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The NBA: Labor Negotiations Produce Puzzling Comments From Billy Hunter

The recent NBA draft was a great success for the Kentucky Wildcats, but how about for the Wildcats players who were drafted?  Lest we forget, there is a pretty important struggle going on right now between the league and the NBA players over, of course, money.  Yes, there are other issues, but the real issue is greenbacks, moolah, cheddar, dollar bills, and who gets how much.

Let's throw it over to Billy Hunter, the National Basketball Players Association executive director, for our first giggle:

Professional athletes are often puzzled by the general public’s attitude toward them when they become embroiled in labor disputes with team owners. That attitude seems to range from apathy to contempt; few seem to identify with the players at all.

...

"It’s part of the overall climate that one sees around the country," Hunter said. "True, our players may earn a few more dollars than the average person, but they’re still confronted by the same issues." [my emphasis]

Star-divide

I think Hunter was trying to be serious, but ... seriously?  I am reminded of the movie Jerry Maguire ,in the scene in which Tom Cruise is watching a TV sports show and a football player with an apparent drug problem, crying, tells the host:

They don't understand what kind of problems and pressures 54 million comes with.

This perfectly illustrates Hunter's absurdity.  The average NBA salary is something around $5.5 million dollars.  Of course, that number is misleading due to the mega-contracts of guys like Kobe Bryant and LeBron James et. al. , but the league minimum for a rookie with 0 years of experience was almost $442,000 in 2010-11.  The average household income for Americans in 2009 was around $41,000.

It isn't that people can't make the leap of logic to see the similarity, it's the contrast in problems that keep rearing up.  Most Americans are trying to keep their financial heads above water and keep from drowning in debt, and it drives nearly every decision from choice of schools to family vacations.  NBA players, even at the lowest level, have no real excuse for having financial problems at all other than living in vast excess, due to the fact they make more in 1 year than "Joe Six-pack" does in a decade.

So I guess the only thing I can say to Billy is, "Brother, please!"  The average American understands the labor vs. management struggle perfectly well, but your stakes are just a little different.

Hunter goes on to make yet another comment that struck me as funny:

"Their intention is to lock us out and break the union to achieve what they want to achieve," Hunter said following a meeting of player representatives from the 30 teams.

On it's face, this seems to make sense.  Wouldn't the league be better off without the NBPA?  In a word, no.

The NBPA is the only thing standing between the NBA and an endless series of antitrust lawsuits, which is exactly what happened when the NFLPA decertified in 1987 after the NFL broke their strike, and ultimately forced the NFL back to the bargaining table.  Like the NFL, without the NBPA or similar labor union, the NBA could no longer effectively act as a league, at least in the sense that it does now.

What no NBPA would essentially do is force a contraction of the league and a firewall between teams.  Without intraleague sharing and collaboration, salary caps and free agency restrictions to "level the playing field," it's likely that the NBA might have to split itself into small market and large market divisions.  It would change the game dramatically, and I have no idea if it would be successful or not, but my feeling is that it would be bad for players and bad for management, except for the large-market team management, who would probably reap vast profits due to lower player salaries assuming league popularity did not decline below a certain level.

There is a limit to how low salaries can go, though, and that is largely determined by the burgeoning foreign basketball leagues.  Competitive pressure for players from that quarter would likely ramp up quite a bit and force a floor on the large-market team salaries, and place small-market teams in an even more difficult position.

To me, at least, the NBA union (and probably the NFL union also), because of the problems it solves with the Sherman Anti-Trust act, is less parasitic than other unions seem to be, and more symbiotic.  So I think Hunter is profoundly wrong there.  The NBA needs the union to exist in its current form, and the union needs the NBA to maximize player income.

What works against the union is that fans and general public are largely opposed to millionaire collective bargaining, on the principle that regardless of the similarity to other private union issues, they just aren't the same due to the amount of money the players are making.  Is that "class envy?"  Yes, but then again, we are talking about human beings here with all their faults.

In the end, both parties know that they will reach an agreement.  What we have here is posturing.  Both parties have valid arguments and grievances in this fight that need to be addressed, and they eventually will be, at least at some level.

But if Hunter thinks he can rally public support by hyperbole such as the above, I don't think he could possibly be more wrong.

