The greatest unnamed source in journalism history gave the best advice for reporters of all eras more than 40 years ago, in a garage in suburban Washington, D.C.
“Follow the money,” Deep Throat advised The Washington Post’s Bob Woodward. It was true then and it is true now. If you follow the money, you’ll almost always get to the truth of a matter, no matter the subject. In this morning’s particular case, it’s the likelihood of a new collective bargaining agreement between the NBA and the National Basketball Players’ Association -- a deal that will replace the existing pact ironed out after the 2011 lockout, and prevent a potential lockout next summer. Both the league and the union have the right under the existing agreement to opt out of it by Dec. 15, an action that would, in a normal year, almost surely mean a work stoppage in 2017.
But this year, a third party has intervened that has accelerated negotiations to the point where a new deal is likely to be agreed upon, if not formally ratified, in the next few weeks.
Hello, Rich Uncle Pennybags!
Notorious RUP represents the $24 billion in television money that has come into the NBA, payments from the league’s network and cable partners (ABC/ESPN and Turner Sports, which runs NBA.com) in the new television deal that runs through 2025. That unprecedented spike in funds flowed throughout the system last summer, forcing contracts the likes of which no one had seen, from teams that had to spend at least 90 percent of a salary cap that has almost doubled in size in the past three years.
So there was $153 million for Mike Conley, and $94 million for Chandler Parsons (both with Memphis), $80 million for Ryan Anderson, $70 million for Evan Turner, $64 million each for Timofey Mozgov and Ian Mahinmi, and on and on. There was also $139 million for DeMar DeRozan, $128 million for Bradley Beal, $127 million for Andre Drummond and $120 million for Nicolas Batum. NBA cap expert Albert Nahmad estimated that NBA teams committed $4.5 billion in new contracts this summer to 275 players.
And all that money created some breathing room, for both the league and the union, and made splitting an economic pie that is expected to rise from its current $4 billion to $8 billion by the time the proposed CBA ends much easier.
If player salaries have gone to Pluto, franchise valuations have reached the outer limits of space, with teams making more and more money from local TV deals, and the league locking in numerous high-profile and high-revenue deals in the last couple of years. In addition, the enhanced revenue sharing plan that was put in place among teams in 2011 has stabilized several teams that were among the worst-performing before the lockout, with high-revenue teams taking a portion of their local TV deals into a pool for lesser performing teams.
Forbes magazine put the average estimated value of every NBA team this year at $1.25 billion, up 13 percent from last year, estimating a third of the league’s 30 teams would have lucrative new local TV deals by 2018.
But it is the national TV money that makes all those companies and teams secure, knowing the NBA is on the verge of unprecedented labor peace.
Talks less contentious
It has made negotiations between NBA Commissioner Adam Silver and National Basketball Players Association Executive Director Michele Roberts -- each representing their respective sides as the big boss for the first time -- much less contentious than those between former commissioner David Stern and former NBPA executive director Billy Hunter. To be fair: if Stern and Hunter had $24 billion to divide, they’d likely have found a lot of common ground, too. But they’d been battling against each other for almost two decades, when there wasn’t nearly as much money in the system and both sides thought compromise could be construed too easily as capitulation.
Silver and Roberts are working in a different time, and have been willing to give one another the benefit of the doubt as they build their relationship. Both are strong-willed, but don’t have the sense/need for the dramatic flourishes of their predecessors.
“Definitely, the pile of money helps,” a source familiar with the discussions noted last week. (As the deal is not yet done, both sides have continued to respect a news blackout on the state of negotiations, though details of the progress between the sides leaked out a month ago.)
“There’s no doubt about that. It’s a little bit of a chicken and egg,” the observer noted. “Would the personalities be different, would the tone and attitudes be different, if we were in that (previous) economic climate? It’s hard to say. She can be very tough, but at the same time, she can also be very reasonable. And he, likewise.”
Here is where you must again point out that negotiations aren’t completed, and as with any negotiation, things can turn and change suddenly -- and badly. But there is no sense at present that there are major points of contention between the two sides, after months of behind-the-scenes negotiations involving both the union’s Executive Committee, including NBPA President Chris Paul and players including LeBron James, Carmelo Anthony and veterans James Jones and Kyle Korver, and the league’s Negotiating Committee, including influential owners and team executives like Michael Jordan (Charlotte Hornets), Jeanie Buss (Los Angeles Lakers) and the Wyc Grousbeck (Boston Celtics).
