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http://sheridanhoops.com/2011/09/05/nba-lockout-update-sides-are-closer-than-theyre-saying/NEW YORK — Here’s the dirty little secret about the NBA lockout, despite what both sides — the owners and the players — would have you believe:
They are a lot closer to a settlement than most people realize.
I know this because I talk regularly with a bunch of important people who tell me important things, and I am going to explain why I believe a settlement will be reached that will not only save the season, but also enable the NBA to have an “all is forgiven” honeymoon period (similar to what the NFL just experienced following its labor settlement) in which the frenzy of free agents signings, trades, training camps and exhibition games will make everyone forget all of the doomsday talk they’ve been hearing all summer.
First, some background. If you only listened to union director Billy Hunter, as NBA players were doing in late August while Hunter was touring the country giving status updates to his locked-out membership, you’d think the sides are currently $8 billion apart in their stagnant negotiations. That is the party line from the union.
But it is not entirely true.
Yes, under the 10-year collective bargaining agreement the owners have proposed, the gap is indeed somewhere in the area of $7-8 billion range.
But if you look at the six-year deal the players have proposed, which includes $500 million less in annual revenue (than what they would have received under the old deal) over the six upcoming seasons, the simple math tells a different story:
Over those six years, the difference in proposed revenues that would go to the players adds up to $2.97 billion.
That is still a significant amount of money, but it is nowhere near as significant as what is being put out there publicly.
Moreover, if you look at years 1, 2 and 3 of the proposals, the sides are a total of $870 million apart. (The players are asking for $2.17 billion in salaries and benefits in 2011-12, $2.33 billion in ’12-13, and $2.42 billion in ’13-14. The owners are offering a flat $2 billion per year.)
Or to put it another way, in a business that brought in $4.2 billion in revenues last season, the sides are only $170 million apart for next season.
Does that seem like an insurmountable difference that would justify the cancellation of the season? No — especially given the fact that neither side has said it has put its “last and best” offer on the table.
The gap in what each side is seeking financially in Years 4, 5 and 6 is more significant, and what the owners are asking for in Years 7, 8, 9 and 10 is not completely germane to the equation right now because the players have not indicated they would be willing to do a deal for longer than six years, and history shows the sides traditionally have negotiated six-year labor agreements.
Owners and players are scheduled to reconvene Wednesday or Thursday to set in motion a series of meetings that will determine whether the lockout is settled in time to save a full 82-game season. If the owners come to the table with an offer that promises more money than the flatlined $2 billion in Years 1-7 that they have been proposing, they’ll be getting somewhere. So that’s the first thing to watch for.
Another major sticking point, for now, is the owner’s desire to transition from the current soft cap system to a hard cap system in Year 3 of the new CBA, which would necessitate an unprecedented giveback, perhaps through an unlimited escrow tax, perhaps from an across-the-board salary cut for every NBA player, that the players would simply not accept. (If Hunter put that proposal forward to his membership for a vote, it would be rejected, he would be out of a job, and the sides would go back to square one.)
Also, a transition to a hard team cap in Year 3 would almost certainly necessitate the breakup of LeBron James, Dwyane Wade and Chris Bosh in Miami. You think the NBA really wants that?
So the Year 3 transition that the league is seeking is actually a red herring. But if there were to be a transition to a hard cap (or a harder team cap through a more punitive luxury tax system) in Year 5 or Year 6, it would allow teams a half-decade of long-term financial planning to get ready for the new harder-cap system. This is one of the areas where it seems the owners have no choice but to soften their current stance.
But here is the key thing, the two most important words to keep in mind as this lockout plays itself out: Aggregate dollars.
Right now, the owners have offered the players slightly more than $12 billion in total compensation over the next six seasons. The players are seeking just under $15 billion.
Somewhere in between $12 and $15 billion lies the settlement number, and they’ll get there one way or another. Once that happens, it’ll take only a few days to tweak other aspects of the CBA – pensions, the anti-drug policy, the draft, the age limit, group licensing — that have barely even been touched upon in negotiating sessions thus far. It would then take approximately two weeks to put the agreement into writing, and then the business would reopen.
So what does that mean in terms of a deadline to save the current 82-game schedule?
Here is a projected timeline that pushes things about as far as you can push them:
Oct. 1: An agreement is reached on aggregate dollars.
Oct. 4: All remaining issues are settled.
Oct. 5-19: The agreement is put into writing.
Oct. 20: Free agency opens and players already under contract are allowed to report to their teams.
Oct. 21-31: Training camps are held, and each team plays two exhibition games.
Nov. 1: The season opens on time, with three games: Bulls-Mavericks and Thunder-Lakers in a TNT doubleheader, along with Rockets-Jazz.
I have been saying all along that there is too much to be lost by having a work stoppage that extends into the fall and forces the cancellation of games. And with the NBA coming off a fantastic season in which attendance, ratings and merchandise sales all skyrocketed, there is took much risk of punishing the product to go too far down the bumpy road the owners have chosen to take.
At the end of the day, they have too much to gain by making a deal that gives them a significantly larger share of the pie that what they were getting under the old deal. And lastly, all of the principle players in the negotiations are reasonable and rational men. They are not interested in destroying what they’ve built up over the past several seasons, especially in 2010-11.
So a settlement is coming, and I am here to tell you that it’ll likely come a lot sooner than most everyone else has been predicting. It’ll take a lot of back-and-forth over the remainder of September, but it can certainly get done when both sides can identify the middle ground and move there simultaneously.
