CBA Talk: Why the Owners Might Move Enough to Get the Players to Meet Them in the Middle

After weeks, months and, arguably, years of preparing for the likelihood of a long, frigid winter for the NBA and its players, did last week bring a sudden and unexpected thaw? Consider what Sam Amick referred to yesterday as “the reading of the labor tea leaves.”

"On the heels of Roger Mason’s now-infamous tweet in which the NBPA vice president wrote, “Looking like a season. How u,” but later claimed his account was hacked, one league source claims that union president Derek Fisher text-messaged numerous players last week indicating that some progress had been made and imploring them to be physically prepared just in case the season started on time. There was another curious happening on Thursday, when — according to ESPN’s Chris Broussard — NBA deputy commissioner Adam Silver attended the U.S. Open with Wasserman Media Group CEO, Casey Wasserman [whose company employs NBA power agent Arn Tellum and serves his stable of clients, which includes Pau Gasol, Joe Johnson, Brandon Roy, Al Horford, Russell Westbrook, Tyreke Evans, LaMarcus Aldridge and Danilo Galinari]."

With much of the NBA blogosphere begging for activity daily since June 30th, they should be pleased with both last week and this week.  Last week brought the optimism so many were seeking. An owner/player meeting today includes an expanded group of representatives for each side. On Thursday, the two sides will break into their individual conclaves to let their constituents know the current state of the negotiations. (The owners will meet in Dallas and the Derek Fisher will take the NBPA reps to Vegas, where about 40 players are slated to participate in the Impact Basketball Academy summer league.)

Of course, we could just be in for a much-needed lesson in the difference between activity and accomplishment, as Ken Berger cautions.

"According to five people briefed on the three days of high-level talks over the past two weeks, the two sides essentially are in the same place they’ve been since the owners’ most recent formal proposal in late June: billions of dollars apart.“I don’t think they’ve made any progress there at all,” one of the people briefed on the negotiations told CBSSports.com. “They’re talking a lot, and the conversations are more cordial. But as far as the real numbers, I don’t think there’s anything there.”"

So what we hear on a daily basis could mean everything, nothing or anything in between. One month from now, we could be analyzing free agent moves and training camps or we could be sitting exactly where we are. As has been the case for two and a half months, nothing will be any different, until something is actually different.

Hawks, Doves and Henry’s Owner Headcount

On Friday, TrueHoop’s Henry Abbott posted one of the most useful pieces of the lockout thus far — his “best assessment of where the 30 owners stand at the moment” in terms of their bargaining positions. And his research has led him to conclude that the ownership group is more fragmented than David Stern would have you believe.

"The way the NBA tells it, all 30 owners are perfectly united, on every issue from hard caps to revenue sharing.Of course, it cannot be so. Human nature dictates some owners are doves — eager to play the upcoming season — while others are hawks who would risk ditching a season in the name of a new collective bargaining agreement that strongly favors owners."

If the harbingers of progress are real (denials, notwithstanding), and the two sides are on the verge of an agreement that prevents the cancellation of games, then it tells me that the owners have moved considerably from their most recent public position. The reasons why the owners — who have been broadly portrayed as unreasonable bullies in this conflict — may actually be dealing from a semi-permanent position of weakness can be seen by using Abbott’s research to break things down a little further.

Though Abbott’s piece is based upon some speculation, it is relatively well-founded speculation. He lists “more than a dozen well-placed sources” that include “people directly involved in the talks, owners, players, CBA experts.” So for the purposes of this discussion, let’s presume it is at least accurate enough to base a worthwhile conversation on.

The simple tally is as follows:

17 “Hawks” (who would risk the season in the name of a new CBA that strongly favors owners)
12 “Doves” (who are eager to play the upcoming season)
1 Unclear (Alex Meruelo, who owns the team in Atlanta I won’t name for the confusion it could create)

Even if you were to cede Meruelo to the side of the hawks, 18 to 12 does not represent a strong majority. This count would dovetail with a comment Abbott made a few weeks suggesting that only about four owners needed to be moved out of the hawk category to get a deal signed with the players. Therefore, let’s take his arguments and break the owners down even further.

(Bucks owner and hawk hardliner Sen. Herb Kohl (D-WI) on what he thinks of the current CBA.)