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You would think,

that with one year in the NBA and the right financial adviser, you should be set for life.
On one level, it blows my mind that someone can have $400000, run out of money, and expect sympathy! But on another level, can I really expect a 19 year old to know what to do with a half million dollars?

by tyler cottrell on Jun 25, 2011 11:26 AM EDT reply actions  

Anyone who thinks $400,000 will set you up for life has never made $400,000.

Raise a couple of kids, take care to the two mothers-in-law, send the kids to good schools, and buy a nice house (not a mansion, just a nice house) and you will discovery that $400,000 isn’t rich. It is nice – you should be able to pay bills and put some money in savings, but “rich?” Please. For one, people that make $400,000 actually have to pay income taxes. Lots of people making the “average” salary don’t pay any Federal income taxes – they get a check back for the earned income tax credit. You probably know more people in this $400,000 income bracket than you know because the standard of living difference isn’t that large. It certainly isn’t set for life.

As Chris Rock once said, Shaq is rich, but the guy that signs his paycheck, that dude is wealthy.

[Note: I have never made $400,000 either.]

The players and the teams are both helped and hurt by the CBA – notwithstanding the anti-trust issuse. Salary caps essentially protect the teams from paying too much for talent – hurting the best players. But it keeps smaller market teams healthy and competitive, good for the league – and thus good for the majority of players since more teams and a healthy league means more NBA players. These two groups need each other – no one pays to see intersquad scrimmages. You need a complete league of fiinancially healthy teams, and thus having a union and CBA help both sides in that regard.

Unlike, say, anything other than pro sports leagues. There, the unions work to kill their employer. Go visit Brandon Knight next season in Detroit (if there is a season) for proof of that.

by JackBluto on Jun 25, 2011 12:17 PM EDT reply actions  

I think you are right.. these kids need a financial advisor.

Think about it.
$400,000 – 10% agent fee = $360,000
$360,000 – 33% tax bracket = $241,200
$241,200 – $40,000 new car = $201,000
$201,000 – $200,000 new home = $1,000

The money can go quick in the first year.. and most guys do credit on the car and home and then have to pay all of that interest. So I can see how they can get into a hole quick.

by Cameron1 on Jun 25, 2011 12:23 PM EDT reply actions  

Hmmmmmmmmmmmmmm...

run those #s again, using the average Joe’s $41k. The new car alone blows him up. Maybe some will say “yeah, but his career is only gonna be 5 yrs. on average”. True enough, so give ‘average Joe’ $400k for 5 yrs. I think he’d take it. The money is there for pro athletes like it’s not for average Joe, so if Mr. Athlete runs thru with it, too bad, at least he made it for a while. And, he gets that money for doing what a lot of us would die to do, and basically do in church leagues/pickup games/company leagues/etc. anyway. Granted, Mr. Athlete has to train harder, but he’s getting compensated.

Class envy? You betcha. How many of us wouldn’t want to play bball for $400k/yr. if we COULD? I haven’t followed baseball since the last strike back in the ‘80s. I was a baseball NUT. I used to put my son in the car, drive down to Cincy from Toledo, and later the Detroit area, on Friday after work, catch a game Friday nite, sleep in the car at a rest stop, go to King’s Island Saturday, catch a game Saturday nite, sleep in the car at a rest stop(money was kinda hard to spread around for us in those days), maybe even catch a doubleheader(anyone remember those?) on Sunday and drive back Sunday nite. So, when those pampered/overpaid/egotistical louts decided to strike, AGAIN, I said screw you. I haven’t gone to a game nor watched a full game on tv since. I admit that I have watched an inning or 2 since then. Maybe a handfull of times since.

Pro athletes need to recognize, and owners alike, that they’re nothing without the FAN. We make their world possible. If it wasn’t for US, many of them would be playing pickup games on the weekends, just like the guys they really are, without the advanced physical skills…………Average Joe.

Sorry, Cam, didn’t mean to preach. :)

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 25, 2011 6:51 PM EDT up reply actions  

The NFL is expensive and making tons of money.

Avereage Joe is willing to pay for the tickets.

I’m sure you feel better not watching baseball b/c of a strike. All those fans were in the stands to watch the owners I suppose. But if that makes you happy, that’s great. I’m not being sarcastic. But I still love baseball, the NFL and UK players in the NBA. When the lockouts/strikes whatever end, I’ll watch again. I understand why they are fighting, and I don’t care too much who wins.

