// February 15th, 2010 // 1 Comment » // General NBA
The NBA’s Collective Bargaining Agreement (CBA) expires at the end of the 2010-2011 season. The CBA is basically the contract between the NBA players, owners, and the league itself. Much of the makeup of the CBA is the setup of the salary cap, luxury tax, and players’ salaries. It is an unbelievably complicated contract that, I would argue, most NBA players (or most people, for that matter) have not read. Even for a big NBA fan (such as myself), I did not understand a lot of it up until recently. This resource goes through frequently asked questions about the salary cap and explains in significant detail the intricacies of the cap. I highly suggest browsing the topics but there is a lot of difficult legal language and it can be a bit tiring to read.
There were a few points that I found interesting. The salaries for draft picks are interesting. Blake Griffin, the #1 pick of the 2009 draft, earns nearly $5 million dollars this year, over $5 million per year the 2 years after that, then $7 and $9 million in the 2 subsequent years. That’s more money than a lot of productive players in the NBA and Blake Griffin hasn’t played a regular season game yet. As I understand it, there is a fixed level of income for each draft pick. Hasheem Thabeet (the #2 pick) makes about 10% less than Griffin over the same time period. Each pick receives proportionately less money.
To put this into perspective, Ricky Rubio declared himself eligible for the 2009 draft. He did so likely because he felt like he had a chance at being a top 3 pick. He was playing in Europe at the time and had a fairly expensive buyout clause, of around $8 million, in his contract if he chose to leave his team and come to the NBA. Had Ricky Rubio been selected with the #1 or #2 pick, he likely would have come to the NBA to play because he could have justified paying for the buyout w/ his salary. Instead, he was chosen with the #5 pick and his salary would have been around $3 million for the first 3 years, and nearly $5 million for the 4th. Even if Minnesota wanted to pay Rubio more they couldn’t because of the stipulations in the salary cap.
Also, players cannot renegotiate their contracts with a team during the course of the contract. For example, let’s say Andrei Kirilenko decided that he was, indeed, highly overpaid. Side note: I’m a big AK47 fan but there’s no way he’s worth $17ish million. Let’s say he came to the Jazz and said, “hey, I make the same as Pau Gasol and score 5 less points, grab 7 fewer rebounds, and am not transforming the Jazz into a contender like Gasol did to the Lakers. Let’s restructure my contract so that I make less so that we can bring on another quality player or two.” Can’t do it, even if both the Jazz and AK decided to do it.
There are a lot of interesting points to the CBA and salary cap but why is it important that it’s going to expire in 18 months? Remember when it expired in 1999? There was a strike that lasted well into the season. The season was shortened to 50ish games when the 2 sides finally came to a conclusion. It was a tough time especially since baseball had just had their strike.
If you haven’t heard, the economy is sorta bad…it’s kind of a big deal. Teams are losing money like crazy. A number of teams have taken loans from the league in order to maintain operation. They have also cut staff and salary in the same effort. Some teams have made some bad decisions and pushed themselves way over the cap in order to “be competitive” and aren’t even in the running for the playoffs (namely, the Wizards and Knicks). Other teams are over the cap but realistically aren’t going to make that much noise in the playoffs (such as the Suns and up until recently, the Hornets). Other teams are bad and are just, financially, in trouble (the Pacers, Kings, Bobcats, and a half-dozen others). A number of teams in the league are losing money, and losing a lot of it, and have been doing so for several years in a row.
During the bad economy, advertising money for teams has dropped off. Attendance, concessions, and merchandise have done the same. There isn’t much else the teams can do in order to cut costs and they’re still in bad shape. You know who IS in good shape and still making a killing despite this horrible recession? The NBA Players. They are still making millions and millions of dollars a year in the NBA not to mention any of their other sources of income (endorsements, etc). This needs to change. Some NBA teams are close to folding while the players make a killing. If players salaries decrease by, say, 20% it’s not like they’d be putting NBA players out on the street, destitute. The difference between a $10 million dollar salary and an $8 million dollar salary is…oh, THEY’RE STILL RICH! However, if a team can drop it’s overall salary by 20% (which roughly averages out to about $14 million dollars) that’s a significant improvement for NBA teams.
