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Lockout FAQs: What, how and what's next in labor standoff

By Steve Aschburner,
Posted Jul 5 2011 1:53PM

Lots of self-help books and personal coaches advise essentially the same thing for those of us trying to get from here to there: Begin with the end in mind. By targeting a future goal, then breaking down the steps necessary to reach it, all the way back to the present moment, one can confidently and effectively move forward.

We'll assume that NBA owners and players went that route in reaching their current end -- the end of pro basketball as we know it. With a big red circle around July 1, 2011, the two sides in the league's labor dispute moved toward their unfavorable "goal" of testing the other guys' limits in collective-bargaining talks.

The mood never turned sour -- grim at times, glum sure, but not ugly -- across more than a dozen sessions dating back 18 months or so. But then, neither side ever budged much, either, off its original vision for what the NBA's financial and economic systems would look like for 2011-12 and beyond.

Soon there might not even be a 2011-12 NBA season. The message -- both sides are strong, both sides are committed, both sides are willing to test the other's resolve in a public staredown costing potentially billions of dollars -- has been delivered, loud and clear.

Now maybe it's time to repeat the process. Begin with a new end in mind: the end of the lockout. Eventually the NBA will operate again, right? Barring a truly apocalyptic outlook, there will be some system, some balancing-act of the warring parties' needs and wants, that will allow players and owners to prosper, while offering fans the entertainment of the world's best basketball played against the context of a more sober U.S. economy.

Start there. Work backwards. Visualize and internalize all the leverage and rancor and heartache that figures to occur over the next two, four, six or 15 months, before actually slogging through it. Skip any further, real strain on the relationship between players and their teams, as well as on the trust between the audience for NBA basketball and the providers of it.

Fast-forward through this lockout to find the end. Then fast-reverse to identify the steps vital to its conclusion. Working backward from something can be more productive than moving forward toward nothing.

In the meantime, uh, we've got questions. Answers, too, but more like explanations rather than the sort of answers that NBA commissioner David Stern, union president Derek Fisher, National Basketball Players Association executive director Billy Hunter, NBA deputy commissioner Adam Silver and the rest of them need to get a deal done.

The Basics

Q: What happens in a lockout?

A: The NBA essentially is not open for business -- not in basketball terms, anyway. Teams still are selling season tickets (or trying to) and hammering out deals with corporate partners (or trying to), but all contact between NBA players and the 30 franchises officially has ceased. Reportedly no communication from team personnel -- owners, coaches, trainers, other employees -- to the players or even "representatives" of those players, either professional or personal. The disincentive? A possible $1 million fine.

This also means no use of team facilities. No contracts signed. No free-agent shopping. No trades consummated. Individuals in the teams' or league's employ are gagged, too, from discussing the lockout publicly, also with the hammer of $1 million fines.

Q: What are the most important issues that have brought on this shutdown?

A: The NBA owners are seeking changes in both the financial split of league revenues dedicated to player compensation and the structure of the system. In the expiring collective bargaining agreement, players received 57 percent of basketball-related income. That produced what the owners cite now as a majority of teams losing money each year -- 22 of 30, they say -- at a collective rate of about $300 million.

The players, bombarded like the fans by news of record-high TV ratings and NBA popularity through the 2010-11 season and postseason, don't see things as nearly so gloomy. They also believe that the owners could improve their own financial pictures through a) more disciplined and efficient management, and b) a more comprehensive revenue-sharing system to reduce some of the advantages big-market teams have over small-market clubs.

Q: How far apart are the two sides?

A: A chasm, with only the slightest movement offered from each side in the latest discussions. In fact, Hunter said the two sides are so far apart in their perspective on dollars, he thought it might make more sense to focus on structural change -- the bigger picture stuff -- when they meet again.

Q: Are things maybe worse than they were before the lockout was imposed?

A: Not necessarily. It is common in such circumstances for both sides to pull back from their most recent offers, forcing negotiations to resume from much closer to scratch. But after the June 30 session in New York, the owners and the players indicated that such a hardening or posturing would not necessarily take place. When they talk next, they probably will be starting from their current positions rather than some year-old hardline spots.

Q: When is the next negotiating session?

