reply to jgingeri:

    JR, that cheap bastard!

  • The site looks different and I'm afraid of change!

    Put on your lockout shoes...

  • In reply to WearShades:

    It's not just different, it's truly awful. I know it's out of your hands Doug, but if I were you, I'd be looking for someone else to host the blog. I'm on a 1024x768 resolution laptop most of the time, and over half the screen is dedicated to trying to push other Chicago Now blogs. It borders on unusable, and was just a horrible design choice.

    I haven't been posting much the last year, but I've been lurking and reading the blog as much as I can find time for. I'll be honest, I see myself cutting that back over time as I get increasingly fed up with the lack of readability.

  • In reply to msalivar:

    Well, some of that is rendering issues in Chrome. But the comment system is like stepping back to 2002 without threading or an ability to change from descending to ascending, and there are other rendering issues in IE as well. The only place it doesn't look totally amateurish is in Firefox, and it still limits me to about 2/3 of my horizontal screen space for the actual content I'm here to see.

  • In reply to msalivar:

    How ironic that this format change takes place as the NBA lockout begins. I feel like I've been locked out of my favorite blog!

    This new format is truly HORRIBLE. It is almost unreadable and it is completely impossible to follow a dialog between posters.

    DOUG, you've got to do something to correct this or host it elsewhere. Your blog is far too good to be subjected to this format. You're better than this!

  • This lock-out is strongly driven by the owners of the small market teams. I actually agree with LeBron by reducing the number of teams to 24 from 30.

  • Greedy, greedy, greedy. If they wanted to get a deal done, the owners would be open & honest about their revenue. But these are billionaries in the 1st place, and didn't get here by being kind, giving, honest people. Still, if they wanted to get a deal done, be honest, & give a fair offer right off ripey. But they won't. They'll try to pressure the players into accepting a bad deal, which means a long, long lockout. Ass holes.

  • Well... say goodbye to pro basketball for a while, probably the whole 2011-2012 season. The owners have been planning for this for over 2 years and are prepared. The players will eventually lose out, it's just a matter of how much they will lose?

  • Off Topic... but this new site layout is awful. Everything is about half the width, double the font and three times as long as it should be.

    Booo

  • So right now it's supposedly players 57% to owners 43% BRI? And now the owners want to flip the script? I can't see the product/players making only 43% of the revenue. Maybe 50-50 with guaranteed contracts down to four years, and a hard(flex) cap at $65 Mil. I do like the idea of bigger markets like the Lakers not being able to outspend the hell out of smaller markets. As for revenue sharing with the luxury tax gone I don't know what they'll do in that regard. I wish max contracts were at $10-$14 Mil with MLE's remaining at $5 Mil. Then take the ridiculous star/Kobe centered $16-20 Mil out years, and give some of that money back to the valuable team members that help stars win.

  • Excellent analysis here: http://dberri.wordpress.com/2011/06/30/taking-a-look-at-the-numbers-behind-the-nba-labor-dispute/ (maybe the only accurate basketball analysis you'll get from Dave Berri's site ...)

    The TLDR version:

    Since player salaries are fixed at a percentage of BRI yet team expenses are growing, it's simple mathematics that the owners are losing money because of bad business decisions that have nothing to do with what the players are paid.

    In fact if owner's keep growing spending like they have on non-player salary expenses, even if they get player payments down to 40% of BRI they'd still be losing money by the end of the CBA!

  • definitely thought the crappy new layout was a reference to the current look of NBA.com

  • The owners are doing the same thing to the players as movies studios do to their creative personnel-- hiding their profits to get rich.

  • The players need to quickly realize that the owners have no intention of negotiating in good faith. This is a pure power play and attempt to break the players. It is nothing short of an "act of war" against the players.

    I hope the players quickly shift to lawsuit mode - decertifying the union and filing a federal anti-trust complaint. The players need to bring the courts into play as leverage against the owners. The players have no other leverage to use.

