Berger on the CBA Talks (The Big Lockout Thread) (Farewell to the Lockout and the Thread, p. 259)
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LarryCoon
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PostPosted: Sun Jun 19, 2011 10:13 am    Post subject:

1since71 wrote:
you see stern saying they gave the players thier guarented contract request.reality is they gave nothing players already have this right.


Said "right" ending June 30.

That said, look at this as a scale from -10 to 10, with 0 being where we're at right now. A deal 100% in favor of the owners would be -10, and 100% in favor of the players would be 10. Again, 0 is what we have right now.

The deal is going to end up somewhere between 0 and -10. The players' starting position is where we are right now, or 0. The area of the scale between 0 and 10 is simply not going to be a part of this discussion.

The only thing being negotiated is how far in the negative numbers they're going to end up -- i.e., how much the players will have to give up. Not giving up guaranteed contracts is a (small) win for them -- even though they have them in the current agreement.

It's an ancillary issue from a league-wide perspective, but important to the players from an individual perspective. Given this, it's a reasonable thing for the owners to have given back at this stage of the negotiations. The owners have more of a big-picture and long-term perspective than the players do (for obvious reasons).

But it does signal that they won't actually end up with a hard cap (which I already suspected). You can't have high salaries, guaranteed contracts and a hard cap at the same time. Even with a salary rollback, you'll quickly reach a point where something's gotta give. If they were going to be adamant about a hard cap, then they would have stuck to their guns on guarantees.
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PostPosted: Sun Jun 19, 2011 10:57 am    Post subject:

^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.

I think my idea of a soft cap with a hard cap above it could be a fair compromise.
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PostPosted: Sun Jun 19, 2011 11:14 am    Post subject:

LakerSanity wrote:
^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.

I think my idea of a soft cap with a hard cap above it could be a fair compromise.



To me, there's only one issue (and there's really only one issue to the owners): How are you going to split the pie?

If the owners got the 50-50 split they want, they wouldn't care too much about the mechanism by which it was achieved.
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PostPosted: Sun Jun 19, 2011 11:24 am    Post subject:

activeverb wrote:
LakerSanity wrote:
^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.

I think my idea of a soft cap with a hard cap above it could be a fair compromise.



To me, there's only one issue (and there's really only one issue to the owners): How are you going to split the pie?

If the owners got the 50-50 split they want, they wouldn't care too much about the mechanism by which it was achieved.


The mechanism is the means to achieve that split. There is the split and then there is the pragmatic aspect of how to achieve it. Even then, I think the owners care about a better product and not being hamstrung in regards to bad decisions. So while the money is #1, the mechanisms are a matter of concern as well so to ensure a good product and adequate player movement.
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PostPosted: Sun Jun 19, 2011 11:59 am    Post subject:

^^^^

Guys,

I might have missed something - but where this information on "50-50 split that owners want" is coming from?
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PostPosted: Sun Jun 19, 2011 12:05 pm    Post subject:

LarryCoon wrote:
1since71 wrote:
you see stern saying they gave the players thier guarented contract request.reality is they gave nothing players already have this right.


Said "right" ending June 30.


Let's be precise. There is no "right" to guaranteed contracts under the existing CBA, with a couple exceptions such as rookie scale contracts. When team compete for free agents, however, a team that does not offer a guarantee is at a great disadvantage. As a practical matter, virtually all contracts for significant players are going to be guaranteed because those players have the negotiating leverage to get guarantees. This has been true for a long time.

The owners were asking for a rule that would prevent players from negotiating for complete guarantees. There is nothing wrong with asking for such a concession. In fact, I won't be surprised if this winds up back on the table at some point. The owners have dropped the issue from their current proposal, but the players aren't anywhere close to accepting that proposal. There is going to be a lot of negotiation before this is over.

LarryCoon wrote:
But it does signal that they won't actually end up with a hard cap (which I already suspected). You can't have high salaries, guaranteed contracts and a hard cap at the same time. Even with a salary rollback, you'll quickly reach a point where something's gotta give. If they were going to be adamant about a hard cap, then they would have stuck to their guns on guarantees.


I don't follow your logic. If the owners get their way, there will be a transitional phase and a salary rollback. In fact, Stern is acting like a three-year transition phase is a big concession by the owners, when in fact it would be necessary in any case. But once you've transitioned to a hard cap system, I don't see why you couldn't have guaranteed contracts. The contract either fits under the hard cap, or it doesn't.

