Lockout Looming?

by Jeff Clark on Jan 24, 2009 11:19 AM EST in News/Links Comment 10 comments

Interesting take on the potential for a lockout in a few years:

The NBA has to decide by Dec. 15, 2010, whether to extend the collective-bargaining agreement through the 2011-12 season. If not extended, it expires June 30, 2011.

With the economy in shambles, teams are watching profits fall off faster than Allen Iverson's game. When they have a chance, NBA owners are expected to want to continue to reel in bloating salaries and try to steer the NBA closer toward a hard salary cap.

"If the economy doesn't turn in two years, there's definitely going to be a lockout because everybody is taking a hit in this recession," Jackson said. "The owners are definitely going to want to make some cutbacks, and the players aren't going to want to make the cutbacks.

"But I think we have to put our differences aside and say what's best, and that's playing this game and giving fans what they want and not being selfish."

You can see now why it was wise for LeBron, Bosh, and Wade to build in options to become free agents before the CBA expired. They want to lock in a big paycheck before the rules change.

The optimist in me hopes the economy has turned around by that point. However, if it hasn't, I don't think the Players Association is going to get much sympathy from the average fan. I know the owners are rich too, but the money to pay these guys ultimately comes from you and me.

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Perhaps it is time to revisit NBA and the coming deflation

The bad recession we are experiencing has not hit the sports world including the NBA with full force yet. But it will. A lot of sponsorship money and advertising revenue will dry up due to bad corporate profits. The consumer has to pull back in spending and the first thing to go is spending on tickets and incidentals needed to attend sports events. Already, I’m hearing of advertising for deep descounts on NBA tickets and stories of teams releasing “big inventories of tickets”.

So with the fall of housing prices and stock market values, wealth is being evaporated. Without cash and credit available, how are NBA owners going to be able to pay their obligations? Where will the money come from for consumers to pay their tickets? The companies have to cut their budgets and the first thing to go is money to pay for those expensive luxery suites, which represents a significant (35%?) of the team’s revenue.

Less revenue = lower NBA salaries….. It has to at some point. Also, there are more opportunities overseas for young players to travel and work, and for older players to extend their careers. Basketball has gone global and if the overseas franchises are doing better financially than the NBA franchises, I can see good American players signing up overseas. So there could be a talent shortage for the NBA in several years. What if Kevin Durant, Al Jefferson, Kendrick Perkins, Rondo, Micheal Beasley, Derek Rose, Dewayne Wade, Monta Ellis, Al Horford, Kevin Martin, and Travis Outlaw decide to jump to Europe? What if Gnobli, Nocioni, and Scola go back to South America? What if Yao and Yi go back to China? If all this came to pass, the NBA will have to contract to 24 teams with the likely teams to fold being the Clippers, the Thunder, the Grizzlies, the Bobcats, any two of the Hornets, Heat, Jazz, Nets, Bucks, and Timberwolves.

The threats of deflation to the NBA is that the agents and the players association could be forced into salary reductions or be locked out. Rookie contracts could be extended up to 6 years. Player rosters could be cut from 15 to 12. Contracts would not be fully guarenteed but there would be buyout provisions that still count against a teams salary cap. The salary cap would transition to pure hard cap like the NFL has in place.

Personally, I think ticket prices are way too high and that the NBA inflation from 1982 has been about 5 times the CPI. The NBA must deflate at some point to bring it in line with the rest of the national economy – much to David Sterns chagrin. Television cable packages and the Internet will soften the blow of deflation somewhat but the deflation is inevitable in my opinion.

Boston Celtics - 2008 World Champions

by QuinielaBox on Jan 24, 2009 11:36 AM EST reply actions 0 recs

Nice post Ron. We have been told to not expect any raises for two to three years. All travel funds have pretty much been zeroed out. Our budget has been cut about 20%. Most of the universities I am familiar with now have hiring freezes unless there is an emergency. My point to all this? Once the economy does turnaround, it is going to take some time before the public begins spending money again. There’s going to be a lag. So irregardless, it’s going to take a few years beyond that for profits to return to levels of last year or the year before. A lockout will only alienate the players from the populous, as they will appear greedy in a time of economic trouble.

I think franchises might be in jeopardy, but attendance next year will be the telling sign on that one.

by amenhotep04 on Jan 24, 2009 12:30 PM EST up reply actions 0 recs

Agree almost 100% w Quinielabox

Only wrong thought was the assumption that big money will be available in Europe. I doubt it.

You can count on corporate box cost cutting and the inside arena advertising will go begging. Best seat prices won’t go down but there will be fewer and fewer sellouts and more and more multi game discounting.

LeBron will still get most amount of money but don’t count on it being more than the current rates (ie Garnett). The power is not with the players or the owners. The power is with the buck and it cuts both ways. Houses aren’t worth as much, investment multiples are down and no one is going to get 6-8 years at big, big bucks.

