See update at bottom of post.
Henry Abbott of TrueHoop has an appropriately and predictably skeptical snipe at the owners who, in the course of NBA lockout negotiations, have managed to both convince everyone that they are collectively broke and have negotiated in new rules that allow them to spend more money.
The [amnesty] clause gives every owner the right to pay off one player to go away. Owners won't wriggle out of paying the player, but they will wriggle out of any affiliated luxury taxes, while gaining cap room. [...]
Meanwhile, the 20 players the plugged-in [Chad] Ford and [Marc] Stein project will be cut are due nearly $500 million combined over the rest of their current deals. Those NBA owners will likely, as a league, pay an extra $500 million just to tweak rosters here and there.
In other words, before all the kings' horses and all the kings' men have put the league's economic model back together again, owners have already asked themselves: Would they like the right to pay players an extra $500 million to be a bit more competitive?
And to that they have said a resounding "Yes, we'd love to!"
Abbott goes on to argue that these owners who amnesty players will then pay their replacements, which just piles money on top of money.
It's actually even more vanilla than that.
The players Ford and Stein choose as amnesty picks make a combined $180 million or so next season. Suppose the owners get their precious 50-50 split. That means that players would be due 50 percent of league revenue in the aggregate. Let's say that David Stern magically ends the lockout and the season goes a full 82 games, and basketball-related income rises to $4 billion. (We like round numbers.)
Players would be due $2 billion in that case. Under another negotiated slice of the league's new, nonexistent agreement, teams will keep 10 percent of players' salaries in escrow. (That's up from 8 percent in the last agreement.) Let's say that contracts -- those in existence right now and those to be signed by free agents like David West and Marc Gasol, as well as thoses by rookies -- add up to $2.18 billion, which happens to be the payroll level for last season.
Under the escrow system, teams have hung on to $218 million of player salary until revenue gets trued up in July 2012. That basketball-related income comes in at $4 billion, which sets the league salary cap at $2 billion. Teams had actually paid out $1.96 billion ($2 billion, less 10 percent) during the season, and have to release a total of $40 million from the $218 million escrow pot to even it up. Team owners keep the remaining $178 million. This is how escrow usually works.
Except all of those amnesty players now must be removed from the equation. Abbott says that the league and union have negotiated a clause that removes amnesty rule players from total league contracts for these purposes. They don't count on the team salary cap, so they don't count against the league salary cap. But they still get paid.
So owners pay out $1.96 billion during the season and hold $218 million in escrow. But now we remove the $180 million paid out to amnesty players from the equation: this amount doesn't count against the league cap. There's $164 million of that in what has been paid out, and $18 million in escrow. (We'll assume amnesty players still pay into escrow.) Now teams have officially paid out $1.796 billion in salary and hold that $218 million in escrow.
The true-up tells owners they need to give players $204 million out of escrow. So they do. And now owners hang on to just $14 million.
Without the amnesty clause and assuming these conditions, owners pay out exactly $2 billion in salary next season. With the amnesty clause and assuming the practice is exactly as widespread as Stein and Ford project it to be, owners pay out an extra $160 million in salary next year, for a total of $2.16 billion.
Owners are holding out for an extra $100 million in concessions from players in the form of the revenue split. This single clause could cost them up to or more than $160 million next year, without even looking at dominoes regarding higher salaries for replacements.
This is pure insanity.
This is a one-time cost vs. an institutional shift, but finding ways to immediately spend spoils acquired through no small amount of pain seems rather short-sighted. But that seems to be the only way some of these owners operate.
UPDATE: The league says that Abbott's reporting on the salary of amnesty players not counting against league basketball-related income is incorrect. That essentially wipes this exercise out.