Sympathy for the devil

Sympathy for the devil

Virtually every media outlet is inline with players, and virtually every media person also sources their information from players, agents, and coaches and needs to maintain those relationships. The owners haven't really had any media support, outside of the players shooting themselves in the foot.

So let's give the devil his due, and allow me to play devil's advocate in an attempt to destroy every pro-player argument in existence.

The owners aren't changing a CBA

There is no collective bargaining agreement now. The past agreement ran for a specified time, and that time is over. While we tend to mentally view this new agreement as a continuation of the old agreement, it isn't.

There is no presumption of continuity. In many agreements that work for both sides there is continuity, but when an agreement fails for one side, they look to radically redo that agreement.

Both sides need to come to a new agreement that works for both of them. Both sides are attempting to do that now.

The players don't make the league. The league makes the league

This is really the core of it isn't it? The players would have you believe that you come out to watch their immense talent. That ownership isn't providing the product, but that the players are the product.

Afterall as @_BryanCrawford tweeted to me, "I've seen anyone on the streets of Chicago wearing a Reinsdorf jersey or the new Robert Sarver sigs. How about you?"

Haven't seen many Reinsdorf jersey's but I've seen plenty Marcus Fizer, Jamal Crawford, Kirk Hinrich, Ben Gordon, Eddy Curry, Tyson Chandler, Elton Brand, Jalen Rose, and Andres Nocioni ones. What do they have in common?

A few things:
1: They all say Bulls on the front
2: No one wears them anymore
3: No one in Chicago would have bought them if those players were somewhere else.

Let's face it, the vast, vast majority of fans root for the name on the front of the jersey not the back. Yes, we want the most talent on our team. Yes, we pay more attention with more wins and more talented players [well maybe not the die hards reading this blog]. Yes, we have love for the players on this team, but we love them because they are on this team.

Not convinced that it's the front of the jersey yet? I'll prove it to you in one sentence.

How many people in Cleveland are rooting for LeBron James? Fans aren't loyal to players, even the best player in the NBA, they're loyal to teams.

This isn't to say that the players aren't important. They are the most critical piece of the league. However, rooting for a team is also largely a matter of civic pride similar to rooting for your college team is a matter of pride. Does anyone watch college sports because the players are the best in the world?

No, because they aren't.

Would the NBA survive without the best players in the world? For a very long time, yes. We root for the jersey.

This isn't to say that there aren't massive revenue driving players, because there are. However, only the top 10-20 players really drive any real revenue. The rest aren't really providing any notable increase in revenue except what they can add to a team's success.

The league, not the players, generates the vast, vast majority of revenue

How much money do you think the players can bring in with their barnstroming charity tours? Anyone think they can generate 1/4th the revenue of the NBA? A simple one billion? Quite frankly, there's no way in hell.

That wouldn't take into consideration their expenses either, but just their revenue. The league creates the product. They create the circumstances that get people to come to 1400 or so games a season and watch it nightly on TV. They get you to care about Ronnie Brewer and Taj Gibson when you probably wouldn't drive to your local gym to watch them play for free if they weren't famous NBA players.

To further drive home this point, let me compare this to a simple advertising deal that virtually every web publisher is familiar with. You get 50% of the revenue from all ads you serve, someone else gets the ads for you.

On Bullspodcasters.com, my personal website prior to this blog, how much effort is google ads putting into my site? How much do they have to do with the product? Nothing, nothing whatsoever, outside of providing the ads. Yet they're taking half the revenue. People don't go to my site to see the ads, they go for the content I create.

The league is providing publicity for the players that they could not get on their own similar to google ads providing me with ads I could not get on my own. However, on top of that, the league is also investing massive amounts of money to do so.

They're paying thousands of employees. They're building stadiums to house games. They're providing in game entertainment to improve the experience beyond just watching basketball. They're spending money to market the hell out of the players in advertisements, and they're drastically improving the ability for the players to generate additional revenue via their own endorsements.

Google's not paying my hosting fees, marketing my site, or drastically improving my endorsement potential, but they're still getting half, and I'm happy to do it, because it's the best gig in town by far.

The NBA IS the best gig in town

Ultimately, the NBA has been so successful in its business plan that it has been able to pay these players three to five times what they would make anywhere else in the world if the NBA went away. Yes, certain players could do better, but if the world had to absorb 500 NBA players the total combined salaries of all those players for the next year would likely be under 500 million.

Many of us have been forced to take pay cuts, been laid off, or had other financial hardships in the past five years or so. How many of us are presently making three times as much at our present job as we could at another job?

