Pacers fans should root for NBA owners to take hard line

October 27, 2011
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So much progress was made between NBA owners and players union officials during marathon negotiations this week that there is renewed optimism a full 82-game season can be salvaged.

A great chorus of hurrays is erupting among vested parties everywhere—not the least of which is ESPN.

However, one small detail is being overlooked. The two sides have made no progress on the biggest issue—the revenue split between players and owners.

In the old deal—the one that was bankrupting about two-thirds of the teams—players got 57 percent of basketball revenue. In the new deal, the owners are demanding a 50-50 split. That’s a deal I’d like to broker with the owner of the company I work for.

NBA players are dug in with their demand for 52.5 percent of all basketball revenue. Each percentage point in the split equates to $40 million annually, so this is no small matter. The 2.5 percentage points at stake would mean $100 million annually that could be spread around among the 30 NBA teams.

With the Indiana Pacers losing anywhere from $15 million to $30 million annually, local fans who would like to see the blue and gold remain anywhere near financially viable for the long-term must be rooting for an agreement with a hard cap—at least much stiffer than it is now—and a 50-50 split.

And while the N.Y. Knicks are coming off one of their best financial years ever and the Chicago Bulls made somewhere in the neighborhood of $55 million last year, teams like the Pacers must be wondering how much longer they can stand to hemorrhage without considering major changes.

Already, the city’s Capital Improvement Board has approved a three-year $33.5 million forgivable loan (subsidy in more common parlance) and local officials have warned that writing checks from the city coffer can’t be a long-term solution.

Yes, the owners are working hard to increase revenue sharing, with hopes of more than tripling the current pot to about $155 million.

But that won’t be nearly enough to erase the red ink on the Pacers ledger, and if NBA Commissioner David Stern and team owners don’t hold fast during the 11th hour of these negotiations, teams like the Pacers and the city officials who back them will have some very difficult decisions ahead of them.

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  • Poor journalism
    As ESPN's Truehoop blog (which led me to this story) points out, your article cites the $33.5 million in public funds the city of Indianapolis coughed up to the Pacers (which you termed a "forgivable loan"), but makes no mention of the nearly identical amount the team paid to Mike Dunleavy Jr., T.J. Ford, James Posey and Jeff Foster in 2010-11.
    There is no excuse for bad journalism. Simply put, if (big if) the NBA is losing money, it is largely because of terrible contracts the owners voluntarily offer to players. That a team could be losing money when there is already a max salary and rookie scale depressing wages should be embarrassing to GMs. You don't think Kobe's worth $50M to the Lakers? Durant and Derrick Rose are still making rookie money.

    This lockout is really about big market owners and small market owners not having an equitable revenue sharing system, and so the small market owners are looking for guaranteed profits by sticking it entirely to the players. Nowhere in capitalism is there a concept of "guaranteed profit in the face of shoddy management."

    Nowhere in this article do you mention that a) the players are why there is any BRI to begin with, and b) BRI is the money remaining AFTER most costs are deducted, so a 50-50 split is not a true 50-50 split. Sorry to say but this article reads as no more than a biased pro-management, anti-labor piece. I can't speculate on the reason for your bias, so I won't ascribe any motives to you, although I do have a suspicion. If you can't do better, your editor at least should.
    • Who cares?
      Besides eating establishments and bar owners around the stadiums......who really cares about the NBA. It's not being missed by most sports fans. Especially with NFL and NCAA football, World Series, NASCAR, etc.... Most do not care about the NBA until the playoffs...if then.
    • good call
      You hit it on the head regarding

      "small market owners are looking for guaranteed profits by sticking it entirely to the players."
    • Raeon
      I couldn't agree more with what you wrote. Owners give out these horrible contracts and then wonder why they aren't making money. Guys like Gilbert Arenas and Hedo Turkoglu aren't anywhere near what they are being paid. Heck the Pacers signed Jalen Rose to an obscene contract (~$20 mil/year) then were lucky enough to be able to dump him on the Bulls two years later. How about the Jermaine O'Neal contract? The Pacers are victims of their own actions.

      This guy must have gotten the idea for this article when he was at dinner w/Herb at St. Elmo's last night.
    • Disagree with Raeon
      If you think there's any question about the NBA owners' claims that they're losing money, you're not terribly tuned into the business reality of the NBA. Did the NBA owners sign a deal with players last time around that has turned sour? You bet. So shame on them. But now it's time to fix it. What the Pacers are paying the players is only a small part of a complex equation that includes not only fair market value established by a collective bargaining system that isn't working, but an it's part of an arcane CBA that requires dollar for dollar trades that often require teams to take on these front- and/or back-loaded deals that, yes, saddle teams with bills they simply can't afford. That's what the owners are trying to address, and understandably the players are loath to address. But putting the notion out there that NBA owners are simply claiming poor in regards to their team's business operations, that's pure ignorance. Is more revenue sharing needed, yes. In the current set-up, there's not quite enough cash to spread to bring all the teams to break even, much less in the black. So yes, it's high time the players take a pay cut. I'm not speaking from the viewpoint of a fan looking for a cheaper ticket. I'm talking from the perspective of someone who wants the Pacers and the other 29 NBA teams to be around for years to come.
      • A matter of degree
        I get that the economics changed, but again, no one is forcing NBA GMs to make terrible contract offers.

