Well, the NBA and its players finally reached an agreement and are expected to begin their abbreviated 66-game regular season on Christmas Day.
As expected, the owners pretty much routed the players in these negotiations though it would be inaccurate to say that the owners got everything they wanted...they only got most of what they wanted.
I won't bore you with all the details of the new Collective Bargaining Agreement (CBA) between the NBA players and owners. Rather, I want to focus on the highlights and on some of things casual fans might want to know.
The Economics
In the old CBA, the players were guaranteed 57% of "Basketball-Related Income," aka BRI (BRI includes just about anything you can think of from TV/Radio, ticket sales, concessions, parking...you name it). Both sides knew that 57% was too high given the current economy so the players quickly moved to 54%. Though the owners initially were looking for a BRI split that would eventually end up with the owners getting something like 61%, this was pretty much silly negotiating posturing. The owners hardcore number was 53% (47% for the players). While this is what the owners wanted, it was only relevant if the 2011-12 season had to be cancelled. As things played out, it became clear that the owners would accept a 50-50 split if the season could be saved.
The ultimate agreement was a BRI split within a band of 49%-51%. The percentage the players receive depends on whether the league's revenue projection is met (50-50), exceeded (51% for players) or falls short (49% for players).
The agreement on the BRI split doesn't actually change any player's salary, so all players will have a 10% deduction from their paychecks which will be deposited into an escrow account. To the extent that players salaries exceed the prescribed level, the owners will be able to get the money from the escrow account. If the total escrow account isn't enough to cover the owners' shortfall, the escrow deduction % will be increased the following year. In the unlikely event that the players' salaries fall below the prescribed level, the owners must immediately cut a check to the players.
As long as the economy doesn't get any worse, the agreed-upon BRI split should put the league, as a whole, on a profitable footing. It will then be up to the owners to put an expanded "revenue sharing" program in place that moves sufficient money from the big-market teams to the smaller-market teams to ensure that the league continues to have a financially-viable 30-team league.
In purely financial terms, the new CBA ought to work.
The New Competitive Model
This is where it gets interesting...at least to me.
The old CBA had a "Luxury Tax" (LT) provision that required teams whose payrolls were over a certain level ($70mil in 2011) to pay a dollar-for dollar tax on their excess salary. The intent was to discourage big-market teams from attempting to gain a competitive advantage simply by grossly outspending the smaller-market teams. What the league learned was that a dollar-for-dollar tax was little more than a speed bump to teams like the Knicks and the Lakers one bit. For the 2006-7 season, the Knicks willingly paid $45.1mil in luxury tax alone...nearly as much as some of the smaller-market teams were paying in total salary.
In the new CBA, the owners initially proposed a hard salary cap. A hard cap is foolproof. Each team can spend only a set amount on players and that's that. They moved off the hard cap proposal fairly early in the negotiations and eventually settled for a LT that starts at a higher penalty rate ($1.50 tax for each dollar over the tax limit) with the tax rate going higher for each additional $5mil a team exceeds the tax threshold. As an example, if a team exceeded the tax level by $45mil like the Knicks did 5 years ago, they'd be forced to come up with a total tax payment of about $147.5mil. As a late concession to the players the owners agreed to delay this new, more punitive LT system until the 3rd year of the new agreement, so the LT remains only dollar-for dollar for this season and next.
While the season 3 graduated tax system is not a hard cap, the NBA hopes that their graduated financial penalties will effectively "even the playing field" in terms of spending on players. However, keeping in mind that the reason big-spending teams spend big is to gain a competitive advantage, they've also targeted new "competitive penalties" to LT-paying teams.
One of the key new competitive penalties involves what is called the Mid-Level Exception (MLE). In the old CBA, any team over the salary cap was allowed to sign one or more free agents so long as the total first-year salaries of these players didn't exceed the average NBA player's salary ($5.8mil last season). Using this exception, even teams at the top of the spending list could add very solid players to their rosters each season, and since these high-paying teams were among the most attractive franchises to play for, they usually had first choice among the MLE-type free agents.
In the new CBA, the MLE has been reset to a flat $5mil first-year salary with contracts of up to 4 years in length. However, for LT-paying teams, the MLE is only $3mil and the contract length can't exceed 3 years. LT-paying teams will no longer be the destination of choice among MLE free agents.
Another competitive penalty for LT-paying teams is that they can no longer use the "Bi-Annual Exception," which, every other year, allows teams to sign a free agent to a 2-year contract starting at $1.9mil.
LT-paying teams also have more restrictive rules with regard to trades than non-taxpaying teams.
Net, in the new CBA, the NBA learned from their past LT mistakes and is aiming for greater parity by attacking the big spenders on both the financial and competitive fronts.
Is all of this good for the (NBA) game?
Yeah, I think it is. Each of the past 5 NBA champions were LT-paying teams. Fans of smaller-market teams stopped believing that their teams could become legitimate contenders and lost interest. The changes in the new CBA should, over time, give these disaffected fans new hope.
This said, the new CBA isn't very "Bulls-friendly." After years of mediocrity, the Bulls finally have an elite team again. With center Joakim Noah getting his salary bumped from $2.3mil to $11.3mil this season and reigning MVP Derrick Rose set to be extended for a contract starting at over $17mil next season, they'll have an elite payroll to match. Just when the full penalties of the LT kick in, the Bulls team payroll figures to be at its zenith.
A lot has been made of the fact that the Bulls have never paid so much as one penny of LT. This fact has been used to support the position that the Bulls (i.e., Jerry Reinsdorf) will never pay any LT. Don't believe it. Reinsdorf never paid the LT because until now, he didn't have a team that warranted it.
In the end, if you're a Bulls' fan, I wouldn't worry. The team will pay what it takes to remain an elite team and ideally to become a champion.
As an NBA and die-hard Bulls fan, it'll be great to have the games back.
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