The league should pay player salaries

The league should pay player salaries

Every once in awhile, you can look at some numbers, and then have an "Aha!" moment. I had such a moment in regards to revenue sharing when reading this post by Coldfish on realgm.

The Post that started the discussion:

That little exercise really turned on a light bulb in my head in regards to the owner's position. When teams like the Knicks and Lakers get huge new local TV contracts, it actually hurts every other team in the current rules system.

Fish goes on to detail this thought in greater detail, but once stated like this the light bulb turned on.

The ability to grow revenue varies tremendously from team to team. The Lakers entered a 3 billion dollar TV contract with Time Warner recently. The Knicks can entertain similar money for their TV deal. Do some quick math and assume a 4% revenue growth per year, and that TV deal starts at 100 million this year.

100 million in revenue is more than some teams get in total.

The TV contract, and similar massive local deals, is the death of the small market team. The Laker's 100 million dollar per year gain means the average salary of every team needs to rise by around 1.5 million for each team once we split out the BRI% of the money, but the Lakers are the only one getting the money.

The same is true of ticket prices and any other revenue source that varies among the big market teams.

As the top tier teams grow their revenue at a rate the lower tier teams can't, it pushes up the league wide revenues and thus the league wide BRI requirement. However, the NBA wants to flatten out salaries which means that all the small market teams have to pay more without increased revenue.

The solution to this is surprisingly simple to fix the system issues entirely.

1: Each team takes the player BRI% of their revenue and puts it into a league pool and keeps the owner BRI% for themselves.

2: A hard cap is instituted at slightly above the BRI% with no salary matching trade rules, no exceptions, no lower soft cap

3: All player salaries are paid by the league.

Now teams need to set their operating costs based purely based on the owner's BRI% that they can generate locally. Player salaries are 100% decoupled from the team. They can no longer benefit by having a higher or lower payroll, because they won't see any extra money from a low payroll or lose money from a high payroll.

The salary cap will set the payroll at the right number for BRI, each team will have an exactly equal amount of money to pay players with no financial consequence by taking on a big contract. Now, all contractual consequences are merely in the on court product and whether or not you tanked your team and tanked your local revenue.

As such, local revenue generated vs local operating costs will determine profits and we'll never have to fight about player salaries again except that each side might want to change the BRI% at negotiation.

This system of revenue sharing is straight forward because it shares the exact amount in the exact correct distribution in order to allow every team an equal chance at players under a more flattened cap system.

It also guarantees, for the players, that flattening out the cap system won't reduce overall salaries by restricting top teams from spending because player salaries will be covered by the league. In fact, it will highly encourage each team to spend up to the cap each year as there will be no disincentive to do so.

The system puts every team on equal footing when it comes to putting a team together on the court. It stops high revenue teams from spending low revenue teams under the table, and it ties only local revenue vs local operating costs towards owner profit.

It's a one stop solution that if implemented would likely end labor strife forever.

Now we just need to get owners to agree to it.

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  • Doug,

    Sometimes it takes you years (e.g. Pjax/MJ vs. Krause) but you always end up with right opinion.

    Yes, one of the biggest problems if not the biggest of NBA finances is revenue sharing. No way, if I am the players union, do I give the owners 20% of my revenue unless they make strides to fix it.

    Cheers!

  • I don't understand. Can we use some numbers here? I'll use small numbers to keep it simple.

    Let's say overall league BRI for one year is $1000. Then let's say player BRI is 53% ($530) and owner BRI is 47% So then the $530 is divided evenly among the 30 teams, giving each team $530/30 = $17.66 to spend on player salaries.

    Your suggestion is that a team take its total revenue, take out $17.66 and put it in a general pool for player salaries? And the team is left with whatever it's left with?

    So if a team's total revenue is say $25.66, then it puts $17.66 in the general pool and is left with $7 for operating costs?

    And this is different from the current system because at present that team would take its $25.66 and 53% (~$13.60) would go to player salaries?

    So that means any team generating less than $33.33 will never see their 47% of BRI.

    Why would small market owners, or anyone generating less than the average BRI agree to this?

    Under this system the big boys still make all the money and the small market owners would make less than they currently do (assuming they're above water).

    Is the idea that small market owners would agree if they could only see the light and realize that this flattens player incentives to bail for big market teams, thereby allowing them to be competitive with the actual prospect of growth?

    But if the small market teams do manage to be competitive and grow they'd just be screwing themselves because it would increase overall BRI and their slice of the pie would never get bigger as a percentage of the big market teams. They'd just make more money -- and maybe that's fine.

    This would essentially tell owners that there's a fee for the privilege of owning a team, but it's not a flat fee, it's a fee based on the percentage of league-wide revenues. So for all but the big-market teams that fee is likely to be way over half of the revenue they generate. On the other hand they're competing for players on a level playing field so they have an opportunity to generate more revenue if they mange personnel well.

    I don't know, that's a hard sell, especially to well-run small market teams because they'd make less money under this system. Perhaps the argument is that if you're a well-run small market team it's because you got lucky with players and it's not sustainable.

