NBA Lockout: Is the 2011 Season No More Than a Hoops Dream?

Wednesday night around 9:00 p.m. Pacific Standard Time was about as close to the pinnacle of fandom as it gets around this sports-centric household. In a frenzied span of 180 seconds, we got to see the spoiler Baltimore Orioles eliminate the Boston Red Sox from MLB Playoff contention, the Tampa Bay Rays come from 7-0 down to defeat the New York Yankees (and seal the Red Sox fate), and watch the premiere of Sportfolio, Rick’s new weekly half-hour sports business program on Bloomberg TV.

Both the baseball and the talk show are getting favorable reviews this morning. The NBA lockout, which enters its 92nd day on Friday, not so much. NBA Commissioner David Stern is using increasingly dire language to describe the scenario for the 2011-12 NBA season, insinuating that regular-season games will be in jeopardy if no deal is in place by the first week of October and that planned labor talks Friday in New York that will likely continue into the weekend represent “enormous consequences at play” as the two sides try to preserve an on-time season opener.

This week’s talks ended on Wednesday after two days so negotiators could regroup before joining their respective contingents in Manhattan for what is perceived as the most important stretch of the lockout so far. Along with Stern, NBA Deputy Commissioner Adam Silver; Spurs Owner/NBA Labor Relations Committee Chairman Peter Holt; Billy Hunter, executive director of the players’ union; Derek Fisher of the Los Angeles Lakers, who is president of the players’ association; and some of the league’s superstars, including LeBron James and Kobe Bryant, are expected to gather in New York.

The fate of the NBA’s 2011 season has far-reaching consequences beyond players and fans. At stake as well are thousands of jobs around the NBA’s 29 arenas, public subsidies in several cities, and possibly a new arena project in Sacramento that would keep the beloved Kings in town. The lockout also has far-reaching international impact, as dozens of top players, including Bryant, mull whether to commit to overseas teams in the absence of a North American season.

The Key Issues: Not Icing, But Cake

The main issue of contention between the two sides continues to be the revenue split between the 30 NBA teams and the players.

In a sweet summation of the issues at stake, the New York Post reported on Wednesday that CBS Sports reported Ken Berger “bought a chocolate cake from a Queens bakery” that had a message written in icing: “Please split 50-50.” Berger reportedly had the cake “delivered to the 14th floor of the Park Avenue hotel in which the sides were meeting.”

While basketball fans can make all the Marie Antoinette insinuations they want about multimillionaire NBA owners, executives, and players, the fact is, the dollars at stake are hardly crumbs.

The NBA made more than $4 billion last fiscal year, but Stern claims the league still lost $300 million. Owners want to change the 57 percent-43 percent revenue breakdown that currently favors the players and establish a hard salary cap. And while they’ve shown signs of softening their stance this week, the sides remain at least $500 million apart. In last week’s negotiating session, the owners proposed that the players’ share of basketball-related income be cut from 57 percent to 46 percent. League sources said the players were offered a 48 percent share on Tuesday.

The owners also want a 5 percent reduction on all current salaries for this season, a 7.5 percent reduction in all 2012-13 salaries, and a 10 percent reduction in 2013-14 salaries, the source added.

The NBA also wants to limit the length of guaranteed contracts to 3 to 4 years, down from their current maximum length of 5 to 6 years. In this case, NBA contracts would look more like the less-guaranteed NFL deals than the more-guaranteed MLB ones.

Small-market NBA owners, finally, insist on including some device in the league’s next labor agreement to keep a superstar with his existing team—similar to the “franchise tag” in the NFL. Doing so would limit high-profile free agents from jumping to bigger markets, a problem that seems to plague the NBA more than other major sports leagues.

The players’ agents, led by power player David Falk, continue to play a role in defining what’s on the negotiating table—including pushing players to decertify their union, as NFL players did earlier this year. Many industry experts, including former NBA and MLB executive Stan Kasten, who appeared on Sportfolio this week, emphasize that removing the agents and their own agendas from the process would go a long way toward speeding up an agreement. Adds NBPA chief Hunter: “Some of the agents are hurting. … They don’t have money coming in. They have big payrolls. A lot of this is about the agents and not the players. We prepared the players to miss paychecks. Some of the agents, though, have acted out of their own self-interest. If something doesn’t happen, some are going out of business.”

