NBA Salary Cap Works Perfectly ... For One Of Its Goals

The NBA wants salary concessions in the name of competitive balance, while showing itself to be rather uninterested in the real fix for competitive imbalance.

The NBA announced four minutes past 5 p.m. last Friday that basketball-related revenues for the 2010-11 season came in at $3.8 million, nearly a 5 percent rise over the previous season. And that's why the NBA released that at 5:04 p.m. on a Friday: because that's not what the NBA wants you to hear.

The NBA also doesn't want you to hear that player salaries grew at a rate identical to that of revenue -- as designed -- because the NBA is trying to convince you that the NBA's salary system is broken. David Stern and his owners do not want a tweaked salary system that simply decreases the players' share of salary but keeps the current soft cap and link between revenue and salary. Stern and the owners want to blow it up, remove that link and make a new system completely unlike anything the league has going now.

And competitive balance will be the rallying cry from here on out.

Because the salary cap is working for its primary goal, which is to "cap salary". The soft cap is designed to limit overall league salary to 57 percent of revenues; the cap level itself is set based on this split. An escrow system ensures that players don't walk away with a greater percentage of revenue as salary. This season, the NBA had to return all of that money kept in escrow to the players because salary didn't reach 57 percent of revenue. 

And not only that, but Ken Berger reported Friday that owners had to kick in an extra $26 million because leaguewide salaries didn't meet the so-called "minimum salary threshold."

So the salary cap worked, at least this season, in capping salaries. We continue to talk about giant salaries -- my "This Is Why We Can't Have Nice Things" series is all about these bad contracts. But that's not actually the real problem with the league. If the owners took the players' proposal right now and lowered the split to 54.3 percent, that'd erase the league's losses and let the owners turn a combined profit. As such, a number of teams would likely fly out of the red -- the salary savings are real, coming out to about $100 million annually.  But the owners aren't going to do that, not by a longshot.

The owners' Holy Grail of the NBA lockout, folks around the discussions believe, is to decouple salary from revenue. You've already seen it in some of the owners' proposal, most notably the one in which Stern suggested the players' salary be capped at $2 billion over the life of the 10-year collective bargaining agreement. Two billion dollars is a lot of money ... but it's roughly what the players take home now, which means that for the life of the new CBA, any growth the NBA saw would be pocketed by the owners. The owners know that so long as revenues grow, player salaries must grow. They want to end that. They certainly understand how difficult that will be to accomplish -- Billy Hunter is no fool -- but that's the aim.

But how can the owners continue to plead their case for a new salary system when the current salary cap actually works, and with a shift in the salary split would continue to serve its purpose?

They'll plead it by drumming up support for competitive balance, that (perhaps mythical) ideal in which there are no dynasties or cursed teams. Every team can win every year; you will never be stuck with a loser for a decade. Under competitive balance, all 30 teams start the season with a rousing performance of "Kumbaya" and end by holding hands. It's the ideal.

It's also an idyll. The 1999 CBA was supposed to help fix competitive balance; it just created new avenues of advantage for the wealthiest owners to explore. We have seen over the past 12 years how far NBA owners are willing to go to outspend their counterparts to gain an edge. No one does it better than Mark Cuban and the NBA Champion Dallas Mavericks. And trust me, it'll be possible under a hard salary cap, just as rampant mismanagement will keep bad teams bad for the better part of a decade, as seen in the hard-capped NFL. (I direct your attention to the Oakland Raiders.) A number of NBA owners have shown in practice that they like tilting the machine in their favor. You really think a little ol' thing like a hard cap is going to stop them? Nope.

The key to competitive balance isn't hammering down on the victors, making teams like the Miami Heat impossible to create. The key to competitive balance is to even the playing field ... which can mean raising the lower-rung teams up to the level of everyone else. Those are the teams losing all of this money: the Pacers, the Nets (pre-Brooklyn), the Kings, the Hornets. By helping these teams become more competitive on a consistent basis, you'll help balance the league.

That's why this NBA lockout is beyond frustrating: because the owners seemingly have little interest in fixing their own house. Stern has left revenue sharing off of the table in CBA negotiations with the union, and says that the league will hammer out comprehensive revenue sharing reform once the lockout ends. He says that it's an issue between teams, not between the league and players. Obviously, players are rightly concerned that by separating the issues, the league will get a weaker revenue sharing system than if it were included in the CBA talks.

It's frankly insulting that the league can push the idea that creating more money for all owners can balance the league. Like the L.A. Lakers really need to cut their salary. Jerry Buss just signed a deal to deliver $200 million in revenue a season just for local TV revenue. That alone will cover the highest payroll in the NBA and all expenses of putting on a season. That makes all other revenue streams frosting. And we need to cut his payroll? Ha. Ha ha. Ha ha ha.

Competitive balance means giving everyone a fighting chance, and that means sharing some of that frosting with the teams in cities that draw $8 million for TV rights. It may also mean substantial changes to the way payroll is structured -- I'm a big fan of further cuts to contract length, such as capping contracts to four years, except in the case of a team's own free agents who are younger than 30, who can re-sign for five years. To further increase flexibility, the final year of any deal signed for three years or longer would be fully unguaranteed. Teams would be protected from injury to star players, players would still receive lucrative guarantee contracts, and bad teams could escape mistakes more readily. Give the lower-rung teams a chance to compete regularly through revenue sharing, decrease the good team-bad team life cycle, decrease the revenue split to 52 percent (lower than players have proposed, but I think doable) to get the league toward the black, and get a damn deal done. 

But negotiations aren't about what's fair or what will work to "fix" a league that saw revenues increase 5 percent in a bad economy. Negotiations are about what you can get. Stern is going to the brink to see what he can get out of the players, and he hopes it's a whole lot more than what's been laid out here. Unfortunately for him, the facts are getting in the way.

The Hook runs Monday through Friday.

***

Correction notice: a previous version of this column stated that the players' revenue split proposal would erase the league's losses and that a 52 percent split would create profit for the league. It has been updated to more accurately reflect the parties' claims.

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