Commentary: Nba Math: A Billion And A Half Says They'll SettleAaron Bernstein
On Dec. 8, when National Basketball Assn. Commissioner David J. Stern canceled the mid-February All-Star Game, it seemed to be one more sign that the standoff between owners and players would kill the whole season. Stern issued dire warnings that a new labor pact must be reached within a week or two to salvage it. But with bargaining at a stalemate, no resolution to the five-month lockout seems in sight.
Don't worry, the odds still favor a pro basketball season. Sure, both sides may miscalculate and blow it by not compromising enough. But if you strip away the rhetoric, it's clear that both parties' economic interests are best served by a last-minute deal. The fact is, players and owners alike know they can't win enough at the bargaining table to make up for a lost season. "We'd be tragically hurt if the season is lost," says NBA Chief Legal Officer Jeffrey A. Mishkin, who still insists the NBA Players Assn. must give in.
NOT BLINKING. What's going on now is the classic game of brinkmanship that occurs in most labor talks. Stern is trying to scare players into swallowing the owners' central demand--a lower cap on league-wide salaries. So far, players haven't blinked. They think a viable season could be mounted even if a deal is struck in mid-January. Privately, NBA insiders concede that Stern may go as late as Jan. 10 before pulling the plug.
In the end, both sides would be crazy not to make the painful compromises necessary to end the lockout. Players took home about $1 billion last season, or 57.5% of the league's $1.7 billion in revenue. This was much higher than the 51.8% level that had been anticipated when the last labor contract was signed in 1995. In late October, players agreed to slow the increases by putting a chunk of salaries into escrow. Owners would get a refund if salaries go over an agreed-upon cap.
The key sticking point: Owners want a 50% cap; players say they won't go lower than 60%. The difference equals some $200 million if NBA revenues hit $2 billion this season. Still, a midpoint compromise would leave both sides better off than if the season were canceled.
Take the players. If the union, for example, got the NBA to accept last season's 57.5% salary cap, players might forgo up to $50 million a year--nothing like the $1 billion in salaries lost if there's no season.
The math is similar for owners. They might lose less than players if the season never starts, since their costs are much lower if games aren't played. Still, they'd lose hundreds of millions of dollars, concedes Mishkin, especially since owners must repay the $465 million in television money they are receiving during the lockout. That repayment could come from lower payouts over the life of the contract or from made-up games. If they compromise with a 57.5% cap, owners would only be out $150 million--this year at least.
Admittedly, the fight is not just about this year. But a lost season could turn off fans for years to come. If that happened, owners and players might lose more than they ever could gain back. Which is why the game may soon move from the bargaining table to the basketball court.