NBA Fan Voice: Proposing A New Salary Structure

It's NBA Fan Voice Day, and fans are making their voice heard amid all of this NBA lockout drama. David Wunderlich, better known as Year2 on SB Nation's SEC blog Team Speed Kills, has a lockout solution: a new salary structure with player slots determined by shares of the cap. Check it out below the jump.

Here's Year2.

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I grew up in Orlando in the '90s, which means that it was impossible for me not to become an NBA fan. It kills me to see the labor strife going on right now just over a decade after we had a lockout-shortened season.

That strife got me thinking about how the salary structure in the NBA could be different. I think I came up with something that is unique but that aligns the two sides' incentives. The goal of making this was to make sure that both the owners and players are committed to raising league revenue while avoiding future disruptions due to lockouts or strikes.

Here are the basics:

 

  • The percentage split of league revenue between owners and players will be negotiated in collective bargaining as now. The salary cap will be determined based on that split.
  • The value of the cap for the current will be based on the players' share of the previous year's revenue. Not only will this ensure that we're working based on hard numbers (rather than projections), but it provides some interesting incentives.
  • Players' salaries will not be expressed in dollar amounts. Instead, they will be expressed in a percentage of the cap. A superstar might sign a 25% contract, while the league minimum for undrafted rookies would be something like 0.5%. All of the designated salary levels (minimum salaries, the draft wage scale, trade exceptions, etc.) will be re-calculated as percentages.
  • Teams can go over 100% for Bird rights and such, with a luxury tax determined by collective bargaining.

 

What's In It for the Owners

As long as league revenues rise from one year to the next, owners will come out ahead of where they bargained for the current year.

Imagine the sides agree on a 50-50 split. Let's say last year's league revenue was $3.5 billion. The players' share for this year will be $1.75 billion. However, let's say league revenue for this year ends up being $3.75 billion. The owners' share of that revenue will be $2 billion, or about 53%. For this fiscal year, they literally got more than they bargained for.

This fact will ensure that owners will do whatever they can to raise league revenue each year.

What's In It for the Players

Signing for a percentage of the cap means that players can increase their salaries beyond whatever built-in escalator clauses they have in their contracts. If they play hard every night, don't tank or slack off when their teams' playoff chances are toast, and generally do anything else to increase fan satisfaction in the game, they can help raise league revenue.

Increasing league revenue will make the cap figure bigger, which makes their percentage salaries bigger than they otherwise would have been. The rising tide will lift all boats.

What's In It for Fans

For one thing, it effectively makes every year a contract year for the players. No further elaboration is needed on that point.

Most of all, it penalizes both sides for labor fights that disrupt seasons.

Because the players' salaries for the current year are based on last year's revenue, the owners would stand to lose lots of money. Going back to the hypothetical above, the players will get their $1.75 billion this year regardless. Any lost revenue from this year due to a lockout eats away entirely from the owners' income. If a lockout was long enough to, say, cut league league revenue in half to $1.75 billion, the owners would get none of it to pay for things like front office staff, arena leases, and all of their other expenses. If the owners think the entire league losing $300 million in a year is untenable, imagine how they'd feel about essentially going without any revenue for a season.

Of course, any reduction of revenue from this year will hit the players next year. If a player strike cut league revenue down to $1.75 billion for the current season and the split remained the same, they would get only $875 million to divide among themselves. If the revenue returned to even just a $3 billion level, the owners would get $2.625 billion (70.8%).

Neither side would like the outcome of a labor dispute interfering with the season. It would hit owners first, which is fair given that they're all independently wealthy from other pursuits. It would give the players a year to prepare for their salary hits, which is good given that many players are personally on shaky financial ground.

So that's my plan. It preserves the soft cap for the players while also having some sweeteners for the owners. It also provides a structure where cancelling parts of seasons is extremely detrimental to both sides. Whether something like this could ever work in reality I don't know, but I like to think it is better than the dysfunctional system that is in place now.

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