NBA lockout: There's still time for a deal
The predictable gloomy forecast came from this week's bargaining session. National Basketball Players Association head Billy Hunter gave dire warnings to NBA players to be prepared to miss at least half the season. NBA commissioner David Stern said simply, "We did not have a great day." It appeared that any momentum was gone, and with it went any chance of the season starting on time.
Not so fast.
As with the NFL collective bargaining negotiations, the overriding issue is the split of revenue, from which all other issues flow. Despite the rhetoric, the two sides are moving closer on the most important item on the checklist. Three weeks from a real deadline, that is significant and should not be minimized.
As with any negotiation of this magnitude, much like the NFL, the devil is in the details. The NBA is insistent on a hard cap, or at least a significantly harder cap, as a way to achieve profitability off the court and competitive balance on it. Thus, in the NBA's view, the hard cap primarily affects both distribution of talent and distribution of money.
Let's assume the hard cap -- with little to no wiggle room through exceptions -- would be set at roughly $70 million, just below the current luxury tax threshold. This number is approximately $12 million higher than the present cap and where I would expect a hard cap to settle should it be instituted. Right now the salary floor is 75 percent of the salary cap, so it probably would be something similar in the new collective bargaining agreement, putting the team minimum around $52 million. How would this change the status quo?
The top four players on the Lakers (Kobe Bryant, Pau Gasol, Andrew Bynum and Lamar Odom) combine to make $68 million, so at least one of this core group would be jettisoned. The Heat would be able to retain their three superstars and the current supporting cast but would have roughly only $5 million in cap room to sign a lower-tier, starting-caliber player. These two examples illustrate that a hard cap could potentially distribute talent toward less talented teams (e.g., Kings, Timberwolves, Bobcats) with the advantage of cap room to spend. The Kings, for example, would have $40 million in available cap space (and $22 million that they need to spend), with the Bobcats and Timberwolves each needing to spend more than $8 million just to meet the minimum.
The NBPA's position is that were a hard cap instituted, non-marquee players would have to accept lower salaries and nonguaranteed contracts. This may be true, but it would depend on a few factors. Were the salary floor raised along with the cap ceiling, lower-budget teams, which will always struggle to attract superstar talent, would be forced to pay much more than they do now. This would flow through to the entire league, not just the upper echelon of players.
As I have noted about the NFL cap, the key to the cap is always the floor, not the ceiling. We know that traditionally aggressive teams will spend -- that will happen every year -- but players' unions need to fight for the mandate that the traditionally underspending franchises be required to spend up to a threshold. The NFL has leaguewide spending minimums this year and next year with team minimums that will trigger in 2013. Assuming that a new deal was accompanied by a new revenue-sharing system, a higher floor would have the same impact in the NBA. It need not create a two-class system of superstars and everyone else.
Also, adjusting the maximum salaries upward may actually have an effect of balance. Stay with me here. Although NBA owners want to lower the maximum salary, if the maximums were raised it would actually help ensure that teams could not fill out rosters the way that the Heat did a year ago, enhancing competitive balance by making it much more difficult to form "superteams." I have always felt that the true superstars who move the meter such as LeBron and Kobe are vastly underpaid relative to their value yet the cap system requires that to field teams alongside them.
The NBA-NBPA can borrow from not only their brethren in the NFL but also a system that some NBA owners are very familiar with: that of the NHL.
The NBPA argues that a hard cap significantly reduces the prevalence of guaranteed contracts, making players less secure and more like NFL players. The fear for the union is that teams would fully guarantee their top players, but with a hard cap restraining flexibility, teams would not be able to provide guarantees to a portion of their roster.
The NBA could require guaranteed deals as the NHL did in its CBA. Rather than locking owners into deals they signed, there is an "out" that may benefit both players and management. If an NHL team no longer wants one of its players, whether because his skills have declined or it no longer wants his full cap hit, it can buy him out for one-third of the total value of his contract (if he's 27 or younger) or two-thirds of the total value of his contract if he is older than 27. Players then can sign new contracts, enabling them to double-dip from their new and old teams. This could be a starting point for ensuring some security in the rank and file of the league. Owners would like the flexibility this would give them, and players should like that it would preserve guarantees at some level.
As I suggested last week, there is a path to a compromise that would save the season. Starting with the revenue split, reports are that the players offered a 53 percent split, which means they will reduce to at least 52 percent. They may change the calculations somewhat, but it's fair to assume that they'll get about 52 percent of basketball-related income, which would equal $1.984 billion this year. This is less than the $2.1 billion they earned last year but allows them upside -- rather than a "capped cap" should the league's finances improve when the economy rebounds and the league signs its next TV deal.
The next task is to figure out a way to ensure a proper level of competitive balance. For one, both sides agree that contracts for free agents are too long, so let's propose they agree to reduce the length of free-agent deals to four rather than five years.
Keeping star players
Let us next assume -- wishful thinking, I know -- that owners can agree to a comprehensive revenue-sharing system that allows all teams from the Lakers to the Bobcats financial flexibility to field legitimate rosters. The solution then may be to institute a system very similar to the flex-cap system the owners proposed in June. Perhaps then the sides would agree to eliminate the midlevel exception but increase and enhance teams' Bird rights -- to go over the salary cap to re-sign their own players. This would allow teams to offer their own free agents significantly more money than other teams could. To give these greater teeth, sign-and-trade deals would be eliminated, adding another element to ensure star players would stay with their incumbent teams.
The two sides should agree to a modified guaranteed contracts system. They should (1) mandate that all rookie deals are fully guaranteed; (2) require that any deal below a certain threshold -- perhaps the average salary -- would be fully guaranteed. This would protect those players who will never see huge paydays; and (3) mandate that any maximum deal can be fully guaranteed for only the first two years and, after that, only half for the remaining years. The deals that are truly crippling teams, like those of Gilbert Arenas, Rip Hamilton and Rashard Lewis, are not beneficial to their teams, the league or the rest of the players.
These are some of the main points I would incorporate in the new CBA. Obviously everything can be tinkered with, but I want to show that everything is indeed negotiable and that there's an easier path to compromise than many people would have you think.
We are weeks from the true deadline, and everything said for public consumption is now choreographed and scripted. The significance of the two sides being closer on the revenue split should not be understated. When we reach the point of reckoning about a hard cap (or much harder cap), the two sides need to think creatively to ensure a relatively equal distribution of talent and money among all 30 teams.
Andrew Brandt, a former NFL executive and agent, is a sports business analyst for ESPN.
Follow him on Twitter @adbrandt.