Silver acknowledged after last month’s Board of Governors meeting in New York that “the fortunes of the league, the fact that there is more money to distribute among our players and teams, has created an atmosphere that makes it more conducive to continue a deal that looks a lot like the current deal. I think there is a sense across the table that we have a system that we both fought hard for in the last round of collective bargaining that for the most part is working pretty well.”
The BRI issue
With so much money in the system, the issue that had roiled both sides in every previous CBA negotiation -- the split of Basketball Related Income between the league and the players -- was quickly resolved. There would be no major shift in the band between 49 and 51 percent of BRI that would go to the players, as was established in 2011. The players wouldn’t seek to recoup the billions they gave back in the last CBA, when they agreed to reduce their share of BRI down from 57 percent. And the league’s hard-line owners wouldn’t look to reduce the players’ share of BRI any further, as they’d done in previous talks. Nor would the league come out with demands for a hard cap with almost no exceptions, as is the case in the National Hockey League.
Why would the players be willing to stick with the current system? Because 51 percent of BRI now is worth $1.5 billion more than it was in 2011, even though they had 57 percent of BRI then; the players’ take then was $2.1 billion out of $3.8 billion of BRI. Now, they’re getting $3.6 billion out of the estimated $7 billion of available BRI, with that pie only expected to grow bigger in the next few years, as revenue streams from local TV, and new arenas in Sacramento and Milwaukee that either are or will come on line.
Across the board, most players, from the beginning of their careers through the later years, are likely to see increases in potential earnings if the current discussions between the league and union continue along their current lines. For drafted players, there will be raises in the rookie scale from current amounts, with the likelihood that agents can negotiate more than the current max of 120 percent of the scale.
Other issues being discussed
- Agreements are also close on significant raises for NBA Development League players, from their current salary ceiling of $26,000 for the highest-paid players to up to $75,000, as the league hopes to continue developing the D-League. That will be concurrent with “two-way” contracts similar to those in Major League Baseball and the NHL that allows teams to send players on the parent team down to the minors. The player’s pay depends on whether he’s up or down. But a higher D-League salary will make those trips a little more palatable.
- Both the mid-level and bi-annual exceptions for the game’s middle class players are expected to rise. This season, the non-taxpayer mid-level is $5.628 million, the taxpayer mid-level is $3.477 million and the so-called “room” exception is $2.898 million. The minimum salary for veteran players with 10 or more years’ experience (those players get $1.55 million this season) is also going up. As has been previously reported by The Vertical, the “Over 36” contract for veteran players will become an “Over 38” contract, allowing older players to sign longer deals without their teams suffering major cap hits. And for the game’s superstars, big raises are also likely in store.
The two sides are discussing proposals that would allow players with 10 or more years’ service in the league, per an industry source, to get a bump in max salaries that would push the maximum contract for such a player re-signing with his own team to more than $200 million for five years, with a first-year salary in excess of $35 million. And pensions, benefits and health care provisions for retired players will also get augmented.
- Other issues, like the age limit for players entering the league, are still on the table. The league has long sought to increase the age limit from its current 19, and at least one year removed from one’s high school class, to at least 20 years of age. The union has talked about a “zero and two” setup, similar to that used by baseball -- players can enter the Draft out of high school, but if they choose to go to college, they have to stay in college at least two years (in baseball, it’s three years) before declaring for the Draft.
- There remain the question of what teams should be able to do with the physical information they collect on players with the use of “wearables,” like the body sensors most teams now use to determine the stress loads on their players’ bodies and other measurable data. Does that information belong to that team forever, or does it go to the next team for which the player plays? Or to the player himself? How do revenues from games in, say, China in future years get divvied up?
Those issues, though, are not lockout-worthy. The league and the union are very close to giving the basketball world the best Christmas-Hanukah-Kwanzaa-Boxing Day gift it can ask for -- uninterrupted hoop through much of the next decade.
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