There would need to be some provision in the hard cap system to deal with major injuries to players. I haven't thought it through, but I'd assume that the owners have something in mind. This would be true even if contracts are only partially guaranteed.
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PostPosted: Sun Jun 19, 2011 12:07 pm    Post subject:

LakerSanity wrote:
^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.


The owners are demanding a 35/65 revenue split, not 50/50. I think you're guessing about where things will end up. You could be right, but that's not where the owners are coming from at the moment.
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PostPosted: Sun Jun 19, 2011 2:26 pm    Post subject:

Aeneas Hunter wrote:
LakerSanity wrote:
^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.


The owners are demanding a 35/65 revenue split, not 50/50. I think you're guessing about where things will end up. You could be right, but that's not where the owners are coming from at the moment.


I wasn't guessing. That's what the article from Berger stated in the first post of this thread. Was there some report that contradicts him and calls for the 35/65 split you mentioned? Sorry if I missed something.
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PostPosted: Sun Jun 19, 2011 4:07 pm    Post subject:

LakerSanity wrote:
I wasn't guessing. That's what the article from Berger stated in the first post of this thread. Was there some report that contradicts him and calls for the 35/65 split you mentioned? Sorry if I missed something.


Yes, you missed something. The 50/50 split mentioned by Berger would be after the owners took about 25% of BRI for themselves. It works out to about a 35/65 split. Note the highlighted passage in the Berger article:

Quote:
But once the phase-in period ends, the owners are still insistent on their original plan -- proposed in January 2010 -- to deduct approximately $900 million in expenses from the league's basketball-related income (BRI) and reduce the players' share of that from 57 percent to a 50-50 split, multiple sources told CBSSports.com.
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PostPosted: Sun Jun 19, 2011 4:11 pm    Post subject:

Isn't that $900 million representative of costs (before playing the players)? In other words, isn't essentially what the owners want is a 50/50 split of net revenue?
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PostPosted: Sun Jun 19, 2011 6:49 pm    Post subject:

The owners would probably try to explain it that way. They want a system under which the players take a one-third pay cut and every team is guaranteed a profit in the $15-25M range. If they got their way, the hard cap would be set at $45M per team.

I realize that you used the term net revenue in the post with your proposed framework. But you were using BRI numbers. The owners want to switch from 57/43 of BRI to 50/50 of about 75% of BRI (which works out to about 37.5% of BRI, or a 37.5/62.5 split of BRI). It works out to about an $800M haircut for the players, or about $2M per player.

You can use whatever terminology you want, but the dollars are what matters. The $55M and $66M thresholds in your earlier post are not what the owners are talking about.
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PostPosted: Sun Jun 19, 2011 7:21 pm    Post subject:

Well I think the owner's position is fine. The NBA players want this to be a partnership. In any partnership, you share profits while both being responsible for all liabilities. If you want a partnership, you start sharing profits after paying overhead, not before.

The only unfair part to me is how you calculate overhead/liabilities. If you stretch the numbers (which I am sure you believe to be the case with the owners in these negotiations), then obviously that's not a fair deal.

However, the principle of a 50/50 split of net revenue seems to be a fair one to me.
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PostPosted: Sun Jun 19, 2011 8:18 pm    Post subject:

If it was a partnership, then the players would have an equity interest in the teams and would share in the profit from the sale of a franchise. When people talk about the league being a partnership, they're speaking figuratively.

We're talking about the division of the proceeds between entertainers (the players) and organizers (the owners). The players are the product, but the product needs to be organized, marketed, and exhibited in an arena. Both sides are essential to the overall enterprise. When the money rolls in, it needs to be divided.

If you think a 37.5/62.5 division is fair, that's fine. Obviously, the owners agree with you. The players don't, and that's what this is all about. The other issues are small potatoes in relative terms.

The owners want to fundamentally change the financial structure of the league, and they are going to need to break the union to achieve that goal. Hence the impending lockout.
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PostPosted: Sun Jun 19, 2011 8:20 pm    Post subject:

Sanity - let me clarify Aeneas' position (we simply argued it multiple times thus I know it and understand - while disagree).