Truth is, the players should fight for more pay. That physical skill you describe is a very rare asset – a combination of genetics and very hard work. They bring the people to the stadium and to the TV set, and they, like an attorney or a doctor or a skilled craftsman or any other rare valuable employee, should try to get every penny they can from the person paying for their services. The difference b/t a car assembly line union member and a baseball playing unioin member is the employer can get any high school graduate to replace the former and achieve similar productivity, while it is really hard to replace the latter. I don’t mean to pick on any jobs – but there is a reason pro athletes and other professions make so much. They have hard to replace skills.

by JackBluto on Jun 26, 2011 12:36 AM EDT up reply actions  

I'm a free market guy, JB,

and I wouldn’t blame anyone for getting all they can. Legally. But, imo, comparing the salary some athletes, and I’ll throw in entertainers in general, to a doctor just isn’t logical. Do you think it’s worth $25 million/yr. to play a game? Granted, they can play it or sing it or act better than you or I. Is any baseball player really worth $50k or more per at bat? We’re not talking about life and death or possibly going to prison for life or death row, right? We’re talking about playing a game. I guess some of the CEOs that people complain about are just getting what they deserve, what the market will bear also. I’m the sort of guy that doesn’t like to overpay for ANYTHING.

As a former baseball junky, I can tell you straight up that I haven’t missed it. But, that’s just me. It’s kinda like when I decided that I was drinking way too many soft drinks and I went to water instead. I ended up losing 8#, saved money and after the 1st couple weeks, I didn’t miss it. But, I don’t say it’s for everyone. You wanna pay extravagant prices for a ticket, more power to ya. Whatever make you happy, I say. I’m not being sarcastic, either.

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 26, 2011 6:37 AM EDT up reply actions  

Here is the problem with your "worth" analysis.

I don’t know how much money an NBA or NFL team makes, but let’s say the Lakers make $100 Million in NET revenue not counting any professional employee salaries, from GM to players (this excludes hourly security, popcorn sales, etc.) from tix sales, TV and playoffs, merchandise, etc. Now, someone is getting that money – someone has to. So who?

For every million you take from the players you are giving that to a coach, a GM or the owner. Now, all those guys have skills and are partly responsbile/to blame for the team’s profits and on court/field success. Why do you say the players aren’t “worth” a bigger share than your arbitrary “worth” figure? The money was made and is going to be “earned” by someone. The players, who are the actual product being sold, have every right to claim a piece of that pie no matter how big it ends up being.

Same for other forms of entertainment. Some top line movie stars make so much b/c their product earned in the past or earned on that project (and they had points) so much money. If the product doesn’t sell, they start making less. At least in most forms of entertainment.

by JackBluto on Jun 27, 2011 4:09 PM EDT up reply actions  

JB,

I guess we’ll just have to accept that we’re at opposite ends of the spectrum on this one. But, I WILL say this………………what any particular business makes in profit doesn’t mean that the employees should get half that profit. The owner put up the money to create the business or buy the franchise, so he reaps the rewards. I don’t begrudge anyone a decent living, but these salaries have gotten out of hand, as have ticket/food/drink prices at the games, imo. You’re entitled to your opinion and I’m glad you have no problem paying $200, or whatever the ticket prices are these days.

GO CATS!!!!!!!!!!!!!!!!!!!

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 27, 2011 6:51 PM EDT up reply actions  

They have to pay taxes and the agent fee, but...

They don’t have to buy the $40k care and $200k house. I believe it was Brandon Jennings that bought a $26k Ford when he signed his first contract. I under stand that Jennings case isn’t typical, and I really don’t think I would have been real thrifty at 18 years of age if I was handed $400k. But these guys have access to financial advisors and other players who have been through what they are about to go through. So there really isn’t any excuse for ending up broke. I have accomplished a lot over the years and I have never made more than $100k in a year’s time. I have also had my fair share of financial problems. But looking back on what I was able to accomplish on the money that I did make, I can only imagine what I could of done over the years making $400k for 5 years in a row. If they would just save their money, they would never get into a hole. If they spend it as soon as they get it, than of course they will get into a hole in a quick way. They have to be smart.

by ScottWalls on Jun 26, 2011 5:30 PM EDT up reply actions  

He spent 26K on a car?

