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David Aldridge

Ten lockout questions to chew on ... probably for awhile

Posted Oct 6 2011 10:45AM's Labor Central

We asked longtime NBA observer and TNT analyst David Aldridge to bring us up to date on the latest on the lockout ...

1. What just happened? It seemed like they were so close ...

They are close, in terms of percentage of Basketball Related Income -- the amount of revenue generated by the league that it is willing to share with the players -- and the two sides have made a huge amount of progress since the discussions started in earnest during All-Star Weekend, when the owners were offering a BRI split that would have essentially been 61-39 in their favor. But there are a lot of different interpretations of BRI, and a significant difference of opinion as to what the owners actually offered on Tuesday (more on that below).

Owners are now willing to give players 50 percent of BRI -- again, with a couple of strings attached, if the National Basketball Players Association is to be believed, no strings if the league is to be believed. The union is at a 53 percent average; its last offer actually begins at 52.4 percent, but averages out with yearly increases at 53. But each one of those points represents tens of millions of dollars. Depending on what definition of BRI you use, each point is anywhere from $36 million to as much as $60 million. (I have been using $40-$42 million per point, based on $4 to 4.2 billion of annual revenue generated by the league. BRI, again, is the money the league generates from its national television contracts, ticket sales, concession sales, parking, temporary signage and club fees. Half of the money teams receive for naming rights for their arenas and 40 percent of the money they get for fixed signage in their buildings is also included in BRI.)

If you use $40 million per point, then, the two sides are about $120 million apart per year (and, again, it could be bigger). If the league were to get the 10-year CBA it has asked for, that would mean the sides are $1.2 billion apart over the life of the proposed CBA. That's a little bit bigger than 53-50 looks at first glance, I think you'd acknowledge. Someone is going to have to make a tough move. The owners, for example, have said the players' offer of a 53-47 split would not allow them to break even. But Billy Hunter, the executive director of the National Basketball Players Association, is under enormous pressure not to move further back. Part of the reason the "Gang of Seven" agents sent out their now-infamous letter on Monday is that there were rumors flying around that the players were ready to take a 50-50 deal. (Two members of the union's negotiating committee have strongly denied that to me.)

2. The owners' 50-50 proposition sounds fair. Is it?

Sometimes, 50-50 isn't 50-50. The league swears that its 50-50 "concept" (it is against the law in New York state, one surmises, to call a proposal a proposal) came with no strings attached and was based on the "old" BRI definition of using gross revenues rather than net revenues. It's an important distinction, because the league has been arguing for a new BRI definition that would allow it to subtract hundreds of millions of dollars off the top before splitting the rest with the players. But the union is equally adamant that the NBA never offered an "old" BRI split. Union sources say the league offered a guarantee of 49 percent of BRI, arguing that the players' share would actually rise to 51 percent over the life of the CBA because of an expected rise in revenues. A source says part of the league's reasoning was that Orlando's new building, Amway Arena, and the renovation of Madison Square Garden -- sorry, they like to call it "the transformation" up in Gotham -- will bring in hundreds of millions of dollars of new revenues alone. (The "tranformation" is expected to be completed by 2013.)

And the union claims that the only 50-50 discussion involved the league taking $350 million in expenses -- for arenas, for the development of programs such as NBA China, and other deductions -- off the top of the BRI pot. Then, the league would split the rest equally with the players. But after that $350 mil comes off, the union argued, its actual share of revenues in the proposed CBA would be 47 percent, not 50. And that would be about $400 million less per year in salaries than the players currently take home.

If the league really did offer a genuine 50-50 split, it could argue, as many -- okay, as I -- have argued that you cannot be fairer. The players provide the talent and starpower; the league provides the venues and infrastructure that helps make the players into stars. But the players believe their skills should tilt the scales slightly in their favor. More to the point, they've already agreed to at least $160 million per year in salary givebacks, having offered to come down to a 53 percent average of BRI in the next CBA after getting 57 percent of BRI in the old one. (Remember, it's $40-$42 million per percentage point.) If it were you, and you'd already agreed to that much in pay cuts, you wouldn't be too keen on giving billionaire owners another $120 million on top of it, either.