Today players' position is as such: we have had 57% of the gross BRI (which is gross revenues in reality). Don't talk to us "what's fair". We're ready for concession - but insignificant one. We don't want "to split the net". We haven't seen enough to say that existing system ain't working. You have expenses - it is your problem as we don't participate in your profits when you're cashing in selling the franchise. We are creating this BRI - give us lets' say, not 57% of it but 54% (I am speculating here on what concession actually is). You want to make profits - redistribute the revenues between "have" and "havenots" and cut your other expenses. Oh, and BTW: we (the players) don't care in particular on any expenses you write off that are part of the franchise acquisition. That's your problem.

That, pretty much, what he is referring to - agree or disagree
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PostPosted: Sun Jun 19, 2011 8:22 pm    Post subject:

^^^

Oops - sorry, Aeneas, didn't mean to put words into your mouth. I thought you're not available
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PostPosted: Sun Jun 19, 2011 8:45 pm    Post subject:

LakerSanity wrote:
activeverb wrote:
LakerSanity wrote:
^I disagree LC. I believe that a hard cap could still happen, but it would require two things 1) the 50/50 revenue split the owners want and 2) shorter term player contracts.

I think my idea of a soft cap with a hard cap above it could be a fair compromise.



To me, there's only one issue (and there's really only one issue to the owners): How are you going to split the pie?

If the owners got the 50-50 split they want, they wouldn't care too much about the mechanism by which it was achieved.


The mechanism is the means to achieve that split. There is the split and then there is the pragmatic aspect of how to achieve it. Even then, I think the owners care about a better product and not being hamstrung in regards to bad decisions. So while the money is #1, the mechanisms are a matter of concern as well so to ensure a good product and adequate player movement.



There would be lots of different ways to get to the split (after expenses) that the owners want. As long as they get their split, they would be less concerned about the way it was achieved. If the players said, "We'll give you the 50-50 split after expenses, but you have to let us decide the specific mechanism," the owners would agree to that in a second.
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PostPosted: Mon Jun 20, 2011 7:01 am    Post subject:

golakersgo121 wrote:
Oh, and BTW: we (the players) don't care in particular on any expenses you write off that are part of the franchise acquisition. That's your problem.


Most of what you wrote is how the owners would characterize the players' position, not how the players (or I) would. That's fine -- we've had that argument.

But I'll toss in a few comments about the problem of franchise acquisition cost. That's what is really driving a lot of the problems on the owners' side. Here's the problem in a nutshell:

1. Franchise prices have no basis in conventional economic reality. Suppose I offered to sell you a business. The business has no significant tangible assets, does not turn a consistent profit, has significant cash flow needs, and is capable of generating large losses. What would you pay me for it? If you're an NBA owner, the answer is at least $350 million, and possibly as much as $450 million. In conventional economic terms, that's just insane. We got to this point because sports leagues have spent the last 40 years or so pumping franchise sale prices. In baseball, they used to call it the "greater fool" principle: Investing in a baseball team is a good move because there will always be a greater fool to buy it from you. In the modern NBA, most of the owners are the greater fools.

2. Now the owners have gotten it into their heads that they're entitled to a reasonable rate of return on those absurd investments. The owners are paying at least 5-10 times what a franchise is worth in conventional economic terms, but now they expect a conventional rate of return.

3. To make it worse, most of the newer owners don't pay cash for their franchises, but instead finance the sale through bank loans. They think the debt service should get paid for, too.

4. If the owners actually got what they're demanding, franchise values would skyrocket even further. The players would not share in the profit. Then the new owners would expect a rate of return on their (even more) inflated acquisition cost.

This is why the players are understandably unimpressed with anything about franchise acquisition. The players didn't force the new owners of the Warriors to cough up $450M for a business that does not generate a consistent profit. The players have no obligation to turn a stupid investment into a wise investment.

The players appear to be willing to address the legitimate financial problems faced by the owners, but they don't appear to be interested in the problems that the owners created for themselves. In 1973, George Steinbrenner bought the New York Yankees for $10M. Even adjusting for inflation and the like, franchise prices in all of the major sports have simply gone through the roof. The players didn't do this. The owners manufactured this for their own benefit.
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PostPosted: Mon Jun 20, 2011 10:23 am    Post subject:

A lot of good stuff here. Some other thoughts:

I wonder which type of protection Small Markets end up with, competitive (limiting movement of star players) or Financial (revenue sharing that significantly dips into local TV deals). Not only are bigger markets unlikely to ceed both but the issues themselves have divergent optimums. The 'League'makes most when its big market teams are good. You want Rose in Chi, Anthony in NY, Bryant in LA. If revenues were perfectly shared, that would be the optimal financial outcome for Milwaukee too. But individual teams want to keep their "LeBrons".