Hawk Hardliners – 7

Jordan (CHA), Gilbert (CLE), Kroenke (DEN), Heisley (MEM), Kohl (MIL), Sarver (PHO), Maloofs (SAC)

These guys want big changes in the CBA and robust revenue sharing. But they are not a particularly influential group and are further muted by the possibility that they may not agree to any compromise that the players could swallow.

“Hockey” Hawk Hardliners – 2

Tannenbaum (TOR), Leonsis (WAS)

These guys also own NHL team. They lived through that league’s canceled 2005 season and came out OK. But they may be drawing parallels that are or aren’t sound. The answer to that isn’t something we could know unless an NBA season, in 2011-12, gets cancelled.

Private Equity Hawks – 2

Gores (DET), Harris (PHI)

These two come from the private equity world and are brand-new owners who are probably looking at the bottom line more closely than previous owners.

Hawks Who Had Success But Want Better Returns – 6

Grousbeck (BOS), Cuban (DAL), Allen (POR), Taylor (MIN), Holt (SAS), Miller (UTA)

Cuban and Holt probably fit the bill best for “smart owners who know how to succeed in current system, but recognize it includes huge amounts of luck if you’re not the Lakers.” If there is common fear among these guys, it’s that if they fall, they might not be able to get back up again. (See: Glen Taylor). But it’s not the individual motivations that matter here as much as who these guys represent. This group includes some of the most successful and stable franchises in the league.

(Jerry Buss enjoying some “psychic benefits” of owning the Lakers.)

Doves in Huge Markets Who Are Doing Just Fine Under the Current CBA – 3

Buss (LAL), Reinsdorf (CHI), Dolan (NYK)

It seems to me that there is really no way these three franchises don’t come out of this worse in any “reset” of the system. The current structure gives them big advantages that they are financially capable of exploiting. Perhaps Chicago might see some advantages compared with the other two (Jerry Reinsdorf is a much more conservative spender than the other two), but really, all three would probably be better off continuing the old CBA.

Doves in Strong Markets And/Or With A Large Incentive to Play This Year – 5

Lacob/Gruber (GSW), Bennett (OKC), DeVos (ORL), Arison (MIA), Alexander (HOU)

These guys range from “I’m OK with the current system” to “we gotta play this year.” Bennett and DeVos may benefit long term from changes to the system, but they won’t vote to lose this season. (Durant/Westbrook have too much short-term potential and Dwight Howard may only have so much time left in Orlando.) Arison needs the season (LeBron/Wade/Bosh won’t be around forever), and Golden State and Houston are doing well enough in their larger markets to be OK with how things currently stand.

Dove Living the American Dream – 1

Prokhorov (NJN)

Mikhail is immensely wealthy and owns arguably the league’s worst-performing franchise. But he will soon be moving to a huge market in Brooklyn and is trying to hang onto a superstar (or near-superstar) in Deron Williams, as Abbott noted. The history of the franchise suggests that its owner would take a hard line, but hope for future and the kind of money tailor-made to exploit the old system keeps him dovish.

Dove Named Donald Sterling – 1

Sterling (LAC)

I can’t begin to really explain the machinations here, but the short answer is that Donald Sterling will figure out how to make whatever system exists work to his advantage — financially.  Besides, it’s certain he doesn’t want to lose another season of Blake Griffin.

League-Owned Dove – 1

NBA (NOH)

As Abbott puts it: “As the NBA owns the team, the good money is that this vote will echo whatever Stern wants. And by the time Stern presents a deal to owners for their votes, it’s a sure thing he’ll want it to pass.” In short, the league won’t put up any fight against its own proposal.

The One Dove Pacers Fans Care About Most – 1

Simon (IND)

Simon wants big revenue sharing changes, but he is apparently malleable on the system. At 76-years-old, Herb Simon is reasonably eager to move forward with the Pacers’ turnaround. Given the positive vibes emanating from last years’ finish and the ample cap space available, Simon may just be tired of waiting to finally erase the JailPacer era.

Go Big or Stay Home

Possibly the single most important thing to understand about the negotiation relationship between the owners and the players is also the one that has been singularly (perhaps studiously) ignored.

It is as follows: A lockout is the only weapon in the owners’ arsenal, if they want to make significant changes.