A: Possibly the week of July 11-15. When the sides parted on June 30, they both penciled in that week as a possibility for resumed discussions.

The Owners' Side

Q: What are the main talking points of the owners' latest proposal?

A: It's hard to know what actually has been presented in the form of a formal proposal vs. offers brought up more casually, because neither side has released documents to the media. But pieced together from various post-meeting news conferences, as separate elements or in various combinations, the owners have been talking about:

• A "flex" salary cap with a target payroll of $62 million per team, with "bands" below and above that to set an overall minimum and maximum that must be or can be spent on players. The current luxury-tax system, intended to discourage overspending, no longer would be needed.

• A guarantee of $2 billion annually for player compensation over a 10-year deal. This would represent an 8 percent reduction from the current $2.17 billion and achieve the owners' financial goals by limiting the players' participation in the NBA's growth projections, most notably in new broadcast contracts in 2016.

• An eventual 50-50 split of BRI, compared to the current 57-43 split favoring the players. Also, BRI would be defined with more exclusions for owners' costs before the split, moving a little more toward a "net" system than a "gross."

• Shorter contracts of three or four years rather than the five- and six-year deals available in the just-expired CBA.

Q: What about doing away with guaranteed contracts? That was a hot topic for the players.

A: The league backed off that issue last month, accepting the union's view that teams, through individual negotiations, should determine whether or not to guarantee a player's deal. But this is misleading, too, because with any type of hard salary-cap (the "flex" version would qualify, too) a team would quickly paint itself into a corner with too many guaranteed deals. To function, general managers would have to avoid them.

Q: Do the teams "get paid" during a lockout, in terms of broadcast rights, sponsorship deals and season-ticket sales?

A: Teams do continue to get their national TV revenue, with a portion of that to be rebated for any games missed. Sponsorship deals vary from team to team, as does the handling of ticket-holders' payments for games that aren't played or get rescheduled.

Q: Are the owners as united as the players?

A: There had been rumblings of factions within the 30 owners. One obvious split was believed to be between big-market teams and small-market teams -- based on the hunch that franchises in places such as New York, Chicago, Los Angeles, Miami, Dallas and Houston are more OK with the current system than those in Sacramento, Memphis, Milwaukee, Minnesota and Indiana. The biggies make more money, spend more money and aren't eager to have their spending capped or their profits shared.

Another potential rift suspected to exist may be between longtime owners (who bought in at much lower prices and thus have realized more gain in franchise value) vs. newbies who are paying top dollar in interest and debt service. But Stern and Silver stressed after a recent negotiating session that no splits exist and the owners, indeed, are unified.

Q: Would the owners consider replacement players as a lockout alternative?

A: Let's answer that question with a question: How many people would pay to see the next-best 450 basketball players in the world compete? The NBA has invested billions, in salaries and marketing expense, to promote its stars. More than the other major team sports, it is a league built on identifiable faces and marquee names.

This isn't just hype, either; the skills and basketball IQ that scouts rave about and the current players possess are exceedingly rare, and the owners know it. Hiring replacement players for, say, a 2012-13 season if 2011-12 gets wiped out wouldn't fix things. The NBA would find itself mocked or, worse, ignored.

Q: Do the owners have any real-world counterparts?

A: They seem to have things in common with home owners, some of whom bought at long-ago prices and are sitting on impressive gains and some of whom purchased their residences at the height of the housing bubble. We have seen that an NBA franchise, like a four-bedroom, three-bath colonial, does not always increase in value. Michael Jordan, for instance, purchased the Charlotte Bobcats for less than what Bob Johnson when they began as an expansion team. Without exponential equity growth, more owners are seeking profitability from operations.

Q: So the losses they're incurring are real?

A: Let's not pretend that successful businessmen purchase NBA franchises only for the money they can make on a year-to-year basis. Some do it to promote or tie-in with their other enterprises. Some do it because they are marvelous toys. Some do it for ego and a fame not easily achieved even for the most accomplished billionaires. Like buying a sports bar and slapping your name on it, owning a pro sports team probably isn't the safest or most lucrative use of capital.

That said, if the league is running at a $300 million aggregate loss, then yes, the losses are real.

Q: How is this different from most ventures?