Honesty time, if you knew you were making three to five times as much at your present job as you could ever hope to find elsewhere, and your company was going through a tough financial time and needed to reduce costs would you take a 15% pay cut? Don't know about you, but for me the answer is 'Hell yes!'.

The fact that the NBA has afforded such massive player salaries is a testament to its success at doing what it's been doing, but the players have become entitled over it.

The NBA owners need to manage their finances better

They sure do, and I know from working as a consultant for several NBA teams that they're looking to cut costs in all areas and will certainly continue to do so. I've seen this first hand. In fact, everyone who works for the NBA outside of the players, coaches, and senior management is working at a steep discount relative to what they'd make in a non glamor industry.

When any business looks to cut costs the first place to check is the largest item on the balance sheet. They had a 2.17 billion dollar employee expense in an area where the employees would be lucky to make 500 million working anywhere else. When asking the owners to manage finances better, isn't player expenses the first place they should look? Isn't it the most natural place to look?

The league is making cuts all over. They've laid people off, teams are cutting expenses in all other areas as well. The players, as an aggregate group, are the most overpaid people working in basketball [your true superstars are severely underpaid though]. They've already trimmed the fat from accounting, media relations, etc..

The owners are lying about their profits and are making tons of money

I know you can hide things on a balance sheet. I know you can maximize your losses for tax purposes. I know the NBA's stated loss of 300 million a year may be high. However....

The players union itself said losses were closer to 120 million. When you take into account that teams like the Lakers, Knicks, and Bulls are likely collectively banking around 150 million per year, that's a ton of money the rest of the league is losing.

You can't revenue share a 120 million dollar loss into a profit, and you can't convince the whole league to split up its money evenly either.

The players say the owners want guaranteed profits for every franchise, well there are no guarantees. The NBA could suddenly lose a ton of interest and everyone could lose money regardless of the players cut. The owners want to set up their businesses so it's highly likely they are profitable as does every businessman.

The only one with guaranteed profits right now are players who made over two billion last year vs a 120 million dollar loss for the owners [the 120 million figure coming from the players association not from the league]. Does anyone really think the players deserve two billion and the owners deserve negative 120 million?

By the way, interest and depreciation are real expenses

I misunderstood some of these expenses and what they were as well. I had an accountant email me and correct me on those views.

Yes, there are some fake expenses like amortizing good will, but interest on debt used to purchase a franchise is a real expense. Depreciation is taking a real expense and spreading it over many years. The owners maximized their tax losses for the government I'm sure, but the number they reported to the players clearly wasn't the number reported on their taxes.

Per Larry Coon's documents on the Nets and Hornets, those teams had 50 million dollar losses per year reported to the government. Clearly if most teams were doing something similar the total losses would be vastly, vastly more than 300 million per year.

The league and players agreed to have their financials independently audited. The players know the real value of what the owners lost or gained. They just feel the owners should operate on a break even level rather than a fabulously profitable one like they do.

You tell me, in your heart of hearts, do the players deserve to operate at a tremendously higher level of profit than the owners? As noted above, the owners are providing real value that the players could not provide on their own.

If the owners don't like they can just sell their franchises!

Sure.

If the players don't like the new CBA they can go play in Europe too.

Both sides have alternatives, but that doesn't mean it makes sense for either side to choose to exercise them. The best alternative for the owners is to massive change the CBA, and the best alternative for the players is to eventually accept the deal and continue to play in the NBA.

Also, there aren't so many people lining up to buy franchises that they can be flipped so easily. If there were, the league wouldn't own the New Orleans Hornets right now.

This is a negotiation

So my final thought is this. This is a negotiation. As a fan, you probably don't give a crap who wins. I know I really don't. I hope either side gives in to the other. It doesn't matter which one to me.

However, the owners have gotten a lot of bad press from virtually everyone who covers the NBA. Their position isn't so crazy as its made out to be. Your NBA owners generate the vast majority of revenue of the league through investment, marketing, and risk. Your players? Well, we love to watch them, but they're largely just swimming in pure profit.

Comments

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  • Most of your posts and podcasts about this whole lockout situation have been mostly in support of neither side while slowly leaning towards the owners so I'm not sure playing devils advocate is really necessary in your case.

  • Good, thoughtful article, Doug.

  • Nice article, you make some awesome points (that are analogous to our society and business owners in general)... I think this viewpoint needs shown more often even though I think both sides are being completely ridiculous.

    When I hear about Amare going around saying they've discussed starting their own league, I just laugh. These players obviously are way too full of themselves and have no idea how the NBA's marketing machine works in their favor. A grand sense of entitlement is every bit as much the problem here as is the owners wanting to bring the players to their knees.