Ultimately I expect the league to build higher walls around both these issues in protection of small markets, but intentionally not high enough to prevent Stars from hitting big markets (ie no franchise tag) and not revenue share to a high degree. You don't want to over incentivize teams to keep costs low and collect subsidies while only a few markets spend to win. Excessive stratification represents too much business risk (though as stated before, perfect pairity is less desireable than having a measured competitive advantage for the bigger markets).

Maintaining maximum salaries that keep Marquee Players in the NBA will be important too. Loosing a Wade, Howard, LeBron or Durrant to another league dilutes the NBA brand. If you are one of the best alive, you play here. The league will not ratify a deal that risks limiting itself from keeping those players stateside.

A quasi false issue is player contract length. That goes back to who is getting the player share vs. how much the player's total cut is. However for teams to remain active in tweaking their rosters to retain fan interest, there needs to be flexability. While I fully expect contract max length to be cut to at least 4/5, there are hybrid solutions that could be made accomplishing the same goal if that were a make or break issue. As an example staying with 5/6 but requiring any contract that exceeds the 4/5 timeframe be only partially guaranteed in the last two (or even three) years.
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PostPosted: Mon Jun 20, 2011 11:19 am    Post subject:

Aeneas Hunter wrote:
golakersgo121 wrote:
Oh, and BTW: we (the players) don't care in particular on any expenses you write off that are part of the franchise acquisition. That's your problem.


Most of what you wrote is how the owners would characterize the players' position, not how the players (or I) would. That's fine -- we've had that argument.

But I'll toss in a few comments about the problem of franchise acquisition cost. That's what is really driving a lot of the problems on the owners' side. Here's the problem in a nutshell:

1. Franchise prices have no basis in conventional economic reality. Suppose I offered to sell you a business. The business has no significant tangible assets, does not turn a consistent profit, has significant cash flow needs, and is capable of generating large losses. What would you pay me for it? If you're an NBA owner, the answer is at least $350 million, and possibly as much as $450 million. In conventional economic terms, that's just insane. We got to this point because sports leagues have spent the last 40 years or so pumping franchise sale prices. In baseball, they used to call it the "greater fool" principle: Investing in a baseball team is a good move because there will always be a greater fool to buy it from you. In the modern NBA, most of the owners are the greater fools.

2. Now the owners have gotten it into their heads that they're entitled to a reasonable rate of return on those absurd investments. The owners are paying at least 5-10 times what a franchise is worth in conventional economic terms, but now they expect a conventional rate of return.

3. To make it worse, most of the newer owners don't pay cash for their franchises, but instead finance the sale through bank loans. They think the debt service should get paid for, too.

4. If the owners actually got what they're demanding, franchise values would skyrocket even further. The players would not share in the profit. Then the new owners would expect a rate of return on their (even more) inflated acquisition cost.

This is why the players are understandably unimpressed with anything about franchise acquisition. The players didn't force the new owners of the Warriors to cough up $450M for a business that does not generate a consistent profit. The players have no obligation to turn a stupid investment into a wise investment.

The players appear to be willing to address the legitimate financial problems faced by the owners, but they don't appear to be interested in the problems that the owners created for themselves. In 1973, George Steinbrenner bought the New York Yankees for $10M. Even adjusting for inflation and the like, franchise prices in all of the major sports have simply gone through the roof. The players didn't do this. The owners manufactured this for their own benefit.


OK, I'll play along.

Aeneas, these rhetorics are possibly good in court - but only until opposing side asks you a question "And how much, exactly, the players' salaries have skyrocketed during the same period of time?"

In any case - the question on hands you simply don't want to answer. Forget for a second about any and all expenses associated with purchasing franchise. Lets' assume - they are NOT part of this calculation.

And thus here is our pie. Total basketball related revenues minus basketnall related expenses (depreciation and ammortization related to acquisition are not part of it - as well as financing associated with acquisition). What is a fair split to YOU? Sanity expressed his opinion - 50/50.

And yours?
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PostPosted: Mon Jun 20, 2011 11:20 am    Post subject:

Laker's Fan wrote:
Maintaining maximum salaries that keep Marquee Players in the NBA will be important too. Loosing a Wade, Howard, LeBron or Durrant to another league dilutes the NBA brand. If you are one of the best alive, you play here. The league will not ratify a deal that risks limiting itself from keeping those players stateside.