3. If we get past Monday with no deal, does that mean no full season, for sure? Could they still squeeze in 82 games?

It gets exponentially tougher with each passing day after Monday. That's October 10. The regular season is scheduled to begin Nov. 1, just three weeks later. It would be almost impossible to agree to a deal on the big issues like the BRI split and the system issues -- and they haven't agreed on all of those issues, although they've made a lot of progress -- then move on to "smaller" issues like the age limit, the amount of money that goes to the players through NBA Properties, pension and benefits, and on and on, get all of that written up and get it ratified by both sides. Then you have to have some form of a free-agent signing period, have some kind of training camp and have some kind of preseason in just 21 days.

And almost all NBA buildings share dates with either NHL teams, or college basketball or hockey teams, and dozens of other events like concerts and touring shows that have to be committed to by venues months in advance. There just aren't that many "dark" nights in these buildings that can be switched to accommodate changes in the NBA schedule.

It is possible you may be able to cobble together 82 with back-to-back nights when possible during the regular season, and you might be able to squeeze out a few extra days by compressing the first-round playoff schedule to include more back-to-back games, the way they used to do in the 1980s and 90s. But it's going to be very hard to have a full schedule after Monday. In fact, it may already be too late.

4. If we get to November with no deal, what then? Any other deadlines we should know about?

That would mean a shorter regular season of about 65-70 games -- because, again, you're going to need at least 3-4 weeks to get ready for a regular season once you have a tentative agreement on the CBA. So the earliest you could probably start would be the first week of December. The one hope I have is that many sources believe David Stern is desperate to preserve the NBA's presence on Christmas Day, with its daylong schedule of games on ESPN, ABC and NBA-TV. In many ways, that's really the NBA's "opening day," because baseball is gone, most of college football is over and the NFL usually just has one night game on the holiday. The NBA has most of the viewing public all to itself. If they still haven't gotten a deal done by Thanksgiving, then, we're in a world of trouble. You could expect the All-Star game, scheduled to be played in Orlando this season, to go away soon afterward.

The last lockout, which produced a 50-game regular season, basically ended on Jan. 6, 1999, with a tentative agreement between the two sides, the day before Stern said he would recommend canceling the remainder of the season if there was no new deal. It didn't officially conclude, though, until Jan. 20, when the deal was ratified. The season started on Feb. 5.

So, to recap:

No deal by Nov. 1: Bad, but not as bad as last time.

No deal by Thanksgiving: Worse, and causing real damage.

No deal by Christmas: Close to fatal; shortest possible "real" season possible.

5. This union decertification talk makes my head hurt. Explain it to me. Gently. Will it come into play?

In most businesses, companies compete against each other. Apple wants to beat Microsoft. But many pro sports in this country are, basically, legal monopolies. They've been given special dispensation by Congress to operate in ways that circumvent the Sherman Antitrust Act, established in 1890 to try and ensure free and open competition in business. But leagues like the NBA still have to negotiate work rules, salaries, pension plans and the like with their employees -- in this case, the players. And the players' union -- the NBPA -- negotiates on behalf of the 450 players in the NBA.

But a union is allowed to take itself out of business -- to decertify -- if it feels it has exhausted all attempts to reach agreement with management on a new contract. By doing so, the union's individual members are then free to file antitrust lawsuits against the company for financial damages, or to ask a court to lift a work stoppage brought about by an owners' lockout. This is what the National Football League Players Association did when its players were locked out by the NFL in March. It decertified as a union --technically, it became a "trade association" -- and players like Tom Brady, Drew Brees and Peyton Manning filed suit against the NFL, claiming that the lockout illegally kept them from working.

A judge in Minnesota agreed with the players, writing that the NFL's lockout irreparablly harmed the players' ability to earn a living, and filed an injunction that temporarily lifted the lockout. But the NFL immediately appealed, and its appeal was ultimately upheld by the Eighth U.S. Circuit Court of Appeals in St. Louis last July. That court's decision was limited to the legality of the lockout, not to the merits of the players' lawsuit. But the majority of that court did take issue with the NFLPA's decertification, writing in a 2-1 decision, "the labor dispute did not suddenly disappear just because the players elected to pursue the dispute through antitrust litigation rather than collective bargaining."