Without that threat, and without the will to act on that threat, the owners are reduced to saying, “pretty please with sugar on it” for anything they want. The NBPA need only play a spoiling action to put the owners to a decision about losing games, and most times, that will be a relatively safe gamble.

The issue faced in this bargaining session is that the owners view the current agreement as to be almost entirely in favor of the players.  As such, there is nothing they have that they would be willing to “trade.” Since they have no carrot, they are left with only the stick.

But the lockout, and  more importantly, the actual cancellation of games — let alone a season — must be used prudently. Before crossing that line, the owners must be rock solid sure of two things: (1) they will stick together, and (2) they will win.

As we see by the diversity of the list above, sticking together is a problem. Though many owners would like to see significant changes, this new look provided by Abbott’s breakdown — and my further distinctions — makes it hard to see that many would be willing to sacrifice much more than the summer and/or preseason to get them.

Of the 17 hawks listed in the Abbott piece, only seven seem to be entrenched enough to be willing to sacrifice all or even part of a season. And those on the extremes of a vote are always somewhat irrelevant in a negotiation, as little or nothing that transpires will change their minds. These seven (the owners of Charlotte, Cleveland, Denver, Memphis, Milwaukee, Phoenix and Sacramento) are further marginalized by the fact that they hold little influence within the voting community.

Moving to the other end of the hawk spectrum, you have the six owners who are most likely to swing their vote. Their positions seem “soft” to me — at least in this limited context. Dallas’ Cuban and Boston’s Grousbeck seem more likely to want to be hard on the players to avoid any significant revenue sharing reforms. But both, along with San Antonio’s Holt, are going to be highly motivated to get their aging championship contenders back onto the floor as quickly as possible. As rich as Cuban is, he may be swayed to kick the can (meaning any problems he has with the current CBA) down the road six years so he can get a 33-year-old Dirk and the rest of his old squad back on the court in November to mount a title defense.

If the owners are unsure that they will be able to remain unified then they’re probably even less sure of being able to “win.” That is to say that even the cancellation of a full season is unlikely to bring the owners what they want. And it seems that the previous two years of saber-rattling from the owners has put the players in position to last out a year.

Consider this: While some owners are fine with (and some would may actually prefer) a system like the current one, there are zero players who want anything to do with the owners’ proposed changes. So while the owners have largely been portrayed (and specifically, by me) as the more unified group who have the bank accounts to hold out longer, that might be a false narrative. One side features about 18 guys who want a CBA “reset”; the other features 450 guys (plus a ton of high-powered agents and any sponsors that just wants the games to start on time) that want the status quo. Unity comes easy, when all you’re trying to do is get somebody to vote “no” to what they view as “a poke in the eye with a sharp stick.”

Furthermore, the changes the owners want will disproportionally affect the middle and lower rung players, who basically are the union. The question of the lost paychecks can be ameliorated by understanding the structure of the players’ pay. According to Shamsports, 272 players made $3 million or less last season (combined, this group made about $314 million). If I were planning for the union, I would be using the reported $175 million lockout war chest, along with possibly the $26 million filler from the BRI audit to support that block of players through the lockout.

Those players, plus a chunk of the 124 players who made between $5-$15 million last year who are staring at being gutted, would likely give you a rock solid “no” vote to anything resembling the owners last public proposal.

Add to that potential (though limited) overseas opportunities, and it’s realistic to believe that the players could last an entire season or more. While I’ve made the comparison of “guys who’ve learned to hold their breath longer vs. guys with oxygen tanks” in the past, I’m less sure that there isn’t a tipping point in a long lockout where the advantage swings back to the players. None of this even considers what impact an upcoming National Labor Relations Board ruling could have, let alone the fallout from a potential decertification of the NBPA or any other litigation.

What it really comes down to is the inherent problem of having just this one weapon in the arsenal. If the threat doesn’t work, you have to cancel games. If canceling games doesn’t work, you have to cancel the season.  If canceling the season doesn’t work, that’s the ballgame.

Now and pretty much forever.

Winning without Winning, Losing without Losing

So now the owners are in the grey area where everything can still be walked back. Other than some meaningless summer leagues, nothing has been cancelled, so nothing has been done that can’t be “undone.” If they are going to abandon their hard line so that no scheduled games will be missed then they have to act now.

