A Suggestion For NBA Owners

Would you rather not give away half of your revenue to your performers? Why settle for the NBPA's latest offer when you can improve your economics a hundredfold?

NBA Labor Talks Go Nowhere

Pro basketball labor negotiations concluded today without an agreement and with grim portents for the coming months: The entire October slate of pre-season games has been cancelled, and regular-season games will be cancelled next Monday if there is no agreement by that time.

Reading the quotes in this article, it seems that the NBA owners formally offered a revenue split of 47% to the players, but Commissioner Stern later strongly hinted that they are willing to come up to 50%. The players' union, however, remains unwilling to budge from its latest offer of 53%. (Whether the owners are sincere in suggesting that a 50-50 split would sate them is unclear, but it would be difficult to walk back from such a public statement.)

It seems, then, that the owners are more ready to compromise to reach a deal today and begin playing ball. I do not attach any moral opprobrium or admiration for a willingness to cave on one's initial position, or for a stubborn insistence on not losing face. I merely note that the players appear less willing to agree to the psychologically salient half-half division of revenues. (They may soften their resolve after a couple months of lost paychecks, of course. An entire missed season of salary is a greater loss, given the average player's 5-year career, than the aggregated annual differences between 50% and 53% of total revenues.)

Of course, a negotiating party can try to appear reasonable by throwing out an extreme initial bid and then "compromising" to something less provocative. And the owners have already won a dimension of these talks by carving out certain revenue streams from the definition of "Basketball-Related Income" that is subject to division. I am mindful that Stern and the NBA owners are trying to spin external observers and commenters. In these talks, the owners began with a proposal of 46% to the players, while the players would have been chuffed to continue the 57% dictated by the 2005 labor agreement. Perhaps the players feel that they should not have to move so much. But the old contract is now null and void; the players' new bargaining position is determined solely by economic factors and the wiles of their negotiating team.

NBA Owners Take First (Legal) Blood in Labor Negotiations

The NBA filed suit against the players' union today in the Southern District of New York federal courthouse, as well as filing a proceeding with the National Labor Relations Board, alleging that the union's threat to decertify and sue the league for antitrust violation is a bad-faith negotiating tactic, in violation of federal labor law.

To my mind, the most compelling arguments in the SDNY complaint come at Paragraphs 40 and 41, wherein the NBA lawyers argue that recent decertifications by the NFL players' union were eventually revealed to be wholly without credibility, as the NFLPA immediately re-formed after the execution of a new collective bargaining agreement. (No court has found the NFLPA's decertification tactic to be against any law, however.) The league also argues at Paragraph 47, and 72-77, that decertification of the NBA players' union would render all existing player contracts void and unenforceable. This latter point goes beyond the NLRB's decision from the 1998 lockout, which held that player contracts are unenforceable while a collective bargaining agreement is not in force. The NBA's argument today seems to suggest that if a hypothetical union decertification were found to be legitimate, then the player contracts would be permanently annulled, even if some sort of labor agreement were later finalized. (Yet such legal interpretation was not the case – at least, no judge found it to be so – when the NFL Players Association decertified earlier this year.)

The NBA is clearly worried that the NBPA could successfully use a union decertification and subsequent antitrust suit under the Sherman Act as leverage against the owners, as the pro football players did a couple weeks ago. In its complaint, the league asks for several declaratory judgments (Paragraphs 52, 61, 65) that their lockout is hunky-dory with regard to US antitrust law. (The pendency of the NLRB proceeding may help to insulate the owners' lockout from antitrust scrutiny, as hinted in Paragraph 58 of the complaint.) This request for declaratory judgment is something of a gamble by the owners: On one hand, they have removed a key weapon from the union's bag. The NBPA can no longer threaten to bring an antitrust suit into court, because the owners have already asked a court to adjudicate the very same issues that a putative players' lawsuit would raise. So the union has been neutered somewhat. On the other hand, there is now a real risk that the SDNY court could actually rule against the owners, finding (upon the decertification of the union) that the owners' lockout is violating the Sherman and Clayton Acts. Thus, the union still has a strong threat point with its possible decertification; perhaps the owners, worried about suffering treble damages if the SDNY court rules against them, could still be inclined to tidily wrap up negotiations. The assignment of a conservative or liberal judge to the SDNY case would certainly affect the owners' calculus. We should also note that under Federal Rule of Civil Procedure #57, declaratory judgment suits can be fast-tracked with a "speedy hearing".

In essence, the owners have cut off their own arm to stop the union from cutting it off first. Tickling oneself generally does not induce laughs, but cutting off an arm can be downright painful.