The only good to come out of this economic collapse is the drain on the uber-rich’s play money. And a lot of that play money went into sports franchises.

I have a brother-in-law who had Yankees season tickets. They went up so much for next year that he dropped them and the Yankees have come back to him two more times with lower prices (ie no one else is stepping up)

by Wildblu1 on Jan 24, 2009 12:12 PM EST reply actions 0 recs

Europe?

The recession is global. Any belief that Euro teams will be spending big bucks is just wrong. The teams in Europe will do the same as NBA teams, cut payroll as much as possible. I dont think Salaries will shrink a lot, but teams will be much more careful who gets them. Bad actors and injury history will not see big money IMO. The length of bigger contracts could shrink some. Let us not forget that the insurance that protects these same salaries is not in good shape either. They will not be willing take as much risk and the owners will not absorb the risk.

I believe the smart players and smart agents try to get deals done quickly rather than hold out in the near future. Job security will be at a premium. Those who get the deals done with a minimum of stress will have that security.

"First fix their hearts"-Eizo Shimabuku

by billysan on Jan 24, 2009 12:41 PM EST reply actions 0 recs

In my survey of the world economy

Big money will not be made overseas. There will continue to be exchanges of talent like Pargo playing in the Russian Federation league. The sports owners do not have infinite financial resources to put together their fantasy teams except for that New York AL entry that I never ever mention by name (Y——-s). But I can well believe that brother in law story about not stepping up to the plate to pay full retail for his favorite team. This recession will probably be referred to as the 21st Century High Tech Depression with unemployment heading to 10-15% worst case and the rest of us having to take pay cuts. That does include the professional athletes. BTW, I noticed KG is making 24 million this year and his salary goes back to 16 next year. Do Ray Allan and PP follow suit while Rondo makes his? What is Lebrons contract going to look like next year (summer 2010)?

Boston Celtics - 2008 World Champions

by QuinielaBox on Jan 24, 2009 4:16 PM EST up reply actions 0 recs

Celtic Salaries

From what I understand a player cannot change the salary portion of his contract. KG is not voluntarily reducing his salary. When he was traded he needed to sign an extension to make the trade viable. I think the way his salary was structured over the term of his contract was to help the Celtics manage their cap situation. PP signed an extension a few years ago. I don’t know how the salary is structured, but it cannot be changed. I believe Ray is on the last year of his contract (from Seattle) and I believe he will be a free agent after this season (not sure).

by TrueGreen on Jan 24, 2009 8:06 PM EST up reply actions 0 recs

Ridiculous

I can barely afford food and abhorrently rich people are fighting over nickels and dimes. Give me a break.

by KungPoweChicken on Jan 24, 2009 4:27 PM EST reply actions 0 recs

It's What The Market Will Pay

I know athletes receive high salaries, but it is only because people will pay them the money. The problem is that some owners will pay players more than they are worth and this leads to inflation of salaries of players who are worth the money. PP, KG and RA, to me, deserve the money they are making when compared to the salaries of other players. What we often forget about these guys receiving these high salaries is that much is given back in way of taxes, contributions to causes and to local merchants. Just consider the restaurants around TD Banknorth. Because of the above three players the games are sold out, lots of fans eat at the local restaurants, they pay for parking etc. Even the scalpers benefit. I don’t know how old you are, but when Larry Bird was in his last year and hurt he was day to day as to whether or not he would play. When he didn’t play and it was known in advance the scalpers couldn’t sell their tickets. So I know they make alot, but others also benefit.

by TrueGreen on Jan 24, 2009 8:14 PM EST up reply actions 0 recs

The owners don’t need a new CBA to exercise restraint.

The funny thing about the NBA, is that there is little or no correlation between payroll size and winning. In baseball, the teams with big payrolls win consistently. In basketball, most of the teams that pay luxury tax are also-rans (e.g. Denver) or outright lousy (e.g. the Knicks).

by Brickowski on Jan 24, 2009 4:48 PM EST reply actions 0 recs

Agree

To me this is the real source of high salaries and high ticket prices, etc. I thought the salary cap was brought in to stop the owners from paying outrageous salaries to players who don’t deserve it. It used to be that players were payed AFTER they showed they were worth the money. Now they are paid large salaries BEFORE they earn it and an awful lot never earn it. I think the owners, not the players are the problem. Also, the salary structure for draftees seems to be awfully high for the higher picks. Rookies who haven’t shown they can play are being paid more than guys like Rondo who has proven himself. I think a strict salary structure for draftees is a good idea, but I think it needs to be re-worked (lowered) for the lottery picks.

by TrueGreen on Jan 24, 2009 8:20 PM EST up reply actions 0 recs