opinion
NBA Impasse: It’s Bound to Wrap up Soon
L
et’s not create false drama. I
am not really talking to the
media. That’s how they
make their living. True, the entire
NBA preseason and all games
through Nov. 28 are gone and
counting. According to the NBA
owners, 22 of the 30 franchises are
losing money. Lots of money in
the aggregate: an average of $330
million in each of the last two sea-
sons. Some owners reportedly say
they would forfeit the season if
necessary, in essence saying fewer
games means fewer losses. The
NBA’s Commissioner calls the
extent of the impasse a “gulf.” No
new talks have been scheduled
and if the owners renew the
request for a 50-50 split, the head
of the NBA Players Association
called it a “non-starter”. That
appears objectively speaking to
define a stalemate.
But back in the 1998-1999 sea-
son, a deal was not worked out
until very early January, and a 50
game season wasn’t so bad. In
fact, the most basic economic
principle was in play – fewer
games (lower supply) created
more demand for the scarce
resource of games. Isn’t that part
of why football has broader appeal
t he S chool oF l aw
Roger M. Groves
tract. They could do what Bo
Schembechler and the University
of Michigan did – put it on a nap-
kin. But once you view the corre-
spondence between the general
counsel of the NFL and NFLPA,
attached as Exhibits to the Brady
or Eller lawsuits against the NFL,
you readily see the trust factor was
not Maize and Blue. We should
expect nothing different during the
NBA negotiations. In both cases,
the players’ counsel suspect the
owners are not completely honest
in their representations of profits
and losses, and that League dis-
closes only incomplete books and
records to intentionally obscure
the whole truth. That battle alone
is waged over years of time.
The NFL collective bargaining
agreement is over 400 pages. I
have dealt with sophisticated cor-
porate deals before, but nothing –
nothing - was as complex as this.
The complexity is not really
because of the lack of trust per se,
or closing loopholes for contin-
gencies. It has mostly to do, in my
The NFL negotiation had the benefit
of another issue to counterbalance
against revenue sharing – player
safety in a brutal sport.
than baseball – getting revved up
all week for that one game for
only 16 weeks versus being able to
pick over 160 games almost any
day of the from spring to fall?
And let’s be real. All the profes-
sional sports are too long anyway.
Why, because the club owners
demanded it. Players, the ones
who actually experience the pain
of playing, didn’t volunteer for it.
The owners operated under the
assumption at the time that more
games meant more profit. Now
that it is not working out as envi-
sioned, they are in no hurry to
resume until they legislate a fix.
And let’s also admit football is the
King, not LeBron, in this country
through the last game played on
January 1, so until then a substan-
tial part of the hoops fan base is
not overly concerned.
But the single biggest reason for
a long tortured negotiation is not
so obvious to most of us. We say,
“Why does it take so long to agree
on how to split $4 billion? There’s
enough there for 415 players and
30 owners?” What we cannot read
in the paper or see from a 30-sec-
ond sound bite is that we have an
increasingly sophisticated group
of players who selected tall cotton
representatives that matches the
legal skill set of the owner and
League. In major corporate trans-
actions, highly sophisticated
lawyers are trained to envision
everything that could go wrong,
and protect their client’s interest if
it does. The more thoughtful and
imaginative the respective coun-
sel, the more clauses the contract
contains.
Now if everybody trusted every-
body, there would be no need to
cover every contingency by con-
opinion, with the desire of owners
to create exemptions and excep-
tions in their favor. For example,
both the NFL and NBA know they
are going to share revenue. The
real battle is how they define the
“revenue” that will be shared. The
owners try to exclude items from
the definition. The NFL agree-
ment has a mind-boggling way of
defining “All Revenue”. It is on
par with defining and calculating
capital gains under the internal
revenue code. After deductions
and exclusions are considered,
“All” does not mean “All”. Yet
that is what it is called. The NFL
owners knew that the more exclu-
sions they create from All
Revenue, the less they have to
share because the item is no
longer in the pot from which shar-
ing occurs. The excluded items
are retained by the NFL so they
keep more of the total revenue. I
am willing to bet my 401(k) that
same process is a major part of the
NBA negotiation right now.
And then the NFL owners were
savvy enough to create various
categories for salary. There is not
just one type of income to NFL
players. There are over 30 types
of compensation. The more cate-
gories one creates, the more
opportunities to create exceptions
to the obligation to make pay-
ment. So the game is not to
always argue about whether there
is a right to a revenue split, or
salary. The devilish detail is
whether there are ways to stop
payment because the definition
requires certain qualifiers. I fully
expect counsel for NBA owners to
utilize the same strategy
employed by the NFL. There is
nothing illegal or lacking in good
faith about aggressively pursuing
your client’s interests. So negotia-
tors on both sides are legitimately
competing in an arena quite apart
from, and longer in duration than
the players on the field or court.
My point is that the NBA is
going through an arduous process
that is underpublicized and under-
And the NFL negotiation had the
benefit of having another issue to
counterbalance against revenue
sharing – player safety in a brutal
sport. In other words, players
could sacrifice more on the rev-
enue split because they could win
on safety issues (fewer contract
practices, more funds into health
benefits, etc.). The NBA players
And let’s be real. All the professional
sports are too long anyway. Why,
because the club owners demanded
it.
appreciated. It is in some ways
more complex than the NFL nego-
tiation. There is only one league
and one venue – NFL in the USA.
Approximately 15 percent of the
NBA players already have over-
seas contracts, because unlike
American football, NBA-styled
basketball is truly international.
But 85 percent of the players
know where home is, where the
best life style in the world is, and
home is where family resides.
That distraction will play itself
out.
do not have that same trade off
issue.
But even at this contentious
point, the NBA issues appear nar-
rowing to these five: the revenue
split, duration of the CBA, how
hard (punitive) the salary cap,
whether to continue the loophole
to the salary cap called the
“midlevel exception”, length of
individual player contracts, and
whether to reduce the cap on max-
imum raises.
And just like the NFL, I suspect
both sides in this NBA negotiation
will employ a strategy includes
this: “even if we have to concede
on an issue, we either delay the
implementation or start it now,
and phase it out over time.” Our
laws too are negotiated with the
same
dynamics
in
play.
Republicans and Democrats for
over a century have had sunset
provisions, phase in and phase out
clauses. It is the nature of what we
consider mature skilled negotia-
tion. We should expect no less in
the current labor sweepstakes of
professional sports in America.
So instead of shaking our collec-
tive heads in disgust, with acid-in-
tongue comments like players are
too dumb to understand it, or own-
ers are too greedy to share it, we
should simply recognize that
although it would be better to sit at
the kitchen table and hash it out
like a honest principled family,
this is just the day in the life of
reality transactional law.
roger M. groves is a Professor
of law at Florida Coastal School
of law, teaching business and
sports courses and director of the
Center for Sports and Social
entrepreneurship. Visit roger at
http://center4players .com/ and
follow him at twitter@rgroves-
law.
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october 26, 2011 The Portland Skanner page 5