NBA Follows NFL in Locking Out Players After Failing to Produce Labor Deal

The National Basketball Association locked out players when their labor contract expired, shutting down the league after a season of record television ratings and near-capacity attendance.

With the National Football League locking out players in March, it’s the second time two major U.S. sports have endured work stoppages simultaneously.

“Maybe we can now really begin to negotiate,” union Executive Director Billy Hunter told reporters after three hours of talks ended in deadlock yesterday. “We’ve been waiting for the lockout, now there’s a lockout. Let’s get down to business.”

The work stoppage, the third in NBA history, began at one minute after midnight New York time, the NBA said in a news release.

“We didn’t see any options,” NBA Commissioner David Stern said at a news conference yesterday afternoon. “I’m not scared. I’m resigned to the potential damage it can cause to our league.”

The NBA and its players disagree over how to split money from a league that generated about $4.3 billion revenue last season. The league says it is losing $300 million a year and wants to tighten payrolls.

$5 Million Average

“We’ve made several proposals to the union, including a deal targeting $2 billion annually as the players’ share -- an average of approximately $5 million per player that could increase along with league revenue growth,” NBA Deputy Commissioner Adam Silver said in a news release last night.

The players say they shouldn’t have to give up income because of management’s mistakes.

“We can’t seem to bridge the economic gap,” Hunter said.

Hunter spoke after the owners and players’ union met at a Midtown Manhattan hotel yesterday without reaching a resolution. They’ll meet again within two weeks, he said.

“That was the closing agreement up there -- that we wouldn’t let the imposition of a lockout stop us from meeting,” Hunter said.

During the lockout, players won’t receive their salaries. They can’t use team facilities and won’t receive paid health care, coaching help and summer leagues. Teams won’t negotiate, sign or trade player contracts. The lockout can save teams money by allowing them to shut down or scale back administrative operations.

Furloughs, Layoffs

Stern said he was aware a stoppage would affect those who aren’t affiliated with either side of the dispute. No furloughs or layoffs from league offices are planned for the immediate future, but will be considered as time passes, he said.

“A lockout has a very large impact on a lot of people, most of whom are not associated with either side,” he said.

The NBA’s 1998-99 season was shortened to 50 games from 82 following a lockout, the only time games were missed because of a labor dispute. An off-season lockout in 1995 lasted from July 1 to mid-September. Training camps generally open in September and the season starts in late October.

The length of this lockout may rival that of 1998-99, according to Paul Haagen, who teaches contracts and sports law at Duke University in Durham, North Carolina.

“This could be quite lengthy,” Haagen said in a June 27 telephone interview. “If we’re talking into November or December, I don’t know, but that’s a distinct possibility.”

The NBA said in April that 22 of the league’s 30 franchises are losing money.

‘Broken System’

“The expiring collective bargaining agreement created a broken system that produced huge financial losses for our teams,” Silver said. “We need a sustainable business model.”

The union agreed that owners lost money, labeling the estimates somewhat inflated.

Following the owners’ 10-year proposal disclosed by Stern on June 21, Hunter said those terms left the sides more than $7 billion apart.

The players argue they shouldn’t have to pay because some owners mismanaged their teams, paid too much for them, are in too much debt or have unprofitable arenas, Haagen said.

“Their position is basically, ‘Look, we’re putting out a good product, people are interested, if you manage your affairs properly you’ll make money, and our job is not to be a welfare agency for the teams,’” Haagen said. “The other side of it is, ‘You can blame us all you want but if the teams aren’t making money, you guys are going to lose jobs.’”

Record Audiences

The 2010-11 season was the most-viewed in history for Walt Disney Co. (DIS)’s ABC and ESPN as well as Time Warner Inc. (TWX)’s TNT, the league’s national television networks, according to the NBA. It also produced the most-viewed playoff games on ABC and ESPN, while ABC’s broadcasts of the six-game finals between the Dallas Mavericks and the Miami Heat trailed only last year’s, when the Los Angeles Lakers topped the Boston Celtics in seven games.

Arena capacity was at 90.3 percent during the regular season with 21.3 million fans in attendance, the seventh straight season of at least 90 percent capacity and the fifth- highest attendance in NBA history.

Two major U.S. sports leagues have had work stoppages at the same time once before. Major League Baseball endured a 232- day strike from August 1994 until March 1995 that caused the cancellation of its postseason. The National Hockey League locked out its players in October 1994 and settled in January 1995, shortening that season to 48 games.

NFL Dispute

The NFL, the richest and most-popular U.S. sport with annual revenue projected at $9.3 billion next season, locked out its players on March 12. The players then sued in federal court claiming antitrust violations and wage-fixing. That dispute has continued for more than three months, endangering training camps that normally begin in late July. The NFL season starts in September.

Stern, 68, who led the NBA during both its previous work stoppages, is six weeks older than Hunter, who became the union’s executive director in 1996. The fact that this may be the final negotiations for both men could influence how things play out, Haagen said.

“Generally, psychologically in negotiations, it tends to make people bolder,” he said. “Then the question (for Stern) is, is the bold that you recognize you’re going to do a deal and you’re working together, or is the bold, ‘This is the time that we’ve got to do the restructuring.’”

To contact the reporter on this story: Mason Levinson in New York at mlevinson@bloomberg.net.

To contact the reporter responsible for this story: Scott Soshnick in New York at ssoshnick@bloomberg.net

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