Sports Business: BASKETBALL
THE NBA: WHY PUSH MAY COME TO SHOVE
It faces hard bargaining with players. Threat to next season?
Let's face it: Despite some playoff excitement, this has been the year the National Basketball Assn. tripped on its own shoelaces. Low scoring because of play-their-own-game hotshots, the Latrell Sprewell incident, the possible end of the Jordan Era with no one to fill his size 13s, drug charges, and attendance as low as 15% to 20% in some cities. Why, even sneakers sales are off.
Once the model of a disciplined, lucrative league, the NBA now finds itself at a crossroads as it sweats a summer of heated collective bargaining and the possibility of its first work stoppage ever. It's ironic, but part of the reason the NBA has reached this point is a decision made over a decade ago when it found itself at another crossroads.KEY CLAUSE. The year was 1983, and the financially troubled league's future looked dicey. In a united effort, negotiators for owners and players hunkered down to fashion a rescue plan whose centerpiece was a salary cap. One of the cap's inventive features was dubbed "the Larry Bird Exception." Essentially, it lets franchises exceed the cap by any amount to re-sign their own players.
"At the time," says Russ Granik, who was then the league general counsel and is now deputy commissioner, "it was something the league wanted every bit as much as the players."
No more. The Bird Exception now is anathema to Commissioner David Stern and salary-conscious NBA owners, who blame the loophole for allowing player costs to spiral to absurd levels. And though they won't say as much publicly, eliminating or modifying the Bird rule will be a major ambition for management at the bargaining table.
Don't expect the players to roll over, though. "Certain issues will be blood issues, ones that the players will never concede on," says Steve Kauffman, a California-based agent.
Clearly, however, something has got to give. Under the current contract, the "soft" salary cap places restraints on what teams can pay their players. This season's cap was $26.9 million. With a new, four-year, $2.65 billion TV package in the bag, next year's cap, under present rules, would probably top $30 million and maybe even double the $16 million figure of just three seasons ago.
The pact now in place guarantees players 48% of "basketball-related income" (BRI) but says the NBA can reopen negotiations if player compensation climbs to 51.8% of BRI. It hit 55 this season. In March, the owners voted 27-2 to reopen talks.
A major reason is the Bird Exception, which, say league officials, has been ruinous for the profitability of many clubs. "No one anticipated the level teams would go to to keep their own players," says Granik.
Alternatives to the Bird Exception outnumber the tattoos on Dennis Rodman. Certainly, the league would love to keep the cap and eliminate the Bird loophole. Then, there's talk of a luxury tax levied against teams that spend beyond the cap--an idea that Stern floated two years ago. But whatever Stern proposes, NBA observers believe he will take aim at the widening economic fault line among players.PAY GULF. The NBA's middle class is vanishing, leaving fabulously wealthy megastars and roughly 24% of players who collect minimum salaries: $242,000 for rookies, up to $326,000 for veterans who have been on the same team at least two years. "My guess is Stern will increase the minimum salary (for veterans) to $400,000 or $450,000. In exchange, he'll want a cap on the high end," says agent Marc Fleisher.
Megasalaries may be manageable for such teams as the Chicago Bulls or the New York Knicks. For small-market clubs, however, they're killers. This season, only 6 of 29 franchises have payrolls under the cap--and none of them made the playoffs. Is something going to give? Fleisher predicts that next season will start on time, as it always has. "Stern has a good deal, not as good as he'd like, but a much better deal than he'd get from the present union leadership," he says. Adds Kauffman, hopefully: "I just don't see a work stoppage. Both sides are way too smart for that."
True, but one side may be a tad slicker than the other. Under the NBA's new deal with NBC and Turner Sports Inc., the league gets paid the initial installment of its rich deal even if it delivers no games during the first season.By Mark Hyman in Baltimore, with Jay Weiner in Minneapolis