A: Good question. While sports is the purest meritocracy and most competitive arena the culture has, a major sports league also is a cooperative venture. In the real world, a behemoth paper company would be happy if it drove a small-timer (Dunder-Mifflin?) out of business completely. It could swoop in and take its customers.

But in a league, the strongest teams still have a vested interested in the weaker ones. They need viable opponents -- the Lakers and the Bulls of the world need the Kings and the Pistons of the world -- if they're going to maintain broad appeal throughout the country. Crushing the competition in the NBA would mean contracting away the struggling teams in smaller markets -- shrinking the league overall and, it should be added, eliminating jobs 15 at a crack.

Would hoops fans really want to see an NBA with just 12 teams, anchored in the nation's biggest markets only? Would the players' union want to see its numbers reduced to 180 from the nearly 450 members it currently has?

In a league where some cities are more appealing than others -- by climate, by lifestyle, by state tax rates -- there has to be some other way to equalize the opportunity to compete for a championship. What the owners claim to be seeking now is a system much like table-stakes poker, where everyone has the same amount to spend. Then the difference between winning and losing truly might come down to basketball skills, basketball smarts and crafty management.

Q: Can't the teams just control and police themselves without requiring the players' financial concessions?

A: One would think so. Except that, if the 30 teams all "got religion" at once regarding fully guaranteed or overly long contracts given not so much to the NBA's stars but to its work-a-day players, the union and player agents might immediately level collusion charges.

The Players' Side

Q: What are the main talking points in the players' latest proposal?

A: Again, only pieces have been made public. But among the things shared by the players:

• A reduction in the split of BRI to 54.3 percent for the players to 45.7 percent for the teams. This would amount to a salary giveback of about $500 million over the term of a five-year CBA, which is the players' preferred length.

• No changes in contract guarantees or lengths.

• The continuation of the NBA's "soft" salary-cap system to allow maximum player movement and choice when negotiating contracts with teams. (One benefit of a hard cap is the difficulty it would impose on teams hoping to emulate the Miami Heat's Big Three approach to team-building; many owners feel the league's competitive balance would be tipped forever with a few copycat franchises, crowding the NBA's best players into only a handful of markets.)

• More active participation in the league's growth than what the owners have proposed. This is the topic that Stern and Silver characterized after the final session on June 30 as boosting the average NBA salary from $5 million to nearly $7 million. (The league has done a consistently better job of framing the discussion on proposal specifics, both through savvier media skills and by frequently talking with reporters after the union reps have departed.)

Q: Do players get paid during a lockout?

A: Players still owed salary for the 2010-11 season will continue to receive payments -- some players have 12-month pay cycles written into their individual deals, a number that has grown over the years. Others begin to get paid in October, while still more start receiving checks -- or missing them, if this thing drags on -- in November.

Q: Do the players still receive benefits, such as health insurance?

A: They do not. Even those getting paid what's owed them for 2010-11 lose their health insurance because it is considered a current benefit. Players are eligible to opt for COBRA health coverage, paying the full premium plus an administrative fee, or to seek private insurance for themselves and their families. This goes for players who want to participate for their national teams in Olympic qualifying this offseason.

Q: Could players collect unemployment?

A: Laws vary from state to state but in most cases, players would not be eligible until they have begun missing pay checks for the 2011-12 season. Even then, the sight of NBA players lining up for government assistance might not be the image the union wants to project.

Q: If there is no 2011-12 season, will players' contracts just have another year tacked onto the end?

A: No, that year would be lost. There would be a flood of new players into free agency next summer, on top of the Class of 2011 currently on hold.

Q: Are the players as united as the owners?

A: There have been splits within the ranks before, typically between the league's superstars and its worker bees or between the veterans and its youngsters. But for the moment, the union is presenting a unified front. When player-representatives of the 30 teams met in New York on June 23, a group of about 40 players stood together in a media session to project solidarity. The next day, many of them attended the negotiating session with the owners wearing matching T-shirts that proclaimed "STAND" to stress the same point. At that meeting, veteran stars Kevin Garnett and Paul Pierce spoke up, supporting the work done by the NBPA's executive committee that is stocked primarily with "middle-class" NBA players such as Keyon Dooling, James Jones, Maurice Evans and Roger Mason Jr. Fisher and New Orleans guard Chris Paul are the biggest names on that board.

