Pacers urge Stern to go for the jugular in labor dispute

November 15, 2011
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The National Basketball Association labor dispute is a four-sided, not a two-sided, fight.

And the Indiana Pacers are taking a strong stand as one of 10 teams asking David Stern to go for the jugular in this increasingly bloody battle.

Yes, the owners and players are certainly on opposite sides. But there are also two distinct camps of players and owners forming.

Some players are willing to take a 50-50 split in basketball related revenue. Another camp, spurred by their agents, wants more and is asking union leaders to take the fight to court.

Owners are split mostly along small and large market lines, with poorer teams like the Pacers demanding that Stern stand strong in not giving a penny more than 50 percent of revenue.

In fact, some teams—including the Pacers—think 50 percent for the players is too generous.

According to sources within the NBA, the league’s labor relations board received a letter from 10 owners strongly opposed to the final offer Stern put on the table offering a 50-50 split.

Owners for Indiana, Atlanta, Charlotte, Denver, Memphis, Milwaukee, Minnesota, Philadelphia, Portland and Sacramento said in the letter that they feel that a 50-50 revenue split represents a bad deal for the owners.

Each percentage point in this fight is worth $40 million annually. If the players accepted the 50-50 split, that would represent a $280 million annual savings for team owners. In the collective bargaining agreement that expired following the 2010-11 season, the players got 57 percent of basketball related revenue. No one is arguing that some decrease in that formula isn’t reasonable.

Pacers owner Herb Simon and his cohorts want stiffer luxury taxes for teams over the cap sooner than year three as the latest deal forwarded by Stern stipulated. They also want the maximum length on guaranteed contracts shortened by three years, not one as Stern’s deal does. And they don't like a $2.5 million midlevel exception and sign-and-trade options included in the last deal Stern put on the table.

Once a year, teams are allowed to sign a player to a contract equal to the average NBA salary, even if the team is over the salary cap already, or if the signing would put them over the cap. This is known as the mid-level exception.

It’s easy to point fingers at the players as they walked away from a deal that projected league-wide salaries averaging $7 million in year seven of the agreement.

But there’s this. When Larry Bird and Magic Johnson took the league to new heights three decades ago, the NBA was a 23-team league. The league and its owners got fat off new franchise fees in the subsequent years.

Now four of those seven teams are among the lowest six in team valuation. So now the league is awash in financially bad teams. It’s not entirely reasonable to expect the players to totally make up for those bad business decisions made by owners.

According to Stern’s own figures (the league lost $340 million in 2009-10), the savings from moving to a 50-50 split wouldn’t be enough to completely erase the financial losses for teams like the Pacers.

Depending on whose figures you believe, the Blue and Gold would still be anywhere from $10 million to $20 million in the red annually after the savings of a 50-50 split is realized.  

While lots of teams are losing money, eight NBA franchises last year made more than $20 million, according to Forbes magazine. The Chicago Bulls made $51.3 million and New York Knicks made $64 million. More revenue sharing is clearly a huge part of righting the NBA’s business model.

With this labor fight apparently headed to court, it’s difficult to say how and when it will be resolved. Court cases like this usually last months rather than weeks. Maybe that notion will be enough to scare the sides back to the bargaining table. Maybe not.

The more intriguing question may be what happens after the lockout ends. Specifically, will fans steer clear of NBA venues?

If the owners can translate the new deal to substantially lower ticket prices, I think most fans will find the wait worthwhile.

If the owners don’t follow that course, they’ll need much more help in marketing and public relations after the fight than they ever needed in legal aid during it.

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  • Pacers
    "If the owners don't take that tact" - It's tack, not tact. It means turn in sailing.
  • Unbelievable
    So these owners are saying that a $3 billion giveback by the players (over the term) is not enough, and they want more?

    Laughable. They need to sell their teams to people who can afford to run them.
  • NBA
    Wow these guys are all overpaid. The NBA has become nothing more than a marketing vehicle. The games aren't interesting until the last 2 minutes. College is way better...those athletes still love the game.
  • come on man
    college basketball is so boring, have u seen the scores 92-65. gimme a break
  • Reality
    To say the players make too much minimizes the problem with the business model. The season is too long, games don't have meaning, fans aren't locked in until after the Super Bowl etc. Everyone needs to get real. Start the season at the beginning or middle of December. No one cares while football is sprinting to the playoff, so have a ramp up to a big TV week around X-mas. Shorten the season to 50 games. This makes all the games more important. Hopefully more games will be played to full houses. Less games mean smaller payrolls, and less travel expense.

    The players and owners need to realize this product doesn't have the cache it did 20
    years ago.
    • All sports leagues seasons are too long
      I agree with part of this. The season should be shortened on the back end too. We do not need NBA finals in June. This is true for all Major Leagues, the NFL, MLB have both extended their seasons into the next leagues season all for the allmighty TV advertising dollar. So no more original programming from networks, just reality shows and Major League sports games?
    • Eliminate teams
      Shortening the season might be something fans want to make the games "mean more" but its not going to increase revenues. Its crazy to think that by chopping off 20 games that is somehow going to increase revenues.

      They need to eliminate about 8 teams and make the quality of the games better and more competitive. a 50 game season is still going to have the same matchups. As it is now the NBA is the most predictable sport in guessing who the best few teams will be.
    • They are not saving lives!
      These are ball players! Entertainers! If you have made bad business decisions in the past as the owners did during franchising, you can only learn from your mistakes and try to make a profit. Players are not saving lives they are entertaining. If they don't get to do that what will they do? They Owners have a right to try and make a profit. I am a season ticket holder and I have no problem missing the season if it puts the teams on a equal playing field like the NFL. More Teams bring more fans! That is the goal of Entertainment!
    • Go Pacers!?!?
      This was so much more useful than the typical ESPN/ AP hack-job covering the negotiations, so thanks. I'm a bit dubious of the league's financial claims, because I believe they include non-cash purchase accounting adjustments (intangible asset amortization). That's not a factor for the Simons, but it is an artificial factor for some teams that have net losses that are substantially different than their cash flows. But I'm glad to see that the Simons are taking a stand against the big-market owners. I don't enjoy the NBA season when everybody knows the conference finals will consist solely of big market teams like LA, Boston, Chicago and Miami along with Mark Cuban's quasi-large market Mavericks. Yawn. The league is at its best when at least 20 teams are legitimately good. There is still enough talent in the league that, if evenly distributed, it can be competitive and entertaining. The problem, IMO, is the concentration of quality players on the free-spending large market teams. The Simons and other small market owners realize this, and while not mentioned directly in this article, I'm getting a kick out of knowing how adament Michael Jordan has become in fighting for the small-market owners against the mega-market owners.
    • small market
      I am glad that the article points to the obvious, it's not the bad decision-making that made these teams lose money, but the fact that they are from the small markets. That's why Knicks will always make money regardless of how bad their management is, and Pacers have to be a contender to break-even. That will have to change, or we will have to accept that this market can't support two professional teams.
      .
      Pacers played good basketball last season. They made it to the play-offs. They have a young talented team. And they could not fill up the Fieldhouse. If it wasn't for the Bulls fans, they would not even sell out their play-off games.
    • Give Me
      Gus, it's "give me", and "you". So you don't like college sports?

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