That's not likely to be an issue for years to come. The overseas leagues don't make enough money to offer competitive contracts. There is always the possibility of a Roman Abramovich scenario: some multi-billionaire decides to build a New York Cosmos style team in Europe. So far, that hasn't happened.

However, the Euro leagues could start to affect the depth of NBA benches. The cultural adjustment would be tough for a lot of guys, but any number of players have managed to do it. Take Shannon Brown as an example. He's making about $2.4M here. If the league forced a one-third paycut, that number drops to $1.6M. A Euro team might be a competitive bidder in that range.

Losing players at that level would not dillute the NBA brand, but the benches could start to get thinner.

Laker's Fan wrote:
A quasi false issue is player contract length. That goes back to who is getting the player share vs. how much the player's total cut is. However for teams to remain active in tweaking their rosters to retain fan interest, there needs to be flexability. While I fully expect contract max length to be cut to at least 4/5, there are hybrid solutions that could be made accomplishing the same goal if that were a make or break issue. As an example staying with 5/6 but requiring any contract that exceeds the 4/5 timeframe be only partially guaranteed in the last two (or even three) years.


Back when this was still a hot issue, I anticipated some sort of compromise along those lines. For example, the CBA could require that the last two years be fully guaranteed only against injury (which is insurable) and giving the team the right to buy out those two years at a fixed percentage for any other reason.
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PostPosted: Mon Jun 20, 2011 11:56 am    Post subject:

One thing I want to mention about owners' perspective. At the end of the day, they want protection FROM THEMSELVES.

The players aren't forcing owners to spend. If you eliminated salary caps, luxury taxes, revenue sharing, etc, etc. you'd have free agency as it is in MLB. When a player is eligible for free agency, he can receive any offer from other owners. There's no limit. In the NBA, there's a salary cap b/c owners have kept bidding exorbitant salaries that all the owners as a whole have gotten upset and suddenly cry poverty.

But remember, the players aren't collectively forcing owners to spend $$. It's individual owners that are offering these salaries. Ultimately, owners are trying to protect themselves from other owners. So, why is it the players' responsibility to limit their own salaries?

Personally, I think the owners should deal with some form of revenue sharing amongst themselves and then be done with it. If they run their franchise to the ground, then sell it to a better manager. If the local area can't support the team, then move the franchise.
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PostPosted: Mon Jun 20, 2011 11:58 am    Post subject:

Laker's Fan wrote:
Maintaining maximum salaries that keep Marquee Players in the NBA will be important too. Loosing a Wade, Howard, LeBron or Durrant to another league dilutes the NBA brand. If you are one of the best alive, you play here. The league will not ratify a deal that risks limiting itself from keeping those players stateside.


That won't be an issue. I saw a list of the top European salaries a couple of years ago, and those guys were only making $3-6 million. It's hard to imagine a time when the foreign leagues will ever make enough money to lure away the stars, even if NBA salaries drop by a third. Shannon Brown is a good example of the level of player who might be coaxed away.
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PostPosted: Mon Jun 20, 2011 12:12 pm    Post subject:

golakersgo121 wrote:
Aeneas, these rhetorics are possibly good in court - but only until opposing side asks you a question "And how much, exactly, the players' salaries have skyrocketed during the same period of time?"


What does this discussion have to do with courtroom arguments?

Anyway, player salaries have no direct relationship to franchise values. Player salaries are linked to revenues. How much have ticket prices gone up? How much have TV revenues gone up? This is about how the revenues get divided between the entertainers and the organizers.

Franchise values should be linked to the actual financial performance of the teams, which is of course affected by salaries. But in fact franchise values have skyrocketed even as the various leagues have produced mediocre returns.

golakersgo121 wrote:
In any case - the question on hands you simply don't want to answer. Forget for a second about any and all expenses associated with purchasing franchise. Lets' assume - they are NOT part of this calculation.

And thus here is our pie. Total basketball related revenues minus basketnall related expenses (depreciation and ammortization related to acquisition are not part of it - as well as financing associated with acquisition). What is a fair split to YOU? Sanity expressed his opinion - 50/50.

And yours?


I wouldn't approach it that way at all. I'd start by calculating the actual operating expenses of the league other than player salaries and benefits. This includes everything needed to present the product, from marketing to hiring coaches to leasing arenas to providing team transportation . . . all of the actual costs needed to present the league's product.

