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Blog Entry

What's in the deal and how it got done

Posted on: November 26, 2011 6:54 pm
 
NEW YORK -- After weeks of stubbornness, posturing, white-knuckle negotiating tactics and finally lawsuits, the NBA labor dispute finally came down to something that had been sorely lacking.

Compromise.

Imagine that.

Instead of losing an entire season and immersing the sport in a debilitating legal battle that would've squandered all its momentum, the NBA is back with a deal that neither side loves, but both sides can live with. In other words, the best kind of deal -- one that both sides walk away from a little disappointed. Based on conversations with officials from both sides, here are the broad strokes of the agreement, with emphasis on elements that had been unresolved when the National Basketball Players Association rejected the owners' latest offer, dissolved and filed antitrust lawsuits that soon will be withdrawn:

* BRI: The players will receive between 49-51 percent of basketball-related income based on the extent of revenue growth. But whereas under the owners' prior proposals, the players felt it would've been nearly impossible to achieve the 51 percent ceiling, sources said they'll have a realistic chance of hitting it by the fifth or sixth year of the deal with robust revenue growth. The players will receive 60.5 percent of incremental revenues beyond projections each season, up to 51 percent in aggregate. Previously, the owners were offering only 57 percent of marginal revenues up to a total of 51.

* Mid-level exception: For non-tax-paying teams, they're four-year deals starting at $5 million in the first two years, with the starting point increasing by 3 percent in subsequent years. Owners had been pushing for alternating 3- and 4-year deals for non-taxpayers. For tax-payers, the so-called "mini" mid-level will be for three years starting at $3 million in the first two years, with the starting point increasing 3 percent in subsequent years. This is an enhancement of the owners' previous offer of a two-year "mini" mid-level starting at $2.5 million.

* Room exception: Teams under the cap get an additional two-year exception starting at $2.5 million (same as previous offer).

* Luxury tax rates: The same dollar-for-dollar as in the previous CBA for the first two years. Starting in Year 3, the rates increase to $1.50 for the first $5 million over; $1.75 for $5-$10 million over; $2.50 for $10-$15 million over; $3.25 for $15-$25 million over; and an additional 50 cents for each additional $5 million (same as previous proposal).

* Repeater Tax: A dollar-for-dollar additional tax for teams that are above the tax line for a fourth time in five years (same as previous proposal). Owners at one time had been pushing for a $1.50 repeater rate, while the players wanted 50 cents. Voila, compromise.

* Sign-and-trades: Available to all teams in the first two years of the agreement. Starting in Year 3, teams that are close to the tax line would only be able to acquire a free agent via a sign-and-trade transaction to the extent that it put the team no more than $4 million over the tax. The maximum length of such contracts will be four years with 4.5 percent annual increases. Previously, the owners had been seeking to eliminate sign-and-trades for all tax teams or teams that would exceed the tax after the transaction. This was a key issue for the players, and the more player-friendly definition of a tax-paying team also applies to use of the mid-level exception. So, if a team is $500,000 under the tax, it could use $4.5 million of the full mid-level. If a team already is over the tax, it would be restricted to the "mini" mid-level.

* Extend-and-trades: With the so-called Carmelo Anthony rule, owners were trying to take away a player's ability to force a trade to a team and sign an extension. The compromise is that teams can acquire player via an extend-and-trade but can only offer a three-year deal (including whatever is left on the player's contract) with 4.5 percent increases.

* Qualifying offers: The players feel they made significant gains here for restricted free agents. Qualifying offers will be guaranteed with the potential to be significantly enhanced based on performance. So for example, a first-round pick between picks 10-30 would be eligible to receive a qualifying offer as high as the ninth pick's if he's a starter for half the regular season games or 2,000 minutes. Second-round picks and undrafted players could be eligible for QO’s as high as the 21st pick based on the same criteria. Similarly, picks 1-14 could have their qualifying offers reduced if they don't meet the criteria. It's a nice compromise that provides opportunities for players who perform and gives owners protection against having to overpay players who don't.

* Escrow: Withholding from player paychecks to account for a potential overage in their BRI share is capped at 10 percent. Owners dropped their demand for an escrow carryover from season to season.

* New player benefits pool: One percent of BRI will be used for annuities and welfare benefits (such as health, life and disability insurance, long-term care and education expenses for themselves and their children). In the unlikely event that 10 percent doesn't cover the players' BRI overage, up to 1 percent of the pool could be used to account for that.

* Contract lengths: All the same as in the previous proposal. Bird free agents can get five-year deals with their own teams, with other deals being capped at four years. Each team can designate one player eligible for a five-year extension of his rookie contract with his own team. A team can have only one player so designated on the roster at a time. The owners had been pushing for four- and three-year contract lengths until recently.

* Annual increases: 7.5 percent for Bird players, 4.5 percent for others. This is up from 6.5 percent and 3.5 percent, respectively, in the owners' prior proposal.

* Minimum salaries and rookie scale: Frozen for the first two years and then will begin growing consistent with BRI growth. Previously, owners were seeking to cut both by 12 percent -- another win for the players.

* Maximum salaries: Same formula as in the previous CBA, with this exception in the players' favor: Star players who outperform their rookie contracts will be eligible to extend with their teams at 30 percent of the cap -- up from 25 percent. A player would be eligible by satisfying any of the following criteria: 1) winning MVP; 2) being named first-, second- or third-team all-NBA twice; or being voted as an All-Star starter twice. The Bulls' Derrick Rose, for example, would be eligible.

* Player options: Same as in the previous CBA. Owners had been seeking to eliminate player options for players who make more than the league average.

* Stretch and amnesty provisions: Same as in the prior proposal.