        I do think management is merely crying poor because they refuse to open their books to the NBA, and both sides disagree on the way they come up with their numbers. What about ancillary business interests that spring from owning an NBA team? What about TV rights, etc? What about favorable tax treatment on loss vs. capital gains? There are so many ways to hide losses. Fundamentally, NY, LA, Miami are always going to be more attractive destinations than Indiana, Charlotte and Utah. There's already a rookie wage scale and a max salary. The only decent way to address the disparity is better revenue sharing. But the owners would rather band together to screw the players than fight amongst themselves. It's not rocket science.

        But look, even if you are right, even if everything you say is true, consider this fact. Out of the box, the players offered to take what amounts to a $1Billion paycut. And the owners refused. It's a shame the players don't have better PR. The owners don't want to bear ANY of the losses that they themselves mostly caused. But I guess that's now the corporate culture in America.
      • independent look
        I think Forbes does a very solid job at taking an independent look at the business of the NBA with their annual team valuations. Forbes takes into account everything. And Forbes numbers, and remember Forbes doesn't have a dog in this fight, largely back up what the owners are claiming. Forbes' Michael Ozanian does a tremendous amount of research into these studies and his most recent data finds the Pacers losing more than $16 million in a single year. You're not going to make that up by hosting the circus, a couple ice shows, a WWF event and a handful of concerts. And the WNBA certainly isn't adding a dime to the bottom line. Look, I have no ownership interest (or any other financial stake) in the NBA, but I can tell what a profit and a loss looks like. If the players want a bigger cut, start putting on a better show and start drawing better crowds. As for mid-level guys like TJ Ford, etc. making big bucks, if you've paid attention to this round of CBA negotiations, that's just the sort of things the owners want addressed. Owners would agree that guys like Kobe and LeBron should get paid big because they draw big crowds, but guys like Troy Murphy and TJ Ford need to take a big pay cut. I've enjoyed the conversation, Raeon. Have a good day.
      • City Disparity
        I think a majority of the "owners...stop overpaying the mediocre players and you won't have a problem" people need to consider why these players are overpaid. I hope I am not overstepping by saying most NBA players prefer their salary paid in Knickerbocker, Chicago, Laker, or "big market" currency. As there is, for the most part, a pretty uniform process for offering free agents, most offers are pretty similar, sans destination. $8 mill in Indy isn't $8 mill in LA. Further, the big market teams, with a soft cap in place, are able to push the market by signing the Eddy Curry's and Jerome James' of the world to mega-contracts. The market for services is, in part, dictated by teams that are playing the loopholes in the rules (exceeding the soft cap), thus placing those who wish not to pay a luxury tax, at a striking competitive disadvantage. In summation, big market teams have enjoyed a certain privilege in luring free agents. Big market teams payrolls are larger, the salaries which fall under these bloated payrolls, are then used by agents as a barometer for future negotiations. Ultimately, the small market teams have been along for the ride, which I don't think they mind, they are just looking to make sure it is an equitable ride. I'm not an owner backer by any means...abolish any age limit, please...but the players get little sympathy from me.
      • Playeras better wake up
        The NBA players better wake up soon. I have been a Pacers season ticket holder since 1983 and will continue to be one. Call me a fan thru thick and thin. The current salary structure (guaranteed contracts and the current CBA) have driven the teams to a point where only a few big market teams can make any money. Yes there needs to be a different revenue sharing plan amongst the clubs but equally important the players need to get a big dose of economic reality. The owners are not going to agree to a deal that has many of the clubs bleeding to death each year. The players just don't realize how good they have it. Nobody wants to go backwards but this country and world for that matter are littered with individuals who have had to face the hard economic realities that we currently live in. About a dozen years ago we had a 52 game season that nobody was happy about but it didn't destroy the game. There is still time to salvage a very managable season but the players need to quit hitting their snooze button. I am a die hard follower of March Madness but anybody who truly is a fan of the game of basketball would understand that last year's NBA playoffs were some of the best basketball we have ever seen at any level
      • Poor journalism
        Raeon you are way off base. I see your point about the owners taking on bad contracts but for every bad contract there is a player such as Penny Hardaway or Brandon Roy. These were both elite players that had their careers ruined due to injury. Should the owners and fans of those teams have to stay non competative for several years until the cap space for those bad deals come back? The majority of the educated fans understand that it's the players who are at fault. No one in any profession should have guaranteed money.

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