Some of the NBA's most powerful agents have argued that the NBPA should decertify as well and seek redress for players in the courts, because if a league is found to be guilty of illegally restraining a player's ability to earn a living, it would be liable for damages that could be tripled under antitrust law. They are critical of Hunter for not pursuing this strategy, because they think the NBA has not negotiated in good faith, has no interest in reaching agreeement on a new CBA and would be thus goosed into negotiating a better deal if it were facing lawsuits filed by individual players. Hunter has not ruled out decertifying -- which he reiterated on Tuesday -- but he does not think it's a strategy to pursue right now.

Part of the reason is that the NBPA has filed a complaint with the National Labor Relations Board that accuses the NBA of not operating in good faith with the union. If the NLRB rules in favor of the players, it could order the NBA to end the lockout and continue negotiations with the union while the season is allowed to begin. If the NBPA decertifies, however, the NLRB complaint would vanish, because there would no longer be a union. Hunter and the players want to get the NLRB ruling first, but no one knows exactly when the NLRB will rule on the case; a recommendation has been sent under seal from the NLRB's regional office in New York, where the union filed the complaint, to its general counsel in Washington. The agency has been known to take a good long while before offering a decision in cases. The agents don't want to wait that long.

There are, also, two major differences between the football and basketball unions regarding decertification.

One, the NFLPA had to decertify immediately after being locked out under terms of its collective bargaining agreement with the NFL. If it didn't do so, it would have had to wait at least six months before legally being allowed to do so. The NBPA is under no such time constraint. When and if the union thinks it no longer can work for the players, it can decertify.

Two, the NBA has filed its own complaint with the NLRB against the union, arguing that it's the union that has not negotiated in good faith, as well as a federal lawsuit in New York. Part of the league's NLRB complaint against the union is its claim that the union has threatened on numerous occasions over the years to decertify -- the very thing the agents want the union to do. If Hunter opted for decertification, he'd be proving the league's point.

In addition, in its lawsuit against the NBPA, the NBA is asking the court not only to uphold the legality of the lockout, but to declare that even if the players' decertification was found to be legal, that all existing contracts the players have be declared null and void. In other words, each player's contract -- LeBron James', Kobe Bryant's, Kevin Garnett's, all the way down to the Will Bynums and Jon Brockmans -- would be canceled. The league has not yet said what would happen if all 450 players were suddenly free agents, and it's hard to see, say, Miami owner Micky Arison being down with the SuperFriends suddenly being free to strike deals with other teams. But that's where we are.

6. Which side has given the most so far?

Clearly, the players. The concessions the owners have made are on things that were already in place in the just-expired agreement. For example, the owners initially wanted to roll back contracts they had already given to players. Now, they've relented, and won't roll back any existing salaries. They wanted a hard salary cap, with no exceptions. Now, they've agreed to continue with a cap that is more in line with the one in the former agreement, though there may be new mechanisms to try to limit teams from spending. So, in that sense, the owners haven't really "given" anything to the players; they've just agreed to continue what was the status quo. By contrast, the union has already agreed to, again, at least $160 million in salary reductions per year in the next CBA (see above). It's agreed to place additional limits on the length of contracts to lower team payouts, and to allow teams to get rid of bad contracts through an "amnesty" program similar to the one in 2005. And it's discussed some version of a "supertax" that would penalize teams even more than they were in the former agreement ($1 for every dollar they exceed the luxury tax threshold) for overspending.

7. The owners made all this fuss about a hard cap and competitive balance, and now they're willing to give up the hard cap (and, maybe, a more competitive league)? Sounds like they were doing some posturing.

Agreed. But they do have a point about competitive balance in this sense. It is nearly impossible for the Sacramentos and Charlottes of the league to take the kind of financial risks that the Lakers and Bulls can, because the Lakers and Bulls have millions more in cash available to them because of their local television deals and the amounts of money they generate in their arenas. That's why the Kings nearly wound up in Anaheim; even though the Honda Center in Anaheim isn't state of the art, it's better than Power Balance Pavilion in Sacramento. That does make a difference. The Lakers can give Ron Artest a full mid-level exception without blinking because even if he doesn't work in L.A., the financial hit doesn't hurt its bottom line nearly as a similar deal would Sacramento's. (Agents know this, which is why they want teams like the Lakers and Knicks and Bulls to be as free as possible to spend as much as they like.)