    Do I have your, and the owner's arguments, right? Let's not even consider the prospect of players' objections to a salary cap.

  • In reply to bfranke:

    You are messing up my argument.

    Let's say BRI% is 50/50.
    Total BRI is 1000
    Lakers make 100
    Kings make 20

    Lakers contribution to the pool is 50.
    Kings contribution to the pool is 10.

    Both teams get 16.7 million to spend on players (500/30).

    Lakers profit is 50- their operating costs
    Kings profit is 10 - their operating costs

    The present system with a hard cap would be similar to what you describe where each team would pay a near even amount of revenue.

    The advantage to my system over other revenue sharing plans is that teams can't use the revenue sharing money to take as profit. They are forced to either invest it in players or lose it.

    In this scenario, the players might accept a hard cap, because every team will have incredible incentive to spend up to the cap since player revenues are paid by the league not the individual team, they'll have no incentive to not spend the maximal amount they can under the rules.

  • doug, i actually like this idea. the owner's of big income teams like New York will still make a larger profit, as they should be since they invested more initially. But still it doesn't give them a competitive advantage to pay higher salaries than other teams. a hard cap is still necessary though, to prevent the players from stacking teams. and even then, a hard cap may not stop the highest paid. greedy players will take the highest salary offered to them. gluttonous players will take the trophy.

  • In reply to mepeterser2451:

    Well I have a hard cap in the system, and it is necessary to work a hard cap into this system. The beauty of the system is how it should make a hard cap acceptable to players.

    It should provide perfect competitive balance.

    I would remove all contract limitations in this system as well.

    In that new scenario, if LeBron wants 40 million that's fine, someone will likely pay it, but his team will have a lot less room to build around.

    It would create parity of opportunity, parity in terms of methods to build a team, and allow all markets a reasonable chance to make a profit.

  • Would the players be amenable to a hard cap in this sort of structure?

  • In reply to pinkizdead:

    no, players will never like a hard cap because it will always mean a decrease in salaries. one way to change that would be to, under a hard cap, create a max salary for stars so that the extra money essentially goes to poorer players and stars are prevented from taking pay cuts. or the better option, under any cap, force players to take the highest salary offered to them. no taking pay cuts, and because teams like Miami couldn't exist as is, mediocre players will see pay raises.

  • A little off-topic here, but if an Amnesty Clause does make it into the new agreement; do you think the Bulls would actually exercise it on Boozer?

    As an aside, there's a good article outlining actual progress over on Yahoo (http://sports.yahoo.com/nba/news?slug=aw-wojnarowski_nba_labor_talks_101911).

    Call me naive, but I believe this lockout will be over by this time next week.

  • In reply to brad73:

    Only if the team can use the amnesty clause at some point other than the first year.

    The Bulls aren't paying Boozer 60 million to not play. They wouldn't be able to replace him with anything noteworthy if they did.

    It would make the team worse and not save any money.

  • Isn't it true that Many championship teams and nearly all marquee teams spend well above the average. Consistently winning franchises with splashy deals like Dallas, Lakers etc. set themselves apart with spending on players. If all the franchises have the exact same payroll to work with, then it won't be long before teams like the Lakers, Miami, and Dallas will be not so attractive to TV deals because their teams just won't be significantly better then everyone elses. Parity will be way up as will overall ratings most likely, but the big boy franchises will take a major hit in their profits. Even with parity I'm not sure superstar layden teams wouldn't generate more revenue/TV ratings then parity in pro basketball/the NBA.

  • In reply to RoadWarrior:

    Big market teams will always have an advantage because players prefer to play in big markets, but it will be less than it is now.

    That said, I agree it could hurt revenues if you don't allow your big market teams to have an advantage.

  • This is sort of brilliant. Could you explain Step #1 a bit more clearly?

    "1: Each team takes the player BRI% of their revenue and puts it into a league pool and keeps the owner BRI% for themselves."

    You make it sound as if teams know their total year's revenue ahead of time and as if they will effectively pay player salaries up front, at the beginning of the year (not to the players themselves but to the league pool--presumably the players would receive monthly paychecks from that pool).

    Would team "revenue" and total "BRI" be based on the previous year's numbers and then adjusted at the end of the year as necessary?

    In any case, the major drawbacks to your plan seem to be flexibility (with no exceptions players can't control their destiny) and the possibility that true parity would actually decrease overall league revenue. The league has been at its most popular and most interesting when it's had dominant forces like the Lakers, Celtics, and Bulls, in different eras.

    Of course, just because that's been the precedent doesn't mean it is a transhistorical truth. The idea of having tons of solid teams (OKC, Clippers, Memphis, Denver, etc. plus all the powerhouses) is what made 2011-12 look so compelling.

  • The knicks sucked for the last decade and were into the luxury tax for a large portion of that time as well, I believe. They didn't lose much in the way of profits, did they? Dolan never claimed to be losing money, did he?

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