    "The league and players agreed to have their financials independently audited. The players know the real value of what the owners lost or gained. They just feel the owners should operate on a break even level rather than a fabulously profitable one like they do."

    Well said. Keep up the great writing...Its much appreciated how you keep ideas coming in during the offseason (and now lockout). Thanks Doug.

  • I agree with your article for the most part, and the few quibbles I have aren't worth laying out.

    The best point you made is that this is a negotiation. The equities of the situation don't weigh heavily in either side's favor. There's no reason the players HAVE to have guaranteed contracts or for the owners to take $X off the top before calculating BRI. It's just a matter of negotiating skill and leverage.

    The fact is that the owners have more leverage than the players. There are really only two things the players have to lessen the owner's advantage: 1) decertification (not all it's cracked up to be) and 2) international play (see #1, and opportunities are starting to dry up). The courts are a crapshoot and a players league is a fantasy.

    All the Etan Thomas articles and "STAND" T-Shirts in the world aren't going to change that. They've likely seen the best deal they're going to get given their bargaining position.

  • Great article, but can you still play devil's advocate to the question on why it took the owners 3 months into a lockout until they finally provided a reasonable deal?

  • In reply to ChiRy:

    What's interesting about that is that even the "unreasonable" offer is FAR, FAR better than the players could get in any situation other than playing in the NBA. I mean even the "unreasonable" offer dwarfed the second best opportunity the players had by a million.

    That said, I think the owners hoped that by starting really low and then conceding to the point they're at that it would cause some momentum and force the players to move too.

  • In reply to DougThonus:

    As it should be though. Just compare it to the other major professional leagues in this sports crazed country. Bar far it would have been the worst CBA ever. That's not a resonable starting point, and everyone wasted 3 months because of it.

  • In reply to ChiRy:

    Sorry, meant to say "reasonable" there at the end of the 3rd line, :D lol

  • In reply to ChiRy:

    And isn't it true that owners of the 4 major sports make far, far greater profits than other league owners of the same sports around the world? Would the NBA be so great if they didn't have the best players in the world to begin with?

  • I dunno. I mean, I like the Bulls, and the league. But I don't have a real connection to the history of the league like I do with the NFL or MLB. If a second league started up with all the good players I would probably just start paying attention to that one, and only occasionally see what the Bulls were up to (much like how I deal with the Chicago Fire now). I certainly wouldn't watch Celtics or Lakers games in that scenario.

    The specifics of who and what I watch in the NBA are shaped by the league, but the fact that I watch at all is determined by the players.

  • In reply to Duke:

    The players tried to start up a mini tournament / competition in vegas and couldn't sell tickets at all.

    If the players could get a full league going and continually get all of the top talent so that it was just the NBA with a new name, then sure, maybe you'd watch that instead after enough time passed, but that's not a true alternative.

    Who is going to get the stadium deals for the other league? Who is going to front the advertising? What network is going to televise it? The idea, that in general you want to watch the best talent is true, but the players would have no shot in hell of starting another league, and if they did, they'd be lucky to make even 1/10th of what the NBA did this past season.

  • In reply to DougThonus:

    How have professional leagues done when they have had scab players? How is attendance at places where the talent level is low? Obviously, having the best players in the world is a major reason why leagues like the NBA are so successful.

  • I agree with Doug. The players are being stupid. There is no absolute in basketball skills. It is all comparative unlike a Track and Field in Olympics. If LeBron, Wade and Kobe never play a game again...will the league disappear or the game disappear?

    The middle class/lower class in the NBA are getting paid way too much for their skills. If you magically transplant the Spanish league to US and the NBA to Spain..., the Spanish league which came to US will thrive in a few years.

  • I hate to agree with Doug, but his flagrant use of logic and reasonableness in this post warrent it I'm afraid.

    Seriously thanks to Doug for his stead fast coverage, and passion for the truth throughout this whole mess. I refuse to regard him as part of the media for just that reason.

    In the end, two wrongs don't make (a) it/revenge right. Just as the players used to get a relative pittance as in all pro sports, they've now turned the tables with too much guaranteed income without the work/pressure to produce. Shortened guranteed contracts and less ridiculous over pays i.e franchise albatrosses around their knecks. I still say the players should get 50-52% of revenues/BRI whatever, but I'd go with only three years guaranteed. Also I'd shorten rookie scale to three years with restricted free agency after that. Anyway, it looks like the agents have had their bloodsucking/greedy way, and will now leave the players "clients" out to dry. Evil thy name is lawyer/agent.

  • I will always have a hard time feeling sorry for a goup of people who will still stand to make on average $3-4 million dollars a year to play a game.

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