clock menu more-arrow no yes mobile

Filed under:

A Look Back at the Collective Bargaining Agreement

Jeremy Lin, an indicator of what's wrong with the CBA.
Jeremy Lin, an indicator of what's wrong with the CBA.

First, happy Labor Day everyone. Today is a day we all take off to look back on the contributions labor unions have made to our country. The 40 hour work week, sick leave, employer provided health care, and the slow death and decay of General Motors. Today isn’t just a day to gorge yourself with barbecue, beer (If you’re legal!), and what can only be described as a small genocide of grilled animal.

What better way to celebrate this on a sports website than to look back at one of the greatest rights labor unions exercise in this country, the bargained for rights of a class of workers. Yes, friends, the Collective Bargaining Agreement (CBA) is on the table today. We’ll look at the goals both sides set out, the significant changes, and some of the issues on the horizon.

The NBA was locked out for a significant portion of their regular season because of stalled labor talks in 2011. The agenda that caused the break down in these talks included a few key issues that management sought to address and the NBA Players Union sought to keep as close to in tact as it could. Management sought a more robust revenue sharing program, non-guaranteed contracts (Similar to the NFL’s model of partial guarantees and almost penalty-free cuts), greater team control over free agents, and shorter contract durations. The majority of the league was viewed as not financially viable in their given markets when all operating costs were factored in.

The players entered talks seeking to keep salaries guaranteed and contracts long while yielding a share of basketball related income in order to accomplish their goals. The ultimate culmination of this was the CBA we have now. In theory both sides came out of this as winners. Contracts are limited to five years (Down from 6) with a cap on the amount that can be offered depending on tenure in the league. Retaining teams can offer a better raise scale on contracts and one additional year as opposed to non-retaining teams. Players secured guaranteed contracts and eluded a franchise tagging system. Management sought to correct the sins of overspending by imposing harsh luxury tax penalties on teams that still sought the New York Yankees model of team building (buy, buy, buy!). Concessions were made via the amnesty agreement wherein teams can eschew one contract on their books prior to the ratification of the new CBA. The CBA governs the way the league will run for the next ten years with a re-opener in six years (five years from the writing of this article now). Perhaps the biggest blessing to all of this is that David Stern will NOT be around for the re-opener.

The buzz around the league was that the agreement was quickly pieced together in order to recognize some form of profit rather than to remedy any real labor and management issues. Questions were still in the air relating to the move from the 125% salary matching in trades to 150% and whether or not the Amnesty Clause could apply to traded players. As the season developed clarifications came along with a shortened schedule. We are now one year into the CBA with a legitimate offseason (Training camps, a full free agency period, and draft). What have we learned a year out?

Well, we learned a few major lessons. The elephant in the room is the Los Angeles Lakers. In one offseason they traded for Steve Nash and Dwight Howard. The idea of the rich getting richer was what set the CBA into motion yet the Lakers potentially took on massive salary commitments all while approaching luxury tax penalties starting at 1.5:1.00 over the threshold (If you are 5 million or less over the tax threshold and it’s your first time) and that ratchets up incrementally. For example, you’re 8 million over the tax threshold, you pay 1.50 for every dollar up to 5 million. Then you pay 1.75 on the next three million. The 2012-2013 season alone (Per HoopsHype) the Lakers are committed to 99 million dollars. That is a whopping 41 million dollars over this last year’s salary cap. The Lakers will be 29 million dollars over the luxury tax AND repeat offenders (Incurring harsher penalties to 4.25 per dollar on the final 4 million for LA). For 2013-2014 the Lakers are looking down the barrel of 78 million dollars (50 million of that in Kobe Bryant and Pau Gasol). This sort of reckless spending was supposed to be reigned in and clearly the CBA has failed in that regard.

The next lesson we were taught is that the NBA needs to restructure the rights arrangement for second round picks. Currently second round picks are not on the same salary structure or contract limits as first round picks. The Rockets exploited this in a major way. Second round picks cannot earn more than the mid-level exception until their fourth year in the league, at which point they are eligible for their maximum extensions. This was key in the acquisition of Jeremy Lin and Omer Asik due to the Rockets cap situation (Severely under the salary cap, Chicago and New York above) because their cap hit is stretched (The paid amounts are the same but the cap hit is the important figure for a club) and the Bulls and Knicks would have had to eat the actual values and cripple their ability to sign first round picks, sign players long term, and make trades. As bad as Los Angeles’ model of purchasing a team is the Rockets have been just as underhanded by sticking it to large market teams to pry away important role players or potential studs (Some 2nd round picks do surprise us, I will never deny that). The CBA glossed over the rights of players drafted from pick 31 on and that will need to be addressed.