A number of NBA players have stressed their togetherness in recent days. For example, L.A. Clippers forward Brian Cook was quoted in the Los Angeles Times as saying: "We as players and as a union will stick together until this thing is resolved."

Q: Is there a chance the players might vote to decertify their union? And why would they?

A: Everyone is waiting for the 8th U.S. Circuit Court of Appeals to issue its ruling later this month on the NFL's lockout. If that court favors the football players in their decision to decertify, opening the door for them to file antitrust claims, the NBA players could opt to persue the same tactics. However, if the court reaffirms the owners' right to lock out the players, members of the NBPA would be unlikely to invite the legal system into this fight. There also is a chance the NFL could settle its labor dispute before the 8th Circuit rules, making the NBA players' decision less clear. Interestingly, both the football players and the basketball players are being counseled by New York attorney Jeffrey Kessler.

Q: Is playing internationally a viable option?

A: A number of free agents such as Hilton Armstrong, Sonny Weems and Nenad Krstic already have committed to that. Others are free to do so and, if weeks stretch into months, might opt for the certainty of a job over the uncertainty of the lockout. Rookies, unable to build their own lockout war chests, also could feel financial pressure to get to work sooner rather than later. For NBA veterans under contract, however, they would require the cooperation of FIBA and the NBA -- and they could end up jeopardizing the money owed to them on their current deals.

Q: Do the players have any real-world counterparts?

A: Employees everywhere have taken hits in this new stripped-down economy. Few American workplaces have been untouched by some combination of givebacks, layoffs, furloughs, pay cuts, pension freezes or boosted contributions to retirement and insurance plans. The sacrifices that the NBA players have talked of as inevitable, and offered thus far, aren't resonating with too many fans when the average salary of $5 milllion is on folks' tongues.

A pay increase of nearly 40 percent over six years -- as Stern and Silver framed it last week -- in what would be slower-than-historical growth won't win many converts either. Not when a situation is as urgent as the owners have made it via their lockout. Not when most fans, rightly or wrongly, link ever-pricier tickets to attend NBA games to the players' paychecks, either.

Q: How is this different from most professions?

A: The shelf life of a pro basketball player is short. Positions are scarce. Job security is slight, in doubt almost on a daily basis regardless of a contract's protection. While many folks are working their way through the ranks of other careers, players are dedicating their formative years to basketball. Finding the door slammed at 26 or even 36 can make it harder to plunge into some alternative career or experience the same opportunities and advancement afforded to those who started younger.

Then again, most players' second-best career options don't pay dimes on the dollar compared to what their NBA paychecks are. The NBPA members are the highest-paid union workers in the world, as the owners like to remind us. NBA players have the highest average salaries in major team sports, and the stars have more off-court marketing opportunities than most athletes in their sports. For all the wear and tear across multiple 82-game seasons (plus playoffs), most basketball players don't exit having paid a physical toll comparable to what NFL players pay.

Q: Are the players being asked to fix a problem they didn't create or could be fixed in other ways?

A: Yes, to an extent. The NBA owners have not been as aggressive in their revenue-sharing as NFL teams. The have's have shown a greater disregard for the have-not's that allegedly is being addressed this summer as well. But the pressure to spend more, more, more in the top markets -- and the darned-if-they-do, darned-if-they-don't dilemma in the smaller ones -- is inseparable from the growth in player compensation through the years.

The union's position has been that owners should not be guaranteed a profit and that badly run franchises should face the downside of suffering losses. In that sense, the unionized players might be pursuing pure capitalism more than the successful businessmen and entrepreneurs who own their teams.

The Last Lockout: 1998-99 season

Q: What happened the last time the NBA imposed a lockout of its players?

A: The owners broke off negotiations on June 22, 1998, went into a lockout on July 1 and did not reach an agreement with the union until Jan. 6, 1999 -- one day before Stern's drop-dead date for canceling the entire season. They went 45 days in mid-summer without a bargaining session, then watched as a tidal wave of pain swept across the NBA, canceling training camps, preseason games and eventually 464 regular-season games. The lockout lasted 204 days in all and left the owners and players with a 50-game regular season that ran from early February into May.

