NBA Lockout: Revenue Sharing, The Elixir David Stern Must Consider

By Tom Ziller - NBA Editor

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Jul 6, 2011 - The NBA has a very good reason to not include revenue sharing as a topic in collective bargaining talks, negotiations that have led to an NBA lockout. The rationale the league clings to: revenue sharing between franchises, namely the rich ones and the poor ones, is a matter for those franchises themselves to negotiate. Players have no direct role in revenue sharing, because players are not regulated by changes to the league's meager revenue sharing system. To share revenue is to execute a transaction between the teams; the player is just somewhere in the crossfire.

That's the explanation for why even at this stage the NBA refuses to consider revenue sharing in its lockout negotiations.

This is why that's a bad idea.

* Revenue sharing is key to the overall economic structure of the league. The NBA and the players' union are essentially trying to create a new economic structure for the NBA, one that allows players to be fairly compensated for their very obvious and very vital contributions to the game, and one that also allows team owners to profit reasonably. This is a mammoth task. When you consider that to get the latter goal (reasonable profits) the owners feel they have to damage the former (player salary) quite a bit, you understand why this is a bit contentious. The claim is that of the two groups of important NBA people, only one is making money. The other is trying to take some of that.

That's the core issue, and it's been manifested in the flashpoint over the revenue split. Currently, players take a guaranteed 57 percent of revenue. They have offered a deal that would give them 54.3 percent. Owners want more movement. To get there -- or any place where the two sides can agree on a new deal -- the whole system has to be reworked.

There's no denial from the NBA that revenue sharing will be important to the future health of the league. The league argues that revenue sharing alone can't fix the problem -- you can't revenue-share your way out of aggregate losses, is the line they have used, most recently in the saddest press conference ever in which commissioner David Stern and deputy Adam Silver announced the lockout. But the NBA admits revenue sharing will be important. Changing the revenue split and instituting a harder cap are vital. They are all pieces of the greater economic structure the league seeks to put in place.

So why are we doing it in a piecemeal way?

You don't figure out a comprehensive overhaul in pieces. Hence the word "comprehensive." Everything that could help bolster the finances of the teams needs to be on the table, right now, in these negotiations. It's the best way to ensure a sensible, profitable system is the result. Unless you're a cynic, of course, which we'll deal with below.

* It's a valuable bargaining chip to use against players. Players want better revenue sharing really, really bad. But the NBA has conceded that chip because of not-unimportant but cynical reasons. Consider this: how much more willing would the union be to move its revenue split proposal downward even more -- maybe to 52 percent? -- if major revenue sharing were on the table? If the L.A. Lakers and New York Knicks bellied up and agreed to cut in the other franchises on, say, a third of their local TV revenue, wouldn't players be willing to make a concession of their own?

The NBA is lighting on fire a concession it says it will make sometime later on fire to keep players out of it, plain and simple. The league doesn't want players involved in the revenue sharing talks, so it is basically forfeiting it as a negotiation point in the larger deliberation on economics. You know, the one that threatens the next season of basketball. And the cynical reason why the NBA is forfeiting this concession?

* This proves the NBA isn't convinced it will get the revenue sharing it wants. There's no other way to look at it: the league must be concerned that the Lakers, the Knicks and the Chicago Bulls won't step up and agree to seriously help out the troubled franchises. Look at it as a version of the union-league dispute: one side is doing well, the other side claims it needs help, the side that's doing well is generally disinclined to empty its own pockets to help the others. When the NBA finally does address revenue sharing, the high-revenue owners will be as entrenched against Stern as the players are now.

Stern can't very well threaten to lock out his glamour franchises as he has his players, and would prefer to keep the pressure on the players to make the biggest concessions. Salary cuts are Stern's priority. Sharing revenue is below that. Including revenue sharing as a negotiation point in a comprehensive economic restructuring of the league would give Stern two public foes on two ends of the spectrum. It's a recipe for disaster from a message management standpoint. And that can only hurt Stern's position.

If the league included revenue sharing in the lockout talks and failed to get a real concession out of the high-revenue teams, the players would be pissed and would have the ability to hold out and not budge in the revenue split and cap malleability issues. If the league keeps revenue sharing out of the lockout talks and attempts to resolve it afterward, and then fails to get a real concession out of the high-revenue teams, the players would be pissed and completely unable to do a damn thing about until five, six or 10 years down the road, whenever the new collective bargaining agreement kicks in.

Hey, I warned you it was cynical.

***

A week ago, I compared revenue sharing to the life preserver the NBA refuses to toss to struggling franchises, with the league instead imploring the players to toss their own life preserver, salary cuts. But that's not quite right. As the NHL has proven, salary cuts alone can't do it. The 2004-05 NHL lockout -- which cost an entire season, by the way -- didn't fix the massive inequities in revenue and spending. There are still rich NHL teams and poor NHL teams. Despite the parade of different Stanley Cup Champions, competitive balance hasn't been fixed because economic parity has not been achieved. Cutting player salaries from 57 percent of revenues to 50 percent or 52 percent or whatever won't narrow the economic gap between the Lakers and the Bobcats, just as it hasn't between the Rangers and the Thrashers Jets. 

The NBA wants the players to toss out their life preserver, but here's the rub: that life preserver won't save the Kings, the Pacers, the Bucks. And frankly, neither will revenue sharing (the owners' life preserver), assuming you believe the NBA's claims about losses in the face of data that, while disputed, insists otherwise). If the league is as broken as David Stern says that it is, there's no one magic potion that will make it well. A comprehensive program of medicine is needed. Players' salary is part of that, sure. The NBA is after the most potent potion in that area possible.

But ignoring or delaying the elixir that is revenue sharing is insanely dangerous, and the league must understand the players' position here. David Stern is asking players to make all of the concessions without a promise that his high-revenue teams will make real concessions, too. I get the reasons why, as illustrated above. But that doesn't make it any less wrong. The NBA is being completely shortsighted about the biggest economic overhaul it has ever undertaken. What a dangerous way to do business.

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