NBA AM: Can The NBA Avoid A Lockout In 2017?

Making A Deal?:  Call it wishful thinking, being naive or simply forgetting how contentious labor talks usually end up being, but there is a growing sense that a lockout in 2017 – when both sides could opt-out of the current labor deal – could be avoided with an early deal.

Before we dig into specifics, there is one thing worth saying: The current labor deal won’t last beyond 2017. There are too many details that need to be addressed for that to happen, but what is possible at this point is to believe that a newly constructed deal could be reached without the bloodshed of a lockout.

The Players’ Association and the NBA are expected to meet formally this month to set the stage for a new deal, with a goal of reaching a new deal well in advance of the current deadline dates. There is a sense that the players would like to see a new deal in place as soon as next season, which may be too much to wish for.

So what needs to be addressed?

Revenue Split

The wise and astute Larry Coon often points out in our debates over the labor deal that the revenue split between the players and the owners is all that really matters. From that, everything else happens – and if the split of revenue is right, all the things that get complained about go away. Where the details matter is when the split is too small.

During the last round of negotiations, the NBA marched the revenue split way back, getting the final revenue share to a guaranteed 50 percent of Basketball Related Revenue (BRI). This includes a provision of “plus or minus 60.5 percent of the amount by which revenues exceed/fall short of projections,” with defined limits of no less than 49 percent and no more than 51 percent of BRI.

This is where the players feel like they lost the most ground and this is the area that has to be walked upwards to reach a deal, according to those close to the players’ line of thinking.

For the sake of discussion, let’s call the current revenue split 51 percent. Getting that number to 53 percent likely gets a deal done, or close to done. While two percentage points seems like a reasonable concession, keep in mind that the total BRI for the 2014-15 season was $4.840 billion. Two percent of that figure is $96 million that would come from the owners’ share to the players’ share. That is not an insignificant figure, especially as the BRI swells with the addition of the new NBA media rights deal and the new Nike apparel deal, which could increase BRI by as much as 20 percent next year.

So let’s assume for a moment that BRI does jump 20 percent that puts 2016 BRI at $5.808 billion, and that two percent figure jumps to $116.1 million.

That’s money currently contracted to the owners, so that level of concession won’t come easy. But as talks begin, that’s where everything starts.

If both sides can reach a deal on revenue, the rest falls in line pretty easily.

Recalculate Minimums and Rookie Scale

While there has been a lot of talk about how much the NBA salary cap will jump up next year, there are some numbers that will remain unchanged, such as a the rookie salaries scale, the NBA minimums and the value of cap exceptions. All of those amounts are scheduled out through the 2020-21 season and none of those figures accounted for a huge spike in the salary cap.

If unchanged, rookie-scale salaries will become the biggest bargains in basketball and, as a percentage of overall cap, exception based contracts will also become value deals.

One of the reasons the Players Association would like to fast track a deal is to address these inequities and a large number of players fall into one of these pre-set buckets, so resetting the math on rookie scale, NBA minimums and exceptions is deemed important.

Age Limit

The NBA desperately wants the NBA’s minimum age limit increased to two years removed from your graduating class and a minimum age of 20. NBA Commissioner Adam Silver has labeled this a top priority for him, and it’s something the players will have to address to reach a deal.

This is a losing proposition for the players. While on a fundamental principal basis, the players don’t want any restrictions at all, no one involved in the process believes that the players would give up something in negotiations to fight the direction this is headed.

Collective Bargaining is a give and take process. One side wants something, the other side trades something they want in exchange for what the other side wants.

The problem with this format is the NBA removes everything from the table when they go about crafting a new deal, which has been a source of contention with the players in previous deals.

With a blank slate, the NBA then changes what each things will cost the players in compromise. A 53 percent revenue split happens if contracts are not guaranteed. Contracts can be guaranteed, but length must be shortened.

In this format, the rookies always lose because what it would cost the players to fight for a move simply isn’t worth it to the existing players, which means a “Two and Through” age limit is far more likely than not.

D-League Salaries

From a players’ point of view, the D-League isn’t their problem. They don’t want to see a dime of the player revenue redirected to the D-League. However, there is a growing sense that the Players Association has to help the players in the D-League and there could be a horse trade of sorts to be had.

While committing any NBA BRI money to the D-League is a non-starter for the players, there could be good will gained if in exchange for say a “Two and Through” age limit, that owners, from their share, commit to better and more robust funding of the D-League.

Currently, there are 228 D-League roster spots playing under a fixed tiered salary system. Players that have NBA experience are deemed A Tier players and earn $25,500 per season. B Tier players earn $19,000 and C Tier players earn $13,000 per season.

While some NBA teams have figured out ways to augment those values through non-guaranteed NBA training camp deals, there is a sense that with D-League games being part of the new media rights deal, getting the owners to increase funding to the D-league is possible and could be a negotiating point.

Maximum Contracts

Again as a fundamental principal, the Players Association is opposed to anything that artificially suppresses contract values and earning potential, especially for those players sitting at the very top of the food chain.

With players like Chris Paul and LeBron James holding top level positions with the Players Association, there is a sense that addressing the maximum contract concept will happen.

Over the years, there was a sense that owners are not as in love with maximum contracts as you might think and that they would be willing to change that system in exchange for removing guarantees from contracts.

There is also a sense that the current maximum contract format doesn’t give nearly enough incentive for players to remain with the current team. These are all concepts that likely get discussed.

The realities of a max deal are that every player dreams of being able to secure one, but the largest swath of players in the NBA will never get close to one.

The rank and file in the NBA have concerns about there being no middle class in the NBA, and while the Players Association is led by the top earners, it will be interesting to see if maximum contracts get any serious attention.

From a public point of view, new leadership on the players’ side has said they are opposed to maximum limits. The question is how much are they willing to give up to change the system?

As of today, there are 517 players with contract money owed to them for the 2015-16 season. Of that group, 35 players are set to earn more than $15 million. There are 441 players set to earn $10 million or less next season. Of that number, 354 players will earn $5 million or less, and of that number, 259 players will earn $2.5 million or less next season.

So while addressing the idea of a maximum capped salary seems like a popular narrative, it is a negotiating point that effects the fewest number of players.

Reaching a labor deal is never easy, because there can be, at times, an adversarial approach that new leadership with the Players Union hopes to avoid. If cooler heads prevail, and an understanding that money lost in a labor fight usually affect the players more than the owners, a deal without lost games is possible. Time will tell if it’s probable.

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