Given the seemingly fragmented position of ownership shown here, it’s a very real possibility that they could easily abandon their hopes for a “reset” of the system, and settle for a simple money grab that could be gained through a more favorable BRI revenue split. It could be that the “reset” was always a red herring, and this could have been the goal of certain key owners all along.

But then again, maybe the owners are considerably less smart than that and were “fighting the last war.” Maybe after spending the last two months (and/or years) trying to convince the players they were serious, they finally realized the players were serious, too. Then, they contemplated what they were going to have to do if they really were serious. And upon reflection, and perhaps number-crunching, they are not prepared to do it.

In either case, the last two months could have served to push both sides off balance enough that an offer to maintain most or all of the current CBA system (soft cap, Bird exceptions, MLE, guaranteed deals, and contract lengths) could gain the owners a better BRI split — and faster — than otherwise hoped. It seems likely that getting the players down to 50/50, give or take a percentage point, would be enough for all but the seven hardliners above to agree to start the season on time (or as close to it as possible) regardless of the cap system.

Assuming the players are willing to go as far as 50/50 is a risky proposition. But it’s not unreasonable. It’s important to remember that the players — like the owners — are not of a hive mind.  And while the BRI split is important to both, the actual percentage is really something of an abstraction to the two sides.

Consider this: Reducing the BRI split to 50/50 would represent a “pay cut” for the players of a little over 12%. How that affects each player, however, remains an open question. Assuming the same cap structure, you would clearly be able to see the impact on max deals, rookie deals and full MLEs. However, what happens with everyone in between?

Let’s pretend for a moment that, under the old CBA, Nene would have signed a 5-year deal averaging $12 million this summer. Now, under a CBA that is unchanged structurally but features a 50/50 BRI split, it is not certain that he would suffer from a 12% pay cut and instead have an average annual salary of $10.5 million. What he will demand on the open market could be unchanged.

This is because non-max, non-rookie and non-MLE contracts are only tangentially a function of the BRI split.

The primary determinant would be the same as always has been: the number of suitors with available cap space, and the ardor with which they will pursue him. The NBA’s salary structure doesn’t even approach being sophisticated or calibrated enough to have any direct effect on that market reality.

Now let’s talk about the impact a system change might have.

Let’s keep the BRI split at 57%, but reduce the max contract length to four or five years, instead of the current five or six years. That saves the owners zero dollars in total and pays the players the same amount. However, it is likely to have a far more obvious and punitive effect on individual players.

By reducing the max length by even one year, you impose a 20.1% reduction on what would have previously been a six-year deal, and a 23.5% reduction on what would have previously been a five-year deal. Of course, the player would have the opportunity to make that sum up on the next contract. But you have to ask yourself — what percentage of NBA actually players sign more than one “big” contract? (Answer: usually only the few that were worth their first big one.)

Unlike the exercise we went through with the owners, we can’t attempt any useful break down of how the league’s 450 players may be inclined to vote. There are just too many individuals with two many unknowable motivations and thought processes. But we can reasonably put ourselves in the mind of Josh McRoberts, the player ranked 250th out of 500 in ESPN’s #NBARank project. If you are him, which is more threatening to you: a reduction in the total amount of money the players will be owed or the reduction in the length of contracts and a hard (or harder) cap that will necessarily curtail guaranteed contracts?

I think we know which Josh would choose.

We will likely hear later today if more owners now seem inclined to let Josh keep his years — and the rest of the player-favorable system — in exchange for a cash grab off the top.

Ira Winderman summed it up perfectly.

"We have reached the point of the NBA lockout where things either will move quickly or not at all."

If the owners let go of the system, and the players see significant value in that, then there is probably enough common ground — and common fear — to get a deal done.

If not …

Acknowledgment: Recently, I have had the privilege of receiving access to a team of financial and legal experts formed by Larry Coon. Their purpose was to parse through the league’s financial documents and make sense of the financial issues that underlie the labor dispute. They contributed greatly to Larry’s previous article on the lockout and have provided the foundation for some of the ideas in this piece. Assume the good ones are theirs, the bad ones are mine. Many thanks to Larry Coon for the opportunity and to everyone involved – all denizens of LakersGround.net — for their time and thoughts.

As always, thanks to Jared Wade for his help on editing and generally helping shape the piece into something coherent.