45 million hard cap would net the Bulls billions

The owners as a whole are hoping to crush the players. I actually don't care what happens to the players salaries or the owners profits. I would care if the owners brought salaries down to a manageable level then lowered ticket prices, but we know that's not going to happen. Instead, they're going to keep any extra money they make.

The Chicago Bulls aren't one of the teams struggling to survive, but they are one of the teams that benefit most from crushing the players.

First, and most obviously, the profits.

The Chicago Bulls were banking 50 million in operating profit per year when they were terrible or making the first round. I'd imagine their profits last season were in the 70 million dollar range. A hard cap of 45 million likely locks the Bulls into an operating profit of around 60 million per season in a lottery bound year.

If the salary cap doesn't rise with league inflation [and the league's offer says it won't], they could easily be staring 200 million in operating profit a year in place in 10 years. The Bulls would easily bank over 1-1.5 billion dollars in operating profit over the next 10 seasons in this business model. The New York Knicks and Los Angelas Lakers will make even more under that model.

If the owners get their way in the dispute, and the league grows by 4% per year in revenue while operating expenses also grow by 4% and player salaries increase by 1% (which is what the owners offered before), the league collectively would be sitting at an operating profit of three billion dollars per year in 10 seasons.

100 million per year in operating profit per team on average. The poor franchise now that's presently losing money would likely only cash in on around 50 million per year of that profit, but those franchises are presently worth around 275 million and prorating their worth upwards only gets them to around 400 million. Besides the profit, this business model would probably double to triple to quadruple the value of owning an NBA franchise, even a crappy one.

For a marquee franchise like the Bulls, their valuation would likely go up to the two to three billion dollar range.

These are your owners claiming poor. These are your owners that have locked out the players. These are your owners that have taken basketball from us. They don't need a massive overhaul of the system to remain profitable with their franchises, they need better revenue sharing, and they need to stop allowing buyers to finance their purchases and then roll the debt onto the balance sheet.

Even looking at this from a pure profit perspective is ridiculous as it passes over the massive intangible benefits of owning a sports franchise. It puts you in a unique club that only a few people in the world can be in. It provides fame, notoriety, marketing opportunity, tax shelters, and more intangible benefits than just about any business you could imagine.

The players aren't poor either, and if the owners win, I'm not going to lose even the tiniest bit of sleep over the fact that the four hundred or so players need to collectively share are a mere 1.4 billion dollars. They'll be just fine to the extent that they don't piss away all the money anyway, but I'm not mad at the players.

The players aren't the ones who are on strike trying to get an unreasonable amount of extra money while already filthy rich. The players already offered givebacks to the league of one billion dollars over 10 years. The owners are the ones being unreasonable, the owners are trying a power play that would likely increase the networth of even the poorest owner by at least a half billion dollars over the next 10 seasons.

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  • I think I'm with everyone else in saying the new format for this blog is terrible, but I'm still a loyal daily reader. Should go back to the old one Doug if you can manage that.

  • "There has to be a creative way to address the problems," he said by phone. "If 20 percent of my salary were cut, it wouldn't change my life one bit. But at the same time, I want to support those guys who are fighting for everything they have."
    -Brian Scalabrine

    So don't cry for the players. They have the highest average salary in the major sports leagues by far.

    At the same time, the owners offer is ridiculous if only because it would guarantee the players hold out on the next negotiation. I'm hoping it is more posturing than anything else. But I think it is going to take a long time to find out.

  • The comments process sucks...no review, edits.

    I think this economic recession has to have an impact on the player's salaries. It is ridiculous for them to claim to give money back. Nobody is asking them to give money back from before. It is the money they are going to earn in the future. Ask them to look for a real job in the corporate world. Will an accountant/engineer get the same salary as he/she got 4 years back for a similar job? No..

    The only thing I would say the owners shouldn't do is lock the players into a 10 year contract. Put a new contract for 5 years and adjust based on how the league/economy is going. Anything can go down/up real fast. Look at the Cubs. They are not getting people into Wrigley. Was that even a thought 5/8 years back? Honestly, if I were a owner...I wouldn't want to pay 58% of BRI to the players.
    It has to be a bonus/incentive based payments rather than just hard contracts to pay Boozer 15 mil for being a sieve on defense. Have a reasonable number like 7/8 mil and the extra payments based on their play.

  • In reply to schaumburgfan:

    Actually, the owners want the $160M escrow money from this past season, that is money they earned.

  • In reply to schaumburgfan:

    Worth noting that the players, in the latest proposal, are being asked to give back money they already earned. The NBA is withholding (illegally) escrow money which was earned last year, and asking existing, agreed upon contracts be negotiated down by 33%.

  • In reply to schaumburgfan:

    Did I miss the news report where someone held a gun to JR's head and made him sign Boozer to his contract?

    "It has to be a bonus/incentive based payments"- you are aware that those are already allowed in the current CBA, right?

    So are non-guaranteed contracts.

    The owners want to be saved from their own stupidity, plain and simple.

    Of course, how many fans would have whined all summer long if the Bulls didn't sign Boozer because they wanted only 1/2 of his money to be guaranteed and the rest based on incentives? A LOT, and you all know it.

    As for the NFL's "non-guaranteed" contracts, it's written like that because the players get a huge chunk of their money up front in their signing bonus.

  • your postulation is about as ridiculous as this format. True, the NBA game would be made more fair if revenues were shared. But why should an owner who spends a whole lot more for the Lakers team have to share profits with the Kings. If you're going to share revenues, owners will have to buy part ownership into all the teams. That removes the competitive aspect that attracts investors, who usually wouldn't even invest in such a poor investment as the Kings. The NBA game is unfair due to both the players and the owners having too much money. Both of them rig the game with their money. Both of those situations could be fixed by taking away player salaries and revenue sharing. However, revenue sharing will undoubtedly scare away investors which is bad for the NBA.