That’s it? I’m serious. Cheap compacts cost $20,000 new. That is hardly a lot for a car today.

by JackBluto on Jun 27, 2011 4:11 PM EDT up reply actions  

From a basic economics standpoint...

what is the truth? The small market teams seem to be claiming that they are losing money (in the millions). If they are losing money, it doesn’t make sense that they should stay in business. I realize that there is some sort of revenue sharing, but supposedly it isn’t enough to move the small markets into the black. I suspect that the truth is that all the teams are profitable to varying degrees, just that the small markets want to be more so. So in the final analysis, this whole thing is a more a money grab than anything else…it is difficult to be sympathetic for either side when that is the entering criterion. The pie is pretty big..so fussing over the slices is relatively silly..but an essential part of the process nonetheless. Lets play ball and split the cash fairly.

by BlueOrion on Jun 25, 2011 1:50 PM EDT reply actions  

I really believe that salaries in all major sports need to get under control....

Athletes are pricing out “Joe Six Pack” from being able to attend games.

Slower Traffic Keep Right!

by SevenRings on Jun 25, 2011 1:52 PM EDT reply actions  

Too late

“Joe Six Pack” hasn’t been able to attend much of anything since the 1970s. Rock concerts, major sports, you name it. The price of tickets has gone up by an order of magnitude.

Too bad our wages haven’t.

"He still carries a lunch bucket. What's up with that?"

by BlueCollarMan on Jun 25, 2011 3:21 PM EDT up reply actions  

+1

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 25, 2011 6:52 PM EDT up reply actions  

Funny. I don't see just rich people at the games and concerts I go to.

I see people using their entertainment budget on what they deem most important.

The cost of the tickets is a direct result of the demand fro these tickets.

Maybe we should let the government hand the tickets out to the “people.” Then the peole will sell them on RazorGator – b/c they know they are worth more to other people.

I never feel offended about not being able to afford a concert I would like to see – but don’t want to pay over $100 for a ticket. I am lucky I listen to a lot of music and find great bands I can see and stand 10 feet away from for $15.

Play this class envy all you want. I’ll work harder so I can afford some ticket to some events and I’m happy to let the rich go to the rest.

by JackBluto on Jun 26, 2011 12:26 AM EDT up reply actions  

Brings up a funny, or not, story

I remember when the Beatles 1st toured here. I remember saying “$4.00 ? Who the hell do these guys think they are? Elvis only gets $2.75” But, that was back before they invented water, so there’s that.

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 26, 2011 6:41 AM EDT up reply actions  

$6

I have a Kentucky Colonels ticket stub here from Oct 31, 1973 vs. the San Diego Conquistadores at Freedom Hall. Section 114 is $6.

I also have a stub from last year, Toronto Raptors vs. Nuggets at Air Canada Centre, section 120 for $240.

The 2011 Raptors couldn’t carry the jockstrap of the 1974 Colonels.

The difference in ticket prices has a lot to do with how the tickets were sourced. In 1973, I bought the $6 ticket from the box office. In 2011 I was gifted the ticket from a corporate officer who of course expensed it for entertainment. Professional sports has evolved to serve the entertainment needs of our corporate masters.

"He still carries a lunch bucket. What's up with that?"

by BlueCollarMan on Jun 26, 2011 9:40 AM EDT up reply actions  

$8

That’s what I paid in March 1975 for Bulls vs 76ers playoff game (Eastern division championship).

The ticket was for a front row seat not far from the basketball.

by FortyYearCatFan on Jun 26, 2011 1:34 PM EDT up reply actions  

I worked at a gas station in the mid-60s

and Kids would come in and collect the pocket change from all the kids in the car and that’s how much gas they’d get to drive around on. It was common to get $2 of gas at a time.

God Bless Our Troops............Especially Our Snipers!

by bigbill992001 on Jun 26, 2011 7:23 PM EDT up reply actions  

You can buy tix to the Atlanta Hawks for $10-15 a seat today.

In real dollars, that is much less than $6. They are in the highest part of the stadium, but there are worse seats in Rupp than any seat in Phillips as Rupp is much bigger.

The Braves have $9 seats (and $1 seats on the day of the game in far away places) but you won’t be next to the field.

