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Tentative Labor Agreement in NBA Reached, But Is It Enough to Save Game?

Byline: Maury Brown

It was 3am ET Saturday morning when it was announced, but never let it be said nothing good happens after midnight. The NBA and the players have reached a tentative agreement to end the 149 day lockout that has placed the entire 2011-12 season. To do so requires that the players reform as a union and drop their anti-trust lawsuit. It also requires ratification of from the owners and the players. For the players, it will be a simple majority of the 430 player body while for owners it requires a majority, or 15 of 29 owners as the New Orleans Hornets are currently owned by the league.

"We expect our Labor Relations Committee to endorse this deal, this tentative agreement," said Commissioner David Stern early this morning. "We expect our Board of Governors at a meeting we will call after that, to endorse the deal. And we expect that a Collective Bargaining Agreement will arise out of this deal as well."

"We thought it was in both of our interest to try to reach a resolution and save the game," NBPA executive director Billy Hunter said.

According to The AP (http://www.nba.com/2011/news/11/25/labor-friday.ap/index.html), participating in the talks for the league were Stern, Silver, Spurs owner Peter Holt, the chairman of the labor relations committee, and attorneys Rick Buchanan and Dan Rube. The players were represented by executive director Billy Hunter, president Derek Fisher, vice president Maurice Evans, attorney Ron Klempner and economist Kevin Murphy.

The league said that decertification of the union and the ensuring antitrust lawsuit that would have tied the sides up in court and could have resulted in $6 billion in treble damages to the owners was not the reason for the sudden movement in negotiations, but it seems that was clearly a large reason for the deal getting done.

And, it almost didn't. NBPA outside counsel Jeffrey Kessler, who has raised the ire of David Stern and the league's owners was quietly moved out as lead negotiator in favor of Jim Quinn who was involved in the 1998-99 lockout, although Quinn was not there in the final negotiating session. According to Yahoo Sports:

The negotiating session nearly came undone in the early moments on Friday night when Players Association counsel Jeffrey Kessler told Stern and the NBA's negotiating team through a speaker phone that the players wanted to move back to a 51 percent revenue split, a league source told Y! Sports. Stern, labor relations committee chairman Peter Holt and deputy commissioner Adam Silver termed the proposal "unacceptable," and soon left the conference room.

Specifics aren't being released at this time as the sides continue to hammer out the final pieces of the deal. The owners were willing to move off a 50-50 split of Basketball Related Income (BRI) and reportedly have accepted a 51-49 split. In the former CBA, players were receiving 57 percent of BRI. On top of that, a strengthening of the Luxury Tax will take place.

"I think it will largely prevent the high-spending teams from competing in the free-agent market the way they've been able to in the past. It's not the system we sought out to get in terms of a harder cap, but the luxury tax is harsher than it was. We hope it's effective," deputy commissioner Adam Silver said.

The question is, is it enough? As I reported for Forbes in July, audited numbers show that the league lost $1.5 billion over the last 5 years (http://www.forbes.com/sites/sportsmoney/2011/07/06/audited-numbers-show-nba-lost-over-1-5b-over-last-five-years/). The players have said that increased revenue-sharing needs to occur as some clubs are turning a healthy profit (see graph below based off the Forbes valuations) which will now be occurring.

The graph below, and link to the associated table show the reasons why.

Select image to see in larger view

(Link to Supporting Data. See "Operating Income)

Whether 51 or 50 percent of BRI, the league did not get a hard cap, and other concessions had to be made. That's part and parcel with the negotiating process. The new deal will be 10-years in length with an option for either side to opt out of the agreement after 6 years. With that in play, one might assume that by the fifth year of the deal, we'll know whether the system is functioning to the satisfaction of the league and union. After nearly losing the season (and the possibility of much of their fan base), those watching the NBA as an industry can certainly hope it's all enough to get the league on financial track.

FOLLOW MAURY BROWN ON TWITTER @BizballMaury (http://www.twitter.com/BizballMaury)

Maury Brown is the Founder and President of the Business of Sports Network (http://www.businessofsportsnetwork.com/), which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, and is a contributor to Forbes SportsMoney blog (http://blogs.forbes.com/sportsmoney/author/bizballmaury/).. He is available as a freelance writer. Brown's full bio is here. (http://businessofsportsnetwork.com/index.php?option=com_content&view=article&id=6&Itemid=15) He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided) (http://www.businessofsportsnetwork.com/index.php?option=com_contact&view=contact&id=2&Itemid=29).

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Author:Brown, Maury
Publication:The Biz of Basketball
Date:Nov 26, 2011
Words:1036
Previous Article:Bizball Radio with Seth Everett & Maury Brown (NBA #3 Lockout Edition) Decertification and a Possible Loss of a Season.
Next Article:Bizball Radio with Seth Everett and Maury Brown - Basketball #4 (NBA Reaches Labor Deal, ESPN and the Bernie Fine Scandal).
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