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Steve Aschburner

Revenue sharing a vital (yet secretive) component to talks

Posted Sep 20 2011 10:23AM - Updated Sep 21 2011 8:09AM

Each side in the NBA's lengthening labor lockout has a respective "third rail" running alongside the more highly publicized parts of the dispute. It is a dangerous, don't-touch-that topic that is, to them, what Social Security historically has been to politicians.

For the players, it's decertification and the prospect of dissolving the National Basketball Players Associaton, the very entity that has been carrying their water in negotiations toward a new collective bargaining agreement. The unity message that came out of a NBPA meeting in Las Vegas last week, while important for the NBA owners to hear once again, was directed as much at the flexing super-agents who tout decertifying to their clients as a preferred strategy at this point in the sputtering talks.

For the owners, the hot issue is revenue sharing, a transfer of money from large-income franchises to smaller ones that, ahem, doesn't always come naturally to those who control the 29 teams. (Currently, the New Orleans Hornets are both a revenue- and expense-sharing operation held by the NBA.)

From the start, a "more robust" revenue sharing system has been promised by commissioner David Stern as a way to alleviate some of the disparity between the NBA's haves and have-nots. Also from the start, though, Stern, the 10-member planning committe headed by Boston's Wyc Grousbeck, and the rest of the owners have kept their concepts and maneuvers separate from the labor talks. Separate and in the shadows, with little of the speculation surrounding potential CBA terms.

Asked after the Board of Governors meeting in Dallas on Thursday what he could share publicly about the owners' latest revenue-sharing plan, Video Stern said: "Only that the net transfers of dollars will be a multiple of what they were under the old deal of revenue sharing. That's all."

In previous interviews, Stern has predicted that the transfers would be about or at least "three times" what NBA owners have done in the past. Last season, about $60 million trickled down in the NBA's version of wealth redistribution, with 10 to 15 teams benefiting. Tripling that would push the average to $15 million (it was roughly $5 million last season) per participating franchise.

Stern said Thursday that, behind the closed doors of a convention hotel's grand ballroom, the planning committee got as much run as the labor relations committee (headed by San Antonio owner Peter Holt) that is charged with hammering out the deal with the players.

"Absolutely. We spent almost as much time I'd say on revenue sharing today -- in fact, as much time -- as on collective bargaining," Stern said, mentioning a meeting the next day (last Friday) of the planning committee in New York. "We got solicited input from 30 teams on this, and we're teeing it up in a way that it'll be ready to go when we -- if and when we make a deal on the collective bargaining side."

The union expects no less. After pushing the notion for months that revenue sharing could ease the NBA's financial woes more than a tightened CBA -- and urging the owners to bring that topic to the bargaining table -- the players got nowhere and have backed off. Stern and deputy commissioner Adam Silver repeatedly reminded them and others that the NBA cannot "revenue share its way to profitability" when, as a whole, the league claimed losses of $300 million in 2010-11.

To break that down further, sources have said that the 22 teams in red ink last season amassed about $450 million in losses. The eight teams that actually earned a profit made a combined $150 million. Even in the most favorable distribution of revenue sharing, the league would wind up with 30 teams losing $10 million each.

Still, the union has high expectations for that portion of the financial fix. Historically, the NBA has split national TV fees (about $30 million per team) and luxury tax proceeds. Now, local revenue is said to be in play.

"They know a good, robust plan resolves these things, but we haven't heard any specifics for what they're considering," NBPA executive director Billy Hunter told the Los Angeles Times in an interview in Las Vegas. "I will tell you I know this: We won't be able to do a deal until that gets resolved."

So which will it be: Revenue-sharing first, then a CBA? Or simultaneously? It might be hair splitting in the end, though it seems reasonable that each side would want to know what's in place from the other before committing.

The players don't want to eat the owners' losses -- reported to be in excess of $1.5 billion over the last CBA's full term -- without knowing what the league will be doing to heal itself.

The owners -- or at least those with the large-revenue franchises -- don't want to give up profits in revenue sharing until they get a sense of their savings through a more favorable split of basketball-related income (BRI) and a desired salary-cap system. Coughing up $10 million or $20 million to be dispersed to the league's struggling clubs -- and ideally, with systemic assurances that there won't be perennial freeloaders -- goes down easier if a team spending upwards of $110 million on payroll and luxury taxes can count on cutting that by at least a like amount.

A story in the Orange County Register last week, for example, characterized Lakers owner Jerry Buss as being amenable to revenue sharing and a gouge into the $3 billion agreement he negotiated for future local TV rights. But Buss also could be figuring on a hard cap (or some other restrictions on player compensation) that would save him money.

Hard caps. Revenue sharing. The BRI split. Union decertification. Competitive balance. Both sides are neck deep in the language and intricacies of the collective bargaining talks.

And still the lockout nears the end of its third month.

"Even in a league where one team could pay [$100 million] to its roster, another team could pay [$50 million] and would be economically successful -- our owners and our fans don't want it because it wouldn't be competitive," Stern said last week. "And so you can see that these are completely separate issues for us, and they're equally important."

He was talking specifically about the economics of any agreement (the split of BRI) and the owners' stated desire for a hard salary cap.

Sharing revenue? That's more separate still.

Steve Aschburner has written about the NBA for 25 years. You can e-mail him here and follow him on twitter.

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