I guess my point is I just don’t think the prices are so bad unless you want the best seats.

Admittedly, I want the best seats, so I go to few games, but I get great seats. But other people have different priorities, and it is true that the business entertainment aspect is the most important part of selling the expensive tickets.

by JackBluto on Jun 27, 2011 4:16 PM EDT up reply actions  

Athletes?

They are the ones pricing out “Joe Six Pack” from attending games? If that’s the case, then I assume in whatever occupation you have you negotiated a smaller salary than the market dictated so that “Joe Six Pack” could afford whatever goods or services you perform.

by UKfaninDC on Jun 25, 2011 8:33 PM EDT up reply actions  

Being an NBA fan.

This labor dispute saddens me. I think if this drags well into the season there will be much fan unrest. From a fan prospective it seems a tiny bit selfish to me that it gets to the point of a lockout. There has to be some truly fair way to divide billions isn’t there? This along with many other reasons is why I will always be a bigger college basketball fan.

by phatcatfan on Jun 25, 2011 6:46 PM EDT via mobile reply actions  

NBA Economic Reality

Profitability is a somewhat slippery concept. Most people like to think of profitability as what you have left after you pay your bills. But in business that appealing definition is many times tortured to unrecognizable dimensions (all legally) to satisfy multiple government regulators, avoid taxes, entice and placate investors as well as focus management. One place to peek at what is going on under the financial covers of the small market teams is to examine the financial statements of the New Orleans Hornets. – Article

Small market teams that have been losing money show they basically continue to operate through financial lifelines extended by (1) the NBA itself in the form of loans with incredibly favorable terms such as super low (effectively 0%) interest rates and flexible deferred payment provisions; (2) external short and long term lenders not as favorably structured; and (3) equity infusions from team ownership.

By the time the New Orleans Hornets went into NBA receivership in 2010, the Ownership Deficit (amount investors put in the business without getting a return on that investment) was -$83 million. The New Orleans Hornets were an extreme case (I’m guessing here, the reality is that there could be worse cases.) but that’s what is at stake in the labor dispute from the ownership side. The bottom eight teams are slowly seeing their owners’ equity go further and further in the negative.

If you focus just on cashflow, revenues and expenses that increase and decrease bank balances, it’s clear the greatest source of revenues is (1) gate income, (2) broadcasting and cable rights, and (3) particularly for the Lakers, Knicks, Sixers, and Heat, corporate sponsors and advertisers. Overall ticket prices and media rights fees have been escalating significantly in recent years but have experienced resistance in smaller markets. Also, corporate sponsor and advertiser revenue has reportedly been rather stagnant or even declining for the small market teams. Welcome to the recession, Mr. NBA Executive.

Not surprisingly, on the expense side the biggest operating cost is clearly Salaries and Benefits. You would think that with predetermined players’ contracts teams would be able to structure their payout to stay within their means but the pressure to ‘stay competitive’ is such that managements routinely allow player salaries to push the outer edge of their profitability projection envelope using little to no fiscal discipline. The result is often losses, sometimes big losses, anytime a revenue projection goes under goal. String a few bad years together whether due to natural disaster, national recession or just fan apathy and you have a genuine problem. For the 2008-09 season, Forbes reported 12 teams operated in the red – the most since 1998-99. – Article

The squishy nature of the salary cap is routinely blamed for this problem and has been since the soft-cap was instituted in 1983. In addition to allowing teams with the money to violate the salary cap if they are willing to pay the so-called luxury tax on the overage, the league has added no less than 10 legal exceptions to the salary cap: Mid-level exception, Bi-annual exception, Rookie exception, Larry Bird exception, Early Bird exception, Non-Bird exception, Minimum Salary Exception, Traded Player Exception, Disabled Player Exception and Amnesty Exclusion. Effectively, there is no salary cap for big market teams. And, with exceptions like Utah and San Antonio, the fact most teams find it difficult to exercise fiscal discipline means competing with these big market teams is financially eating some of the small market teams alive. – Article

However, the NBA did it to themselves, I have absolutely NO sympathy for them. This new CBA will undoubtedly, imo, trim back some of the excesses inherent in the soft-cap in direct proportion to the amount of backbone the League shows. How much? Probably not nearly as much as they need to.

by TeamWeaver on Jun 25, 2011 9:28 PM EDT reply actions  

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