    I understand the players may need to wait for a decision from their National Labor Relations Board (NLRB) complaint before they can proceed with an anti-trust lawsuit. The NLRB complaint was filed on May 24th. http://latimesblogs.latimes.com/sports_blog/2011/05/nba-players-file-claim-to-nlrb-about-unfair-league-negotiating.html

  • Actually, Doug. The real problem was caused by the players. They bargained for more than they deserve over the past decade. Now, these grossly overpaid players are taking pay cuts to stack teams and ruin the game. This is unacceptable and the only way to fix this is the lockout. The owners are making an absurd offer to counterbalance the players' absurd salaries. Hopefully, they will make a deal that is reasonable. Player's shouldn't be able to buy a team with their salary (Michael Jordan). Next thing you know Lebron James will have bought the Heat while still playing and will have the final decision on everything. I know that wouldn't be allowed, but when you have enough money you can pretty much decide things like they did when stacking the Heat. Pat Riley had nothing to do with getting the big 3 together.

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    The purchase part of a business is a legitimate expense. If the owners cannot make their loan payments, the bank will foreclose--it's the very definition of going out of business. If the owners aren't making enough "profit" over their operating costs to make the payments, they ARE losing money and they ARE in financial jeopardy. Mr. Thonus, your conclusions only prove that you are a writer and not a business person.

  • In reply to Mike Lyons:

    But why, then, did the new owner buy the team for so much in the first place? Clearly the market valued it at X amount, so that's how much the new owner bought it for, knowing the interest would also be at X amount. Is the argument that the owner misvalued the team when he bought it? And now the players have to pay for that mistake with a 35% cut in guaranteed contracts, among other things?

    This is in addition to Doug's point about allowing potential owners to purchase teams even where they have to leverage at astronomical levels. Again: how is this the players' fault? It gets tiresome that every argument about why the league is in bad shape comes down to the owners not being able to control themselves and make prudent business decisions.

    I guess the owners (and supporters thereof) would say, regardless of who's fault it is, the league is in jeopardy, and it's the salaries that are the problem. For the record, I don't believe the owners when they say the league is in such dire shape. But even if it were, I guess understanding "business" means that you extol the almighty market until your own crappy business decisions bring you to bankruptcy. Then you ask everyone else to pick up the pieces. (See, e.g., bank bailouts). And for this we'll all lose a year of Derrick Rose's prime. That makes me kind of ill.

  • In reply to tmleith:

    tmleith, i can't believe people are so clueless about this whole thing. it drives me nuts. You, an NBA fan, are saying these complaining investors are stupid and made a stupid mistake for investing in NBA teams. Are you an NBA fan who doesn't want an NBA?!! That is the most ironic, crazy thing I've read. It is true that they made a mistake investing in a business that overpays its workers, and is therefore not as profitable as it should be. Therefore, as YOU stated, the league is in jeopardy and the system needs to be fixed. Or would you rather nobody invested in the NBA and we watch these players play pickup games at the neighborhood gym, that can fit maybe 100 people. The argument doesnt come down to owners controlling themselves, it comes down to who will invest in this business if we don't fix it. If its not fixed, current owners will try to sell out at a cheaper price sucking up the loss. The cheaper value of the business always means cheaper quality product or limited supply. If I were an NBA fan, which coincidentally I am, then I would root for the owners 100%. It's the only way to continue building the NBA.

  • Mike, the NBA shouldn't allow owners in the league who can't afford to make payments on their debt. This theory would then make it okay for someone to borrow a billion dollars, buy an NBA team with it, then complain when they can't make 100 million a year in cash flow to pay off the debt, because that debt is a legitimate business expense.

    I do agree that they are real costs, but people who can't afford the business shouldn't have been allowed in the league as owners. That's the purpose of having a review on whether they allow someone to buy the franchise or not.

  • In reply to DougThonus:

    actually, a business in order to be a decent business has to be able to pay off the principal cost in the first several years. this is regardless of how wealthy the investor is. No matter who buys it, its a bad investment then. An investor is not there to financially support the NBA, they are there to make a profit. Mike Lyons is right that you aren't fully comprehending the business aspect.

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