Our third lesson is that the NBA’s media model is not sustainable for revenue sharing. The NFL’s revenue sharing is robust because the league controls the rights to broadcast the games and negotiates those rights. The NBA has relegated these deals to the teams and those profits go into the teams themselves. David Stern stated that his goal was a more robust revenue sharing program in the NBA but it’s just not viable. Jersey sales and income from online NBA shops can be distributed but the type of deals signed to broadcast Lakers games will always give them an edge over the type of deals offered to teams like Memphis and Minnesota. Distribution of luxury tax payments to teams under the cap merely rewards owners for understaffing or lowballing their players and trotting out an inferior product (The attempt to offset this with a salary floor merely necessitates spending bad money out of desperation to meet an arbitrary minimum figure). The NFL’s model has more flexibility due to the limited number of games but the NBA is not so inept as to have no options. As near as I can tell the NBA has a pair of viable options if they want to make their revenue sharing robust. First, they could require a percentage of all broadcast contracts be paid into a pool that the NBA redistributes. Second, the NBA could wait until the expiration of all current contracts then release the NBA schedule and sell broadcast rights to the slates of games they’re interested in. Any games not sold to national slates go to local broadcast stations for a set fee that then gets relegated to the organizations. Either way, the solution to revenue sharing is a minefield for the NBA. Teams like New York, Miami, Boston, Chicago, and Los Angeles will always draw more revenue (I’d include Houston in the list but it seems the general opinion is that we need an Asian player to join the big boy’s club) than other teams. The issue is empowering small market teams with money that in turn gets translated to lower ticket prices to increase volume sales (Let’s face it, I’m not shelling out 50 bucks to watch a middling product) and then translated into a viable basketball product.

This brings about our last issue to cover today. The CBA’s troubles with handling finances, accumulation of talent, disregard for the salary cap, and a botching of draft picks rights is that the league is too large to be viable. The league has sought to expand its brand to the point that it is too thin to provide a meaningful experience for most of those interested. Teams like the Bobcats and the Kings are consistently failing to deliver competent management and facilities. Cities such as Seattle were stripped of a team and delivered to a small market that has managed to support it but when the Kings are rumored to be moving and Seattle isn’t granted a team there is an issue with the sport. Proven markets (Yes, I know, Seattle was being difficult with their arena deal but come on) are neglected for experimental markets that ultimately wind up a crapshoot and often with less than stellar results. The modern NBA model requires at least one marquee player in order to be considered competitive. The NBA did see greater interest in the sport since Lebron James joined up with Dwyane Wade and Chris Bosh in South Beach but just how long is that sustainable? How many NBA fans are disenfranchised with the way Los Angeles and Miami has assembled a team and see little hope for their franchise? The NBA will have to tackle this issue sooner rather than later when teams are reporting such major financial losses. The league will have to tackle the idea of contraction due to the emigration of talent from small markets to major markets.

There is one thought I want to leave you with today regarding the CBA in this league. This deal was one that all parties agreed to and bargained for. As broken as the system is, this is the half-baked lovechild of greed and resignation. The owners failed to find any semblance of competitive balance or control over talent (Let’s not even talk about the fact that the contracts given out this offseason have all been pretty ugly too) and the players coughed up a large portion of their share of basketball related income to retain, largely, all of their previous rights. The owners capitulated in the interest of a lockout shortened year to garner what profits they could at the expense of their product (Players injured due to lack of training camps, compressed schedules, bodily strain, etc…). Five years from now it is my sincere hope that under competent management (Good bye Derek Fisher, Billy Hunter, and David Stern) that the NBA owners (I actually agree with Mark Cuban A LOT on his critiques of the CBA) will tow a harder line towards the players and see a few organizations bought out by other owners in order to disperse talent around the league. Happy Labor Day, everyone.