The union believes enhanced revenue sharing between the teams would address much of that imbalance. The league agrees, but only to a point. It wants to lower the gap between what the top teams spend on salaries and what the bottom teams do, claiming that will increase the ability of teams at the lower end to compete year after year.

8. What happens to Billy Hunter and David Stern after this thing is finally over -- whenever that is?

In all likelihood, this is the last collective bargaining agreement for Stern, who turned 69 last month. It is hard to imagine the NBA without him, so long and large is the shadow cast by this man, whose brain has been just as important to the league's ascension as a major American sport as Magic's eyes and Jordan's hops and Bird's shot. But commissioners don't last forever, and if the league gets the 10-year deal that it has proposed to the players this time, someone else will almost certainly be leading the NBA's negotiations the next time around. If you don't think it pains Stern to have as part of his legacy the loss of regular season games on two occasions, you don't know the man. He is a proud and brilliant and at times arrogant man, and these next few weeks will define him in part for generations to come.

But it's a hard push for that final two or three percent for Stern, because he's told many of the league's newest owners that they would be coming into a league with a much better CBA for them than the last one.

Stern had personal relationships with owners like Abe Pollin, Bill Davidson and Jerry Colangelo. These men were his peers, who rose to power in the NBA when he did, whose counsel he trusted and whose words he heeded. If Stern pushes the New Jack owners too hard, will they push back?

Hunter's in a similar bind. He has fought a silent war with the game's most powerful agents since he came aboard in 1996, always holding them at bay. They wanted to decertify in 1998; he resisted. He became executive director of a union whose executive board was filled with then-super agent David Falk's guys, and Hunter systematically has reshaped the board, replacing superstars with role players, reducing the big guys' reach. He communicates with them, but on his terms and on his timetable. They have been sharply critical of his work in collective bargaining, saying he's allowed the game's superstars to be shackled by caps on what they could make, allowed the league to set an age limit on when players could come in, restricted free agency movement and squelched trades, introduced more expansive drug testing for players, and on and on.

But he's always been able to hold them off, because G. William Hunter is a lot of things, but he's not a punk. And he's been able to withstand their latest aggressive move into his territory -- at least, so far. But Hunter will turn 69 himself next month, and the years of being the public voice for the union have, occasionally, taken their toll. This CBA will probably be his last as well.

9. Does anyone -- anyone? -- come out of this thing looking good?

No, because NBA fans, understandably, don't care who "wins" or "loses" in this battle. They just want their basketball, and they know that the NBA and the union are, no matter their reasons, depriving them of it. It's additionally troubling because it took the league so long to recover from the 1-2-3 punch of, within six years, a lockout, Michael Jordan's retirement and the Brawl at Auburn Hills. A lot of fans, frankly, didn't like players like Allen Iverson (though many millions of others did). Now the game is being built around young superstars like Derrick Rose, Kevin Durant, Dwight Howard, Blake Griffin, Kevin Love and John Wall that have much more mass appeal -- and if you read into that that suburban white dads and Wall Street types like these guys more, you're probably right. But those are the people that buy season tickets and suites.

The league has rebounded from the recession as well as could possibly be expected, selling more tickets than ever and experiencing the highest television ratings in a generation. For all the criticism James received for "The Decision" last summer, he made the Heat into must-see TV. The Lakers are still the Lakers, the league's most glamorous franchise. The Celtics are still relevant and strong. The Bulls and Knicks are good again in two of the league's top three markets.

And it's all going down the drain.

10.Your call: When will the season start (if it does), and what will it look like?

They will not cancel the whole season; they've made too much progress to stop now, and the owners' willingness to come to 50 percent and abandon the rigidly hard cap they initially sought means a deal will get done in time to salvage some kind of season.

My guess is the hardline owners will demand the players miss at least one paycheck to see if they'll fold. That would mean canceling the first two weeks of the regular season, because players begin to get paid on Nov. 1, opening night, and get their first checks on Nov. 15-16. So I expect the league will hold out this week, cancel the first two weeks on Monday as Stern said it would, then wait.

If there's no sign that the players will capitulate, I'd expect the two sides to get together again formally before Halloween and hammer this thing out. That would mean a regular season tipoff around Dec. 1, at that 65-70 game length discussed above. Right now, that's probably the best you can hope for.

Longtime NBA reporter and columnist David Aldridge is an analyst for TNT. You can e-mail him here and follow him on twitter.

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