Wednesday, November 9, 2011
If basketball means anything to owners ...
By Henry Abbott
... missing a season now would be sheer lunacy.
As the two sides make their latest negotiations push in New York, there will be real residual complaints from both sides of the table. But the idea that any of them could be worth shutting down the league is, given the mighty stack of player concessions to date, nutty.
It boggles the mind that someone who bought into a league in which players made 57 percent of revenues could prefer that a league in which they make 50 percent not exist.
And what's left to fight about anyway? On Tuesday, union leaders said they were authorized to negotiate further on money issues, where the two sides are incredibly close already. The union's last offer was that players would make 50 percent, while owners would dedicate another percentage point to programs for retired players.
The league was offering 50 percent, but with the potential for players to make a little more or less depending on revenues.
In other words, they are incredibly close.
Meanwhile, the union says there are five system issues in the league's latest offer that they cannot accept. They are:
- The rules governing sign-and-trade deals for taxpaying teams.
- The mid-level exception for taxpaying teams.
- The repeater tax, a special additional luxury tax for teams that habitually have high payrolls.
- "The cliff," which is a term to describe the penalty for going one dollar into the tax. In the old system, teams that were a dollar below the tax threshold paid no tax and received, typically, millions from the league. Going just one dollar over, in other words, would cost those lost millions, plus a dollar in luxury tax for every dollar the team is over. There's an effort to reduce "the cliff" in the league's proposal. Both sides agree, however, that teams that spend hugely on salary will pay significantly more tax than in the past with a new graduated rate system.
- Escrows, which is a question of what percentage of players' salaries will be held back during the season to settle up at the end and ensure owners and players, in each year's final accounting, end up with the proper percentage of basketball-related income.
The first four of those will concern only a handful of teams in a given year. Under the old system, six or seven teams paid tax in a typical year. Now the penalties will be stiffer, and -- informed opinions differ here -- many expect there will be fewer taxpaying teams than ever. In other words, four of the union's biggest concerns will affect a tiny percentage of teams. The league is just not going to be vastly different for owners based on these issues.
Not to mention, the league's interest is in evening out spending to inspire competitive balance. But the evidence that that would even work -- that even spending is the real key to parity -- is incredibly weak. The league could win or lose all of those points, in other words, and the wins would still go not to the teams that spent the most, but to the teams that made the smartest decisions in the draft and free agency.
Whether the Lakers spend $30 million or $50 million in luxury tax, however, or whether they can add a backup point guard now and again is simply no reason to shut down a league with many billions in annual revenues. And if the Lakers do spend mightily, the low-spending teams will share in the big taxes they will accrue.
The fifth issue, escrows, is not what it might seem, either. Sources insist that this deal will be carefully scripted to ensure that (unlike the old one) over the life of the deal players and owners will each get precisely the percentage of revenues they have agreed to. In the old deal, the most the owners could ever recoup from players was the amount escrowed in the bank. Under the new deal, if that's not enough, owners will make up the difference over time. So this escrow fight is fairly meaningless, too. It's mostly a question of whether the players' money ages in third-party accounts or their own, but it's not an issue of how much each side will ultimately make.
The union says these five issues add up to a big impact on the quality of players' jobs, most notably because limiting taxpaying teams' ability to add talent would take the teeth out of free agency.
Let us take them at their word.
For the owners, however ... it's impossible to see how any of these issues would be worth anything like the cost of a missed season, especially when the players are willing to pay for these concessions with even more cold hard cash.
And at some point, for the owners, the question becomes: If you don't enjoy and greatly value seeing people play basketball, why on Earth are you in this business?
Go to any investment adviser in the world, and tell them you want the best possible return on your money, and precisely zero of them will recommend buying a professional sports team. Sure, it works out well sometimes. But the risks are high, the big decisions are often beyond a team owner's control (for instance, with the league or local politicians). It's never anything close to the most rational investment possible.
This is an investment for people who, in addition to the normal things investors are looking for, also have a high tolerance for risk, and are either positioned to make money through affiliated businesses, or are ready to cover operating losses year in and year out. Those who just want the thing to make money every year ought to have stuck the money in a savings account.
But these owners did not do that. They chose the markets they wanted to play in, they chose the purchase price they wanted to pay, they chose the players they wanted to sign and their salaries. And now they are getting a massive reduction in those costs, to go with massive increases in revenue sharing. There is no good argument, anymore, for not letting those players play.