NBA Players—Exo Marks the Spot

So far the body of NBA players remains unified—both behind their union chief Hunter and in the desire to keep their own bodies in ready condition.

“Our players are together, we’re unified, we understand the situation that we’re in,” Fisher recently responded to ESPN’s Jim Rome when questioned about the players’ resolve. “We realize that the lockout is owner imposed, not player imposed, and in terms of the news and the fracture, that really wasn’t the case. We had an opportunity a week ago to clear that up and make sure that we all understood where we are as a group. We accomplished that goal.”

Added Thunder forward Nick Collison to the Daily Oklahoman: “As players, we feel like we’ve come a long way. We’ve already offered significant givebacks, we just haven’t seen any movement from the other side. … We’ve come a long way. We definitely want to play. We still think the system we have in place works well for them and for us.”

As the lockout drags on, one thing basketball fans haven’t been denied is seeing their favorite players in action, as most have tried to keep in shape via a slew of exhibition games.

Last Sunday, exclusively streamed real-time video of The Battle of I-95, an exo featuring 16 NBA players at the University of Pennsylvania’s Palestra, including LeBron James, Carmelo Anthony, Kevin Durant, Chris Paul, and Tyreke Evans. James and Miami Heat teammates Dwyane Wade and Chris Bosh also plan to present a “lockout pro-am all-star exhibition” on Oct. 8 at Florida International University’s 5,000-seat U.S. Century Bank Arena. Other announced participants include the Knicks’ Carmelo Anthony and Amar’e Stoudemire, the Celtics’ Rajon Rondo, Thunder forward Kevin Durant, and Hornets guard Chris Paul. The teams will pit Nike-sponsored players (James, Bosh, Durant) against Jordan Brand players (Wade, Anthony, Paul), with all proceeds going to South Florida educational concerns.

Last week more than 11,000 fans attended NBA rookie Jimmer Fredette’s All-Stars event at BYU’s Marriott Center. Besides the Sacramento Kings guard, the exhibition game featured seven other first-round draft picks along with other rookies.

The players have been busy off the court as well. On Monday, Durant began production on a major Warner Bros. film with a basketball subplot, reportedly titled Switch, in which he has a starring role. Last week McDonald’s announced that James and golfer Michelle Wie will star in dual TV ads for the annual McDonald’s (MCD) Monopoly promotion. The campaign runs through the end of October, and James’ joking, self-deprecating persona in the ads is a clear attempt to rehabilitate his tarnished image.

If all or part of the upcoming season ends up getting canceled, we may see many players in unfamiliar uniforms overseas. The latest boldface NBA name to be offered a lucrative international basketball contract is the Lakers’ Bryant, who has reportedly been offered $2.5 million for 10 games over 40 days, from Oct. 9 to Nov. 16, by Italian club Virtus Bologna. “It’s very possible,” Bryant, who spent part of his childhood in Italy, told Gazzetta dello Sport. “It would be a dream for me.”

Arenas of Concern

In such cities as New York and Los Angeles, shared tenancy with NHL teams will keep arenas full of fans even in the event of a lengthy NBA lockout. Other cities are facing major financial drains, with little time to book the kind of concerts and major events that draw lucrative crowds.

“There’s really no way it could be made up,” Mark Kaufman told the Los Angeles Times. Kaufman is executive director of the Oakland-Alameda County Coliseum Authority, which owns Oracle Arena, and he stated that the Warriors “will owe their full rent [about $1.5 million/year] to their government-owned arenas if the season is canceled” and that the team “would also be on the hook eventually for nearly $6 million that normally would be paid to the county authority by the Warriors mainly from premium-seating revenue and concessions at Oracle Arena.” Similarly, in Phoenix, the Suns pay close to $1.6 million a year to play at the city-owned US Airways Center, and in Orlando, the Magic will still owe the city $2.8 million in rent whether or not any games are played at Amway Center.

Rick Horrow is a leading expert in the business of sports. As chief executive of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider’s Guide to the $750 Billion Business of Sports (February 2010). Beginning Sept. 28, Rick will host Sportfolio, a new program on Bloomberg TV that will air at 9 p.m. EST.

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