The Real Evil In The NBA Lockout

By Andrew Sharp - Featured Contributor

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Sep 16, 2011 - It's Friday, it's football season, life is good. There's really no reason to dwell on the tedium of the NBA lockout anymore than we need to. But if a new collective bargaining deal was really derailed by Dan Gilbert and Robert Sarver this week, then it's important to take a few minutes to explain why that's so infuriating.

In case you missed the report from ESPN late Thursday, Sarver and Gilbert were the owners who refused to compromise this week, even earning scorn from their peers.

Owners were seriously considering coming off of their demand for a salary freeze and would allow players' future earnings to be tied into the league's revenue growth, a critical point for players. The owners also were willing to allow the players to maintain their current salaries, without rollbacks, sources said.

But when the owners left the players to meet among themselves for around three hours, Cleveland's Dan Gilbert and Phoenix's Robert Sarver expressed their dissatisfaction with many of the points, sources said. The sources said that the Knicks' James Dolan and the Lakers' Jerry Buss were visibly annoyed by the hardline demands of Gilbert and Sarver.

Now, the specifics of the NBA lockout battle are important, but again, there's no need for us to get bogged down in the mind-numbing minutiae of corporate bargaining sessions. Not when Gilbert and Sarver are such compelling case studies themselves.

First there's Robert Sarver. After making his fortune in banking, he paid $401 million to buy the Phoenix Suns in 2004, and almost immediately, he began cutting costs. With Steve Nash smack in the middle of his prime, he sold off first round draft picks for millions of dollars--picks that became Rudy Fernandez and Rajon Rondo, among others. He also gave up two first round picks to Seattle so that they could get rid of Kurt Thomas and his $8 million salary. If there's been one theme to Robert Sarver's tenure as Suns owner, it's that he simply isn't interested in spending what it takes to own a winning basketball team. The Suns got worse almost as soon as Sarver took over. Then they got a lot worse, and in 2011, they're functionally irrelevant.

But that's strictly a basketball issue. Where the morality really gets murky is here is why Sarver was cutting costs. After overpaying for the Suns in 2004, the economy went south in large part thanks to shady mortgages brokered by banks. When the house of cards collapsed, nobody was hit harder than banks, and bankers like Sarver. 

To look at this from a broader perspective: Robert Sarver cut costs the minute he took over, and at the same time, he raised ticket prices for each of his first three years as owner. Then, when economic calamity struck, he received $140 million in bailout money from the U.S. government, kept ticket prices the same, and sought to cut an additional $40 million from his team's payroll. And this is one of two men dictating the direction of NBA collective bargaining. Excellent.

The other man is Cavs owner Dan Gilbert, the yin to Sarver's yang. Unlike Sarver, Gilbert has spent like crazy as an NBA owner. He gave a pair of $60 million contracts to Zydrunas Ilgauskas and Larry Hughes in the same summer back in 2005. He traded for Mo Williams and his $60 million contract. He signed Anderson Varejao to a $50 million deal.

When he finally traded Hughes, it was an exchange that brought back Ben Wallace (in the middle of a $60 million contract of his own) and Wally Sczerbiak (in the final year of a $63 million deal). He paid $21 million to Daniel Gibson, and adding a poetic exclamation point to all this, when Robert Sarver was trying cut salary in 2009, it was Dan Gilbert who eagerly scooped up Shaq and his $20 million salary.

In other words, the man who today is demanding guaranteed profits at the expense of basketball being played is the same man who spent hundreds of millions of dollars in his first five years as owner, paying the likes of Larry Hughes, Wally Sczerbiak, Shaquille O'Neal, and Daniel Gibson.

Like Sarver, though, where this gets interesting is why he did it. To Gilbert, losing money on the Cavs made "tremendous sense". Because he could see that even if a team loses money, the tertiary benefits still make it a sound investment. As he told authors Terry Pluto and Brian Windhorst in their 2005 book, "The Franchise":

To me, NBA franchises are like pieces of art. There are only 30 of them. They aren't always on the market, especially a franchise that would have been such a natural fit ... If you just looked at the Cavaliers in terms of revenues, profits and balance sheets -- and you paid this amount for it -- people would say "You're insane! You're nuts." But if you look at all the tentacles, the impact on our other venues, it makes tremendous sense. "We have now opened a Cleveland office [of Quicken Loans] and that's tremendously successful. Our employees love it that we're associated with the Cavs and can come to games -- that helps us attract and keep better people. There are a lot of non-profit things that can be done with pro sports. It brings an unbelievable amount of excitement."

Gilbert could afford to lose money owning the Cavs because owning the Cavs opened doors to other revenue streams. For instance, when Dan Gilbert was lobbying to build four casinos all over the state of Ohio, he could point to his spending with the Cavs as proof of his commitment to the state's welfare. And now he's building a billion dollars' worth of casinos.

And let's not forget his primary business: Quicken Loans. Before subprime mortages sabotaged the U.S. economy and bankers like Sarver, they made Dan Gilbert a small fortune. As one writer summarized back in 2010:

Gilbert is the man known as "Subprime Dan," the who made his millions as CEO of Quicken Loans, offering 0%, no money down mortgages to potential home buyers over the Internet. ... As foreclosures reached record highs in Cleveland, Quicken Loans reported that 2009-2010 has been their most profitable period in the company's history.

In other words, the man who points to a depressed economy to justify the NBA's financial overhaul is the same man who profited from the reckless lending methods that almost single-handedly depressed the United States economy.

Ted Leonsis, himself an NBA owner pushing for reform, once explained ownership like so:

"I view owning a sports team - it's a public trust. You have the psychological well-being of millions of people in the palm of your hand. And I think it's no different than being a politician that being a mayor - I was mayor of my town in Florida for a while, and you feel that you're there to represent a large collection of people and hold the mirror up to them. And that's what I think owning a sports team is all about."

It's a public trust. When you think of ownership in those terms, it puts the lockout in a whole different perspective. On some level, the entire NBA is a public trust. We pay money to support the league, trusting that the game will entertain us, enrich our lives, and at the bare minimum, distract us from whatever ails society, in general. So when David Stern mentions the "changing economic landscape" as grounds for reform, there's a cruel irony in men like Dan Gilbert and Robert Sarver driving the hardest bargain of anyone.

Together, they represent opposite sides of the fool's gold coin that's come to represent America's financial collapse. One sold half-baked housing loans, the other bought them all. One man overpaid for bad players, the other refused to pay for good ones. As an owners and businessmen, the only thing that outstrips their greed is their incompetence.

Who knows what'll happen over the coming weeks and months. The NBA definitely needs reform, and players are willing to make concessions on that front. But at its core, the NBA is about public trust; trust that Robert Sarver's long since eroded it, and trust that Dan Gilbert's repeatedly exploited. If these are the men who get to decide what happens to the NBA this year and beyond, it sure makes it hard for the rest of us to keep the faith.

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