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Thursday, October 20, 2011
The NBA clings to a fragile position

By Henry Abbott

Give them credit, they have been consistent.

The NBA owners have always said that they want two things from a new CBA: To adjust player salaries so that owners stop losing money, and to change some other aspects of the league’s financial underpinnings to make the league more competitive, entertaining and successful.

As the stakes get higher and higher the case behind that second part gets weaker and weaker.

“We think the data is clear,” deputy commissioner Adam Silver said in Thursday's news conference announcing the end of this attempt at mediation. “I know we've had lots of back and forth with people in this room, but we think that a team that spends $100 million on its payroll versus a team that spends $50 million is at a huge competitive advantage. It's not a perfect one-to-one correlation, but there's a huge competitive advantage that comes from the ability to spend more money. And there's a reason we believe why the NFL has been so successful from a competitive standpoint with a hard cap and a reason that the NHL has been so successful from a competitive standpoint with their flex cap-type system, which has a hard, absolute cap at the top of the band.”

That little line about “back and forth with people in this room” he said with a glance at me, and by no accident. I have been vigorously pursuing this concept with the league and others from the moment I first learned of it. I’ve talked to every expert they’ve ever mentioned on or off the record, as well as independent authorities.

And the more I dig, the more startling it is how thin the evidence is to support the league’s assertion that they can spread hope around the league with financial tricks. Limiting how much the Los Angeles Lakers can spend might sound like a good way to make the Sacramento Kings better, but I'm not sure it works that way.

Good teams generally spend

I accept that there is correlation between payroll and winning. There are plenty of exceptions -- for instance, the team with the best record last season, the Chicago Bulls, had a bottom-five payroll. But the fact is that payrolls on teams deep in the playoffs tend to be high and payrolls on teams in the lottery tend to be low.

The NBA is torching this season in no small part on the bet that there is not just correlation but causation. As in, that spending causes winning, and that if low-spending teams could spend more, they’d win more.

Think about bad NBA teams, though. The playbook is as old as the hills. If you don’t have good players, you trade away all the big contracts, hoard draft picks and cheap young players, then spend as little as possible to preserve cap space in case good players come along.

In other words, we all know that when your team is bad, you stop spending.

And the opposite is true. When the Cleveland Cavaliers had LeBron James, they spent like crazy to surround him with talent because that was their time. Small-market teams poised to win almost always pay. This is not like baseball, in which the poor teams can’t afford to keep the studs. San Antonio, Orlando, Salt Lake (Utah), New Orleans, Memphis … there is no NBA market so small it wouldn’t jump at the chance to pay a real-deal superstar.

Where's the precedent?

Especially devastating to the league’s case is that it has never worked before in any major way. I have pressed the league’s leading experts on this for evidence that a hard cap has ever improved competitive balance anywhere on the globe. The NHL recently instituted a hard cap, and but for a passing comment from Peter Holt on Thursday, it’s impossible to find anyone even at NBA headquarters who thinks that serves as a strong example.

They're similarly unable to come up with a better one.

There is a widely accepted -- even by both sides of this debate -- measure of a league’s competitive balance called Noll-Scully. The NFL has always had a great Noll-Scully score -- which has not changed noticeably with changes in the NFL’s cap.

In other words, this both defies a casual observer’s sense of how the league normally works, and has never worked convincingly in any other league.

In a recent paper, researchers David Berri and Martin Schmidt review the entire history of major professional sports in America, and all of the measures any leagues have ever taken to improve competitive balance. They did not find that any “institutional changes” made leagues more competitive (what changes there have been to parity in leagues they trace to other factors).

Schmidt and Berri aren’t outliers among economists either. Worth noting that the “Noll” in “Noll-Scully” is respected Stanford economist Roger Noll, who has written extensively about the competitiveness of leagues, and the anti-competitive effect of salary caps. Noll has testified against the NBA on the issue of salary caps in the past.

Who doesn’t love the idea of a league riddled with close games? All kinds of teams in the playoff hunt? I’m enthralled by it too. I have even had it explained to me how such a thing would have a dramatic effect on TV ratings and the popularity of the league. With the right system changes, I’ve heard, the league could be so much more popular that 50 percent of new BRI (basketball related income) could be worth more than 57 percent under the old system. These tweaks could be worth billions!

If that's so, why not get those billions with a much better solution?

If you're serious about competitive balance

Let star players earn way more. That's the solution. The Lakers are routinely used as the example of a team that outspends rivals. If Kobe Bryant and Shaquille O’Neal in their primes could both have earned their worth, not even the mighty Lakers would have been able to afford them both, and they would have made two teams really good instead of one team a three-time champion.

If the current Miami Heat were allowed to pay Dwyane Wade $50 million a year, they would have started that years ago -- and they’d never have had the cap room to lure LeBron James and Chris Bosh.

That’s a system that would really do what matters to make the league more competitive. It moves the stars around, which is the only reliable way to move the wins around.

There’s no risk of total salaries going crazy -- both sides agree players will continue to share a pool of league revenues, and both sides agree to salary caps and some kind of luxury tax.

But the league doesn't pursue this, of course, because owners like capping maximum salaries. (The union doesn’t push on this issue either, because if stars earned more that would hurt their bread-and-butter, the NBA’s middle class.)

Instead, the league asks us all to celebrate competitive balance -- so long as the pain of creating it is felt primarily by the players. When owners could do something real to make the league more competitive, like change the playoff format or pay Chris Paul far more on the open market, they lose interest.

Seems fishy to me, but I'm not the one they have to convince.

What does Billy Hunter think of the NBA's efforts to improve competitive balance? Is he excited to reap its rewards? Hardly.

"I think," he said Thursday, "it’s all about putting money in their pocket."