Owning A Team Ain't All That

It appears today that the National Football League and its Players Association will be unable to conclude a new collective bargaining agreement, and an extended lockout will ensue. With the looming expiration of the NBA's collective bargaining agreement on July 1st, many pundits are predicting a similar work stoppage in pro hoops, and a possible cancellation or curtailment of the 2011-12 season, as happened in '98-99.

Without the players, what does assets a pro team owner "own"? Likely, you have an exclusive long-term lease with the best arena or stadium in town. You own all the intellectual property relating to your team's name, logo, colors, and so forth. You are party to various marketing deals with corporate sponsors. Finally, you are party to television and radio broadcast agreements. But without any players to populate your team and play games, all that will not get you much more than a cup of coffee. I suppose the team can still take revenue from jersey sales during a lockout/strike, but if a lockout were to drag on and the long-term viability of the league appeared questionable, merchandise sales would slow considerably, aside from sales of older vintage jerseys (aka "throwbacks", in the argot) to hipsters or serious fans.

What is to stop the NBA players from setting up their own league? Let us assume that star players like LeBron James and Dwight Howard were sufficiently charismatic that they could persuade at least a couple hundred NBA-caliber players to join them, and to find rich investors who could back the venture, and unbooked arenas that would associate with their venture. In other words, why shouldn't they form another ABA? Why shouldn't they own their own venture and draw all the residual profits?

[There are, of course, many minor-league professional hoops leagues in the United States right now, including one called the American Basketball Association with an unwieldy 60 teams. None of them has the world's best players, though; one organization has a monopoly on those guys.]

Basketball, with its flesh-baring uniforms and lack of helmets, naturally emphasizes individuals more than other team sports like baseball, hockey, or American football. Sure, soccer sets up the individual athlete for glory, particularly with the rarity of goals, but the television camera tends to take a bird's-eye view of the pitch, making each player's grimaces and bellows hard to discern. A basketball court, at 94' by 50', comprises about 7% of the surface area of a FIFA soccer field, the latter being about 100 meters by 64 meters. A roving cameraman can easily capture the blood, sweat, and tattoos of a hoopster, whereas soccer players just look small on television. Additionally, trends in cheap shoe manufacturing, easy communications technology, and favorable free-agent rules have helped to push individual basketball players into prominence relative to their team, much more so than baseball or gridiron players. So again, why shouldn't locked-out NBA players form their own league?

This recent SI.com article by law professor Michael McCann suggests, at Paragraph 10, suggests that locked-out NFL players could join other sports leagues, although he does not raise the possibility of the players starting their own league. In the NBA setting, it is important to note that under Section 9 of the NBA's Uniform Player Contract, each team effectively has the protection of a "non-compete clause": during the term of a player's contract, the team has the right to go to court and get an injunction prohibiting the player from playing "for any other person, firm, entity, or organization." However, it is unclear whether an NBA player contract would still be considered valid during a lockout. If the contracts are not in good standing during a lockout, then it seems that Section 9 would have no force. We should also note that many NBA players will become free agents on July 1st, though they are mostly middling players like Tyson Chandler and Nene Hilario. Those players certainly can escape the non-compete clause of Section 9, though, due to happenstance, the 2011 free-agent class would not be spectacular enough to support a financially sustainable new league.

It is unclear whether the non-compete clauses would be enforceable in court against Wade, James, Howard, Bryant, Paul, and the rest of the NBA's greatest stars, who would normally, without a lockout, be bound by valid contracts in 2011-12. [I welcome more advice from labor/employment law experts.] But why shouldn't they try? Should they fail, and should a new NBA labor agreement be concluded, it is unlikely that NBA owners would not welcome them back. The threat of a breakaway league is certainly a powerful negotiating position.

There would be other obstacles, too: Perhaps the existing TV networks with NBA coverage would refuse to do business with this new league, hoping to remain in good standing with the owners of the old "NBA" should the status quo ante return. But there are enough cable, satellite, and internet television channels these days that surely the new league could get distribution somewhere. The same arguments apply to the league's other business partners: corporate sponsors, apparel manufacturers, arenas. Surely some competitors might arise to fill the hollow if the old vendors and customers boycott the new league. The apparel manufacturers derive more oomph from their association with individual players, anyway.

Finally, would FIBA recognize the new league? This is not extremely important, as the new league could easily do business within the United States and Canada without dealing internationally. To orderly work with European (and, increasingly, Chinese) clubs for cross-oceanic movement of players, though, membership in FIBA would be vital. Likely, if the new league could prove viable for a couple seasons, FIBA would treat the old NBA as dead and buried.

Some will argue that the stars' competitiveness, sense of their place in history, and "respect for the game" would discourage them from such a yawning step. But what would cement their stature in time better than putting the mighty NBA owners out of business? Basketball with the world's greatest players is the same game, regardless of who runs the show.