NBA contracts can be 6 years in length for a max deal. Look at situations like Eddy Curry or Stephon Marbury with the Knicks. Curry will likely finish his contract by playing less than 100 minutes in his final 3 years because he is out of shape. Marbury proved to be an on and off-court distraction and did not play his final 18 months of his contract. Gilbert Arenas’ contract is massive and now hangs over the head of the Wizards because of his gun problems and because his return to form hasn’t been close to what he once was. These contracts cripple some NBA teams and while part of the blame lies with the teams themselves they are also hostage to the negotiation process and players’ agents. Shorter contracts will help motivate players to be a better team member and stay competitive throughout the length of their contract.
The NBA and the Players Association have begun talks very early (almost two years before the CBA expires) in order to draw up a new CBA ahead of time so that a strike/lockout can be avoided. It’s not like the owners could handle losing a lot of revenue from the loss of 10, 20, or 30 games because of a lockout so there is motivation from their end. The first proposal from the league was received by the Players Association a week or two ago and was reported to have been “ridiculous.” This first draft reported to reduce salaries of first round draft picks, lower the minimum salary by about 20%, and have fewer guaranteed years on those contracts (meaning the team could end the contract early). Also, it called for max contracts to have dramatically reduced salary and for fewer years. Another big point was that the players would receive less in the basketball-related income. Right now, the teams employ a sort of revenue sharing with the players that calls that the players, at max, receive 57% of the revenue. As it stands, the current CBA is massively stacked in favor of the players.
Now, it’s very possible that the first draft that David Stern sent to the Players Association called for too much but that’s how negotiating works. The PA, however, took it a bit far by having multiple players openly oppose it, call it ridiculous, and hiring a lawyer who made outrageous threats to complicate the negotiations. Stern is very savvy. He has been in charge of this league a long time and has been instrumental in the success the NBA has had over the past 3 decades and is a good negotiator and business man. Recognizing that the players may have been trying to sway the fans’ opinion to their favor but making a number of public statements he made a statement of his own. He declared that the NBA projects to lose $400 million this year. He also added that that loss is following a trend over the past couple years that the league has lost hundreds of millions in each of the previous years under this CBA (which debued in 2005). He even went on to point out that under the proposed CBA the league presented, the owners would still stand to lose an estimated $200 million per year for the first 4 years. This move was incredibly smart. Any fan or even non-partial bystander is going to side with the league and owners in this instance. The players are making crazy money from the NBA…not to mention from endorsements and everything else they’re involved in. Everyone else involved in the NBA is losing money by the bushels: the league, the teams, the owners, the organizations, the sponsors, the advertisers, etc. The players are going to have to give…and give a lot or else we won’t be seeing any basketball games come October of 2011. The organizations and owners simply won’t be able to afford it.
One thing to note is that the main reason why the lockout of 1999 ended was because the players literally were running out of money. As hard as it is to believe, despite the gargantuan salaries they have, I’ve read that an alarming majority of the players live paycheck to paycheck. To put that in perspective, let’s assume Player A makes $6,000,000/year. Players only receive paychecks during the season so let’s say that that lasts for about 8 months of the year. That’s about 33 weeks. If they get a paycheck every two weeks Player A is receiving $363,636 per check. Maybe we’ll assume that after taxes, agent’s fees, and everything else they only end up with $200,000 per check. $200k every two weeks? Most of us cannot fathom that kind of money. So many of these guys are under the age of 25. If they are living paycheck to paycheck they are not remotely managing their money well. In this scenario, that mismanagement of their finances might be a blessing and could be a factor in coming to a resolution sooner.
It sounds like a long way off…and it is. But if they can’t start the negotiations now there is no way they’ll have it resolved in 18 months.