  • The NBA needs to fear losing popularity to a European league. Is it possible that the players can try to threaten to play in a European league to gain leverage? They have a right to earn a living right? Wouldn't a court agree?

  • stern keeps talking about neigocating in good faith,and apperantly what that means is that the owners can do anything they want and the players should just take it.

    withholding the escrow money,which the players already earned is beyond unfair, its down right evil. its trying to force the lower-salaried players to agree to unfavorable terms just to get that money that they are relaying on to live off. its dirty,the players never tried to hold that money it was due to the owners. I love basketball,but I hate stopping evil.

  • you hate stopping evil? might want to reword that. Implementing a new CBA is going to affect current contracts no matter what year you do it. its not a good idea to let individual contracts run out before they are affected because that is chaotic let alone unfair to players who become free agents at that point. Scalabrine is probably the lowest paid player and he wasn't worried about a deduction in his salary. People are just greedy, both owners and players alike. My point of view is that the money is better off going to the owners because it makes the game fairer and because investors help this economy a whole lot more than the players do. I have no pity for people who are playing basketball for millions. Thats not a job. A job is something you have to go do every day of your life even though you hate it because its the only way to survive in this world.

  • I agree about the escrow or re-negotiating on the older contracts. But the point is ..in this economy the players have less leverage. They just cannot expect to get more than 50% of income as they are not shareholders. It is one thing to get bonuses but not guaranteed contracts. I can't think of any other business which runs like that where an employee/employees are guaranteed 55% or more of the revenues.

    As somebody talked about rowing...the NBA. was like crap before Magic/Larry and as far as I know personally, there are a lot of people amongst my circle of friends who watched the NBA last season who will go away from the NBA easily. They will not go away from football.

  • In reply to schaumburgfan:

    Many businesses spend half their revenue in salary for employees, the NBA isn't alone there, and every other sports league pays the athletes a similar amount of money in terms of the revenue they generate.

  • In reply to DougThonus:

    Yeah...but all other sports have more players to share that revenue. It is like comparing Microsoft and Boeing. Just for example, do you think just because Microsoft has fewer employees, they will get the same share of salary as Boeing.

    The owners are partially to blame for paying Rashard Lewis or Arenas. But, the system made them do that. Is Kobe worth 28 mil? I can't believe so many people support the players. If they are to get more money or a bigger share, then there has to be some kind of financial revolution in society where normal people get paid more also.

    If the players keep talking the same crap, then I guess NBA is going away for a while.

  • In reply to schaumburgfan:

    Normal people don't get paid more because people aren't paying $100 a seat to watch anyone flip burgers or sell widgets.

    And yes, some owners are stupid- how can anyone look at the amount of money an owner paid to Rashard Lewis, Gilbert Arenas, etc and not say that was a stupid business decision. How did paying those guys all that money help that owner sell more tickets?

    I just happen to think the current CBA is the best in all of sports. If you need to adjust the BRI% split that's fine, but the system in place now allows a smart owner to field a good team and a dumb owner to screw himself by over-paying guys who don't deserve it.

  • Players in a situation like this are always going to be at a disadvantage. Money doesn't go into situations where it has no leverage. The players can/will be forgotten about in a few years, the owners know that the team brand is what people remember, and if there is a lost season...oh well, the fans will come back when they get bored with other stuff. Since the fans will never really stay away, the owners have no fear of really losing anything on their investment. If there is no NBA next year, we will find something else to do, and if the NBA comes back the year after, people will be bored and buy tickets. There is a risk that the league will become unimportant to people, but a small risk.
    As for the players starting their own league, no way. That requires a lot of venture capital, a lot of cooperation, and a lot of business sense. There may be a few agents out there who can run a league, but for the most part the players would be bickering about who paid for what, what color uniforms to use, what color ball to use, how many rappers can perform at half-time, whose wife gets to sing the national anthem, etc.
    And nobody playing currently in the league is going to lay down their own money.

  • In reply to coachskiles:

    I don't think the players could run a league to necessarily compete with the NBA, but I think they could probably set up a mini league pretty easily pool the money and split it evenly amongst the players association in order to help fund guys during the lockout.

  • In reply to DougThonus:

    I guess that's what I am doubtful about: players pooling their money. I suppose a bunch of mid-level guys or rookies might do it, but alternatively the one thing I fear is a sort of "Stars" tour where a bunch of the big money guys just try to sell tickets to what is essentially exhibition basketball. You know, a "LeBron All-Stars" sort of thing. Ugh.
    Maybe the owners will realize that they're about to kill the goose that lays the golden egg.

  • Don, owners aren't stupid. if you can make millions then you must be a smart investor. Owners are forced into paying absurd salaries because if they don't then they don't get the players and they fall behind on ticket sales and lose money. Then when they do have to sign players for huge salaries they complain about it and then you complain about them being stupid for complaining about a rigged system.

  • actually don, in 2010 McDonald's overall revenue at $5.97 billion is almost twice the $3.5 billion the entire NBA took in.

    They had to sign Arenas because if you look at the Cavs whose best player is Baron Davis & Jamison you will realize that no one will attend their games. I would sign Arenas and Lewis any day in order to win games and attract audiences to bring in money. Otherwise, you're in a hole.
    Also signing players isn't just up to the owner. There are lots of smart people trying to build a team, including the players. The current CBA is the best for players getting rich but it is the worst for the NBA game. It allows players to rig the game. A lockout was the best thing that could have happened to the NBA.

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