That's the baseline. It represents what the owners actually contribute to the product. At an absolute minimum, they're entitled to get that much back out of the pot of revenue. If they aren't (which may be the case right now), then they're entitled to an adjustment.

The question then becomes how much of a premium should the owners receive on their contribution. 10%? 20%? Something like that would be reasonable. The point is that the premium should relate to the operating outlays, not to the bloated franchise prices.

Let's try some hypothetical numbers. Let's assume that the average franchise has $50M in operating expenses as I've defined that term. That may actually be a little high, but this is hypothetical. That's $1.5B over 30 teams. Give the owners a 10% premium, and that's $1.65B. Give them 20%, and that's $1.8B. Total revenues for 2010 were a little over $3.7B, and they are supposed to be up for 2011.

Now consider the 50/50 split in the owners' proposal. The owners would get $900M plus $1.4B, for a total of $2.3B. That's about a 53% premium using my hypothetical numbers.

Let me stress again that these numbers are hypothetical and are presented just to provide context. I am not saying that my numbers prove that the players should get any particular percentage. I'm just telling you how I would do it and providing an illustration.
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Aeneas Hunter
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PostPosted: Mon Jun 20, 2011 12:17 pm    Post subject:

composite wrote:
But remember, the players aren't collectively forcing owners to spend $$. It's individual owners that are offering these salaries. Ultimately, owners are trying to protect themselves from other owners. So, why is it the players' responsibility to limit their own salaries?


That's one of the things that rankles me about US sports owners. They've managed to convince a lot of people that things must be this way in order for a sports league to survive. But if you look across the pond, you'll find soccer leagues that do just fine without salary caps. Those leagues have their own set of problems -- most notably a lack of parity -- yet they somehow manage to thrive without sports socialism. If someone spends too much money (hello, Leeds United), they go bankrupt and everyone laughs at them.
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golakersgo121
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PostPosted: Mon Jun 20, 2011 12:42 pm    Post subject:

Aeneas Hunter wrote:
golakersgo121 wrote:
Aeneas, these rhetorics are possibly good in court - but only until opposing side asks you a question "And how much, exactly, the players' salaries have skyrocketed during the same period of time?"


What does this discussion have to do with courtroom arguments?

Anyway, player salaries have no direct relationship to franchise values. Player salaries are linked to revenues. How much have ticket prices gone up? How much have TV revenues gone up? This is about how the revenues get divided between the entertainers and the organizers.

Franchise values should be linked to the actual financial performance of the teams, which is of course affected by salaries. But in fact franchise values have skyrocketed even as the various leagues have produced mediocre returns.

golakersgo121 wrote:
In any case - the question on hands you simply don't want to answer. Forget for a second about any and all expenses associated with purchasing franchise. Lets' assume - they are NOT part of this calculation.

And thus here is our pie. Total basketball related revenues minus basketnall related expenses (depreciation and ammortization related to acquisition are not part of it - as well as financing associated with acquisition). What is a fair split to YOU? Sanity expressed his opinion - 50/50.

And yours?


I wouldn't approach it that way at all. I'd start by calculating the actual operating expenses of the league other than player salaries and benefits. This includes everything needed to present the product, from marketing to hiring coaches to leasing arenas to providing team transportation . . . all of the actual costs needed to present the league's product.

That's the baseline. It represents what the owners actually contribute to the product. At an absolute minimum, they're entitled to get that much back out of the pot of revenue. If they aren't (which may be the case right now), then they're entitled to an adjustment.

The question then becomes how much of a premium should the owners receive on their contribution. 10%? 20%? Something like that would be reasonable. The point is that the premium should relate to the operating outlays, not to the bloated franchise prices.

Let's try some hypothetical numbers. Let's assume that the average franchise has $50M in operating expenses as I've defined that term. That may actually be a little high, but this is hypothetical. That's $1.5B over 30 teams. Give the owners a 10% premium, and that's $1.65B. Give them 20%, and that's $1.8B. Total revenues for 2010 were a little over $3.7B, and they are supposed to be up for 2011.

Now consider the 50/50 split in the owners' proposal. The owners would get $900M plus $1.4B, for a total of $2.3B. That's about a 53% premium using my hypothetical numbers.

Let me stress again that these numbers are hypothetical and are presented just to provide context. I am not saying that my numbers prove that the players should get any particular percentage. I'm just telling you how I would do it and providing an illustration.


Sorry - I gotta run. it is a very interesting discussion, Aeneas; I will be back in a couple of hours and respond then.
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