On Monday, the National Basketball Players Association (NBPA) announced that they had rejected NBA owner’s proposal for a new Collective Bargaining Agreement. As is usually the case, most people are turned off by labor negotiations concerning professional sports, seeing the conflict as the petty squabbling between two groups of privileged individuals. Make no mistake, though, that the NBPA made the right decision in rejecting the proposal. Not only is this rejection in the best interest of the players, but it is also in the best interest of small-market owners like the New Orlean’s Hornets as well.
When it comes to professional sports and labor disputes, the public is usually not sympathetic to either side. Looking at the comments on any article that recently discussed the NFL lockout or the current NBA lockout and you will read something to the effect of “billionaires arguing with millionaires” at least a dozen times. That is because neither side is perceived as being forced to work in deplorable conditions for low wages. As a result, many people blame both the players and owners for a lockout. During this trying economic climate, hearing wealthy people discuss revenue sharing must seem especially unseemly for many. For this reason, it’s not surprising that a recent poll found that 76% of Americans do not miss the NBA.
But when it comes to the NBPA rejecting the owners’ proposal for a new CBA, people shouldn’t roll their eyes and groan as if the players are being selfish. It was a bad deal that actually did nothing to solve the real problems the NBA is facing. In fact, it could only serve to exacerbate the problem. The deal fell apart over a few key issues, one being the unlimited escrow system the owners wanted to introduce. ESPN reports that if the owners spend more than their percentage of the Basketball Related Income (BRI) on player salaries, then they get to take 10% of the escrow accounts to satisfy the difference. If that still doesn’t cover the difference, then owners can access 1% of another escrow account that deals with “post-career player annuity and player benefits.” If the difference is still not covered, then future escrow accounts can be accessed to cover the cost.
This is obviously a bad deal for the players. They have no guarantee that 10% of their salary is ever going to actually be theirs. Add on top of that the access that the owners might get to their future benefits. Most players only play in the league for about five years, so losing 10% every year is no small matter. The incentive for owners to stay within the cap disappears with this proposal, as they will only ever have to spend the stated percentage no matter what they spend. This creates a powerful moral hazard for the owners and could ensure that players always lose 10% of their salaries every year.
But that also makes this a poor system for small market teams as well. One of the reasons that the owners are pushing for a more favorable CBA is that player salaries are crippling small market teams. They have crippled themselves with player contracts that probably weren’t worth the money. They can’t, though, absorb these contracts the same way the Boston Celtics or Los Angeles Lakers can and just spend over the soft cap and take the luxury tax hit. As Bill Simmons writes, “The players won't help them. Their attitude is, ‘Just don't sign those dumb contracts then.’ But the owners have proven — flagrantly and embarrassingly over these past few decades — that they can't freaking help themselves. They want more protection.”
But this escrow system doesn’t offer protection for small-market teams. The big markets have the capital to spend well over the allotted percentage and take years to recoup the loss through those escrow accounts. Small market teams, with less capital, still won’t be able to compete with the spending of the large markets. And they will probably still make stupid deals for too much money and too many years. So, the NBA will still have basically the same problem: Small-market teams will still struggle. Now, though, players will be worse off.
The players were more than justified to reject the proposed CBA. It affected their salaries and benefits in a way that gave owners license to take more of their money. Worse still, this deal would not have benefited the small market teams that have been struggling this past decade. So when you hear about the NBPA rejecting this offer, try to refrain from rolling your eyes and thinking “what a bunch of selfish, privileged rich people.” The players may have just pulled the small market teams from the fire, so they aren’t completely selfish.
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