A Three Way Jump Ball In The NbaAaron Bernstein
For more than a decade, the National Basketball Assn. has enjoyed peace and prosperity while baseball and football bounced from one labor catastrophe to the next. Now, the NBA, too, is teetering at the edge of a nasty labor battle.
The central problem is one most employers and employees would love to have: how to split up a fast-growing pie. Dissident players, led by superstars Michael Jordan and Patrick Ewing, think the new six-year pact the basketball players' union and the NBA reached in mid-August would undercut players' ability to sell their services to the highest-bidding team.
SHOWDOWN. Instead, they want players to decertify the union. The idea isn't necessarily to dump it permanently but to clear the way for suing the NBA on antitrust grounds, which players can do if no union exists. This would force owners into a better deal, they say, just as an antitrust suit against the National Football League scored football players a better contract a few years ago. Meanwhile, the NBA fired a preemptive shot by locking out the players.
Showdown time is coming in early September, when the National Basketball Players Assn.'s 425 members will vote on decertification. If a majority says no, players will likely approve the new pact, which lowers their share of total revenues to 48%. But if players say yes to a decert, the league will face a dilemma. It could sweeten the pot. Or it could continue the lockout, as Commissioner David J. Stern vows to do, and run the risk of a worse contract--plus potentially huge antitrust damages--down the road. Both sides would lose big if basketball ends up replaying a disaster like baseball's last year.
So far, the players' vote is too close to call. Some 200 players signed decert petitions this summer, but others think the strategy is too risky. "Decertification gets you nowhere but into a courtroom," says Utah Jazz guard John Stockton. Says Los Angeles agent Leonard Armato: "Labor strife causes irreparable harm to the sport, like in baseball." He's advising clients such as Orlando center Shaquille O'Neal to vote no.
Until now, the key to basketball's labor peace has been the salary-cap system agreed to in 1983. That pact limited total player pay to 53% of NBA revenues, vs. the 60% they had been getting. However, teams could use half a dozen exceptions to pay over the cap. The loopholes kept salaries climbing at double-digit rates, even as revenue growth slumped from 20% a year to less than 10% in recent seasons.
The result: Average salaries have quintupled in the past decade, to $1.87 million last season. The NBA argues that this amounts to 64% of revenues, way over the cap. Meanwhile, leaguewide pretax margins collapsed from a peak of $195 million in 1993 to about $70 million last season, says the NBA. "We can't afford to go on like this anymore," says Commissioner Stern.
So Stern proposed what he argues is a 59% salary cap, a limit on rookie pay, and fewer exceptions. And he got the union to back a so-called luxury tax on teams that spend beyond the new cap. But when dissidents threatened to decertify, the league rescinded the tax. In mid-July, the union agreed to the new proposal. But Jordan and company still balked and have continued the decert campaign.
Why are the dissidents still griping? They argue that the proposed system takes away so many salary-cap exceptions that it would undercut the free market for players, who can sell their skills to the highest-bidding team after three years. Fewer teams could bid top dollar for players they want. And players' ability to switch teams for a better deal would be curtailed. Teams also would have less room to maneuver, since they're already way over the new cap. "A fair deal begins with what we had before," says Chicago Bulls guard Jordan. "We won't go back from that."
The dissidents also don't buy the NBA's stats. The old agreement's definition of revenue left out income from luxury boxes, international TV, and arena billboards, which was either minuscule or nonexistent in 1983. But this revenue boomed in the early 1990s. The union even won a legal settlement against the owners for excluding this income.
Once these items are included, as owners agreed to do in the proposed deal, the numbers look completely different. Players got about 53% of the expanded revenues last season, the NBA concedes, vs. 64% of the narrower revenue definition. And the new salary cap works out to 48% of the expanded revenue. In other words, the previous system cut the players' share to way below the old 53% cap (chart, page 58). When salaries shot up to the cap last season, owners decided that 53% was too high after all.
The question players face is how hard to press for more. Union President Simon Gourdine embarked on a national tour in mid-August to drum up support for the new contract. But Gourdine's fear of playing the decert card left him looking weak after the dissidents' threats prompted owners to kill the luxury tax he had agreed to. Militant players argue that the NBA is just as worried as the union about winding up in a baseball-style mess. So the league will cave in some more if they decertify, they argue. The risk is that the owners may hold their ground. Fans may soon need lessons from their baseball brethren about how to survive without a season.