Pacers in crosshairs of NBA labor fight

February 17, 2010
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It appears the Indiana Pacers aren’t the only NBA franchise experiencing serious financial difficulty.
 
Though Pacers officials tell me things are looking up this season, it’s still an uphill battle. That has as much to do with the NBA’s business model as anything that takes place at Conseco Fieldhouse.
 
The league’s challenges as a whole have become more evident as the NBA struggles with an uncertain future and a collective bargaining agreement with its players that expires in 2011.
 
The rate at which the league is losing money is pretty alarming.

NBA Commissioner David Stern said during all-star weekend in Dallas that the league stands to lose $400 million this season, and has lost at least $200 million each of the last four seasons.

Last year, I wrote in this blog that the NBA is entering an apocalyptic era where player salaries must be drastically reduced and contracts must be restructured. Stern is calling for reducing the players’ take from 57 percent to 43 percent of the league’s total revenue, with a individual player salary cap of $13 million per season.
 
It’s a pretty radical shift, no doubt. But Stern realizes he needs to act before the league enters a desperate time.

Not surprisingly, Billy Hunter, the NBA players’ union boss, smacked Stern’s shot at resolving the looming labor issue and the league’s fiscal crisis into the third row.
 
Hunter said the players’ union will introduce its own proposal soon. We can only hope it calls for the kind of substantive changes that will make a difference—heck, maybe even make ticket prices more affordable to more people.

The most important element, at least as far as I’m concerned, in Stern’s proposal is a step to weaken or possibly even eliminate players’ contract guarantees.

Non-guaranteed contracts, much like those in the NFL, would assure that teams don’t get stuck with fat guaranteed contracts that are impossible to dump. It would require players to stay hungry—playing year-in and year-out for their contracts. That restores competitive balance in the NBA, something fans would love and the league desperately needs.

Maybe most importantly, eliminating those guaranteed contracts restores fans’ faith in the game, eliminating grumblings about mid-level players with no incentives to play all-out soaking up $10 million or $15 million annually with no contract renegotiation in sight for three to five years.

It would also eliminate fiascos like the Pacers found themselves in last year with Jamal Tinsley. In the NFL, those problems rarely exist.

As for the players’ argument that they need some protection, a system with fewer guarantees in contracts would still allow for large signing bonuses.
 
But players are only part of the problem. Look no further than the N.Y. Knicks, who are looking to break the bank with not one but two huge free agent acquisitions this off-season. Sure, there’s a current salary cap, but the NBA system is full of luxury tax loop holes that allow big market teams to pummel its mid- and small-market brethren.

Ironically, the Knicks’ train is being engineered these days by former Pacers president Donnie Walsh, whose course in N.Y. could do a lot to further the big-small market divide.

Conservative estimates post the Pacers’ annual losses at $15 million. There have been years with much bigger losses.
 
And I’m not sure any amount of winning will put the team in the black long-term under the current formula. Pacers officials said they’ve lost money 26 of the last 28 years.

I understand the players not wanting to give anything back, but there are more than a few sports business experts who wonder how long the league and its teams can continue to suffer the kinds of financial losses they are absorbing today.

Apocalypse Now? You bet.
 

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  • salaries under control
    If the NBA players' salaries were more under control, I'd be much more apt to support this league and the Pacers. I don't mind guys like LeBron and Kobe getting the big bucks but seeing the likes of Troy Murphy and T.J. Ford knocking down $8 million to $15 million a year is a bit more than I can stomach. Half these guys look like they're jogging up and down the court. I have to believe non-guaranteed contracts would help end that.
  • c'mon now!!!
    Zach Randolph is due to make $16 million this year ... and $17.3 million next year. I'm not picking on Zach, but c'mon now!!! I can't support that.
  • NBA
    Player greed and union manifesto, if not brought into check, will drive the NBA down the chucky hole for good. The League needs a 25% cut in salaries with no guaranteed contracts just to start.

    If the players won't agree to that, then the fat lady had better start warming up!
  • Greed
    Same as the recent bank failures due to risky loans...the NBA will crush under its own success. The player's union won't accept salary cuts, when we all know how ridculous it is making $15 million a year to play basketball. It shows selfish greed. I can't stand watching the NBA anymore. Greed can make you ill.
  • It is in the best interest of the owners and player to cut salaries and to do whatever it takes to keep small markets viable. If not, then as the small market teams fail, fewer players will have jobs.
  • NBA
    The league is over-extended and needs a correction fast. But this won't happen anytime soon because small market teams don't fail - they simply move to other cities (look at Seattle to OKC). And there are too many mid-market cities willing to bail-out the teams in exchange for that all important "national recognition". Real change may require a total collapse!

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