Q: What does this mean for 2011-12?

A: The summer leagues in Las Vegas and Orlando already have been cancelled. Free agency has been postponed and likely will be hurried up after a settlement is reached. There are no definitive dates by which a deal must be struck for next season to escape unscathed. But if history is a guide, a lockout in 1995 lasted 74 days -- into September -- without changes in preseason or regular season schedules.

In 1998, though, the league kept pushing about a month out, in terms of cancellations. That meant October preseason games were wiped out in September, a New Year's Day game was cancelled on Dec. 1 and Jan. 7 was circled as the last day to salvage a partial season. The 1999 All-Star Game was cancelled due to scheduling demands and the awkwardness of celebrating in the midst of a broken season.

Q: What did the 1998-99 lockout achieve? And at what cost?

A: A number of provisions made it appear that the owners won that standoff. A maximum salary on what NBA superstars could be paid was established -- no more $33 million balloon payments like the one Michael Jordan enjoyed in his final season in Chicago. The rookie pay scale was firmed up, and players had to wait five years before gaining complete access to unrestricted free agency.

Mechanisms to help the league's middle class of players, however, were installed as well. The mid-level and bi-annual exceptions to the salary cap gave non-stars a shot at big pay days. A ramped-up scale of minimum salaries based on years of service was instituted, with 10-year veterans guaranteed salaries of at least $1 million. And then to encourage teams to sign those pricier vets, the league agreed to subsidize the difference in pay over a younger player.

The downside, of course, came in the form of hundreds of millions of dollars in lost paychecks and league revenues to players and teams. There was a tremendous price paid in fan interest, with attendance dropping for three seasons after the lockout and TV ratings suffering as well (in fairness, Jordan's second Bulls retirement might have had a little to do with both).

Teams staged open practices, public scrimmages and autograph sessions, and slashed some ticket prices, to woo fans back. Newer NBA fans might experience the same treatment this time. Older ones might figure, "Fool me once, shame on you. Fool me twice..."

Other Issues

Q: Are teams, or the bosses at league headquarters, likely to reduce staff?

A: That happened in 1998. The Lakers already have reportedly shed a number of front-office employees and other teams are looking hard at day-to-day costs of doing business.

Q: How much might broadcast partners suffer without NBA games to fill their airwaves?

A: According to a story in Adweek recently, ESPN/ABC Sports and TNT stand to lose up to $1.25 billion in ad sales revenue if the entire 2011-12 season is scuttled.

Q: What's up with and the team's own Web sites? Current players seem to have been scrubbed off in videos, images and even stories.

A: "We don't think it is appropriate to be using video and photography of our current players at this time," NBA spokesman Mike Bass said.

Q: What happens in the 2012 Draft if no games are played in 2011-12?

A: TBD. Our man David Aldridge dealt with this at length in his Morning Tip this week. A draft order would have to be determined in some way, agreeable to both sides, if team records in a full or shortened season can't be used to decide it.

Q: If the owners were successful in getting a 10-year deal, this likely would be the final CBA negotiations over which Stern would be presiding. Does that help or hinder a deal?

A: Hard to say. While the commissioner surely would not want a lost season or even another ugly shortened schedule as part of his legacy, he also would not want to send the NBA into an uncertain future facing serious financial troubles.

Q: Both sides have remarked about how cordial these negotiations have been. Is that a good sign?

A: It's not a bad sign. Emotions and nasty rhetoric rarely solve anything. They also seldom emerge in full until money -- in the form of pay days foregone -- comes into play.

Q: Why isn't the NFL lockout a good model for the NBA?

A: First, the NFL makes a lot of money. Players and owners have been squabbling over the size of their respective pieces from that fat pie. If they lose games, they all lose money. The NBA, in its current system, actually has some teams that would do better financially if they did not stage games. No players, on the other hand, will be better off in their pockets if they do not play games.

Also, keep in mind that the NFL offseason is much longer than the NBA version. That gave football more time to wrangle, more time to get things out of their system. The NBA faces a quicker turnaround from one season to the next, putting the preparation and preliminary events for next season in jeopardy sooner. That makes Labor Day -- appropriately enough -- something of a deadline for preserving the 2011-12 season, untouched and mostly unaltered.

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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