* The luxury tax cliff: Same as most recent proposal. Owners have agreed that a tax-paying team will only lose half the tax money it otherwise would've received by remaining under the tax.

* Minimum team payroll: It's set at 85 percent of the cap in the first two years, and 90 percent thereafter. The cap ($58 million) and tax ($70 million) levels can be no lower than last season's levels in the first two years.

* Deal length: 10 years, with each side able to opt out after Year 6. (Same as previous proposal.)
Comments

Since: Nov 28, 2011
Posted on: November 28, 2011 7:20 pm
 

What's in the deal and how it got done

Finally - Someone with enough courage and experience to see what the NBA has become.  Nice job dmoneyrox.  I agree.  Also, I'm sorry for a lot of things...  Sorry the NBA has lost dmoney for the near term (possibly long term), because we need more of his type, voicing those kinds of opinions...  Sorry that the owners allowed it to get this far...  And very sorry that the evolution of the sport moved the direction of tough, physical play, rather than speed and finesse.  It makes the game so much harder to officiate and takes away from the unique gifts and abilities of many of today's gifted stars...  Rose, Durant, Bryant, Wade, et. al.  Sorry LBJ lovers.  He didn't make the short list for a reason.  Just sorry my favorite sport has been slowly degraded.



Since: Feb 24, 2007
Posted on: November 28, 2011 2:34 pm
 

What's in the deal and how it got done

First of all as far as I am concerend the lockout reamins as I will pretend that they are not playing for all intents and purposes this year and probably for the next few years at least. Next the players are employees and as such have given up nothing. They are well paid for their work, have very nice working conditions, work in a safe environment, etc. Their work should be tied to their skill and talent level, but not to how much money their boss makes. The players take zero business risk. Their contracts are guaranteed once signed whether they play or not, or whether the owner makes money or not. Until the players get paid as a percentage of profit, they have no argument. If they are willing to do that then the owners would be forced to completely open their books, but would be limited in loss and all would be right. The owners would be guaranteed a percentage over the total operating expences or EBITDA, and the players, based on performance would divy, up the rest. Until it is handled that way the league will always have this argument. This can be done on an individual team basis or a league basis and would include oversight for owners that waste their teams profits. 

The salary cap, taxes etc are to insure that teams in small market places can compete. That makes sure the league can remain viable. As long as the cap is as high as it is, and there are as many exceptions available, and teams are forced to pay a percentage of the inflated cap, then the CBA is basically useless. The problem is that this is the only time owners can get together and change the landscape because any other time they do it is called collusion. The other problem is that in order to do this they have to be willing to go to court, and they have to begin preparing their case for years in advance so when it does go to court, they can prove why their operating expences truly are high enough to justify what they are asking for. If this happens, the employees, no longer represented by a union, are free to go elswhere and market themselves as players proved that they can and will do during this lockout. The rules change and the owners and players end up with a correction similar to the stock market when it gets in over it's head.

Last, now that this is over, it is time for David Stern to step down. He has failed. He was great during the heyday years of big stars and shoe contracts. He got everyone a new arena, and he built a league that was too big to sustain itself. Now with a chance to right the ship, he caved and got the owners to cave, all in the name of playing this one season. he is not strong enough to make the hard decisions. He has been made a very wealthy man, and will have his place in the HOF. He needs to go now. In the next few years when some of the provisions are frozen it will look fine, but in the years after it will be back where it was.

Of course all this is just about a few people making a lot of money. the fans will see none of this. There is nothing in the CBA about freezing ticket prices or passign along any of the 300 million in savigns to the fans. It will al go to a few of the owners. Most will not even see any of it, because they were not the ones losing money, or were the ones over the cap anyway. Whether you think one set of millionaires were right or the other, neither cared about you so I don't know how so many can care about any of them.




Since: Sep 4, 2007
Posted on: November 28, 2011 2:30 pm
 

What's in the deal and how it got done

People being paid millions of dollars to play a game and then complaining about being treated like slaves or plantation workers is not "my cause".  Complaining about taking a paycut from an average of around $5.4million per year to around $5million per year (not including licensing royalties, endorsements, appearance fees, etc) because ownership is losing hundreds of millions per year is not "my cause".  It is also not "your cause", as, if  for no other reason, that none of us are NBA basketball players.  Likewise, whether or not the owners make or lose money is not your cause or my cause as none of us own NBA franchises.


Its called perspective.  To an immigrant used to making pennies per day we (american employees) have nothing to complain about.  The truth is that the amount you are paid is only relative to envious people that cant understand why their parents advise is not working out for them.  "go to school, get a good job, work hard."  The amount of money you make has nothing to do with this. You cant control the amount of money you make if you are an employee.  You can only strike or quit your job.  Business owners on the other hand cannot fire themselves and can give themselves raises everyday if they wish  You can stick your head in the sand and let the difference in the amount of money the NBA players make and you make  give you the illusion that you are not in the same boat if you like.  Don't buy this nonsense about losses.  There is a difference between a paper loss and an actual loss.



Since: May 17, 2008
Posted on: November 28, 2011 2:12 pm
 

What's in the deal and how it got done

I have long said the players cause is your cause if you are an employee. Some of you still dont get it.
People being paid millions of dollars to play a game and then complaining about being treated like slaves or plantation workers is not "my cause".  Complaining about taking a paycut from an average of around $5.4million per year to around $5million per year (not including licensing royalties, endorsements, appearance fees, etc) because ownership is losing hundreds of millions per year is not "my cause".  It is also not "your cause", as, if  for no other reason, that none of us are NBA basketball players.  Likewise, whether or not the owners make or lose money is not your cause or my cause as none of us own NBA franchises.

I can understand, to a point, both sides fighting for certain system issues but ultimately, for me, I lean toward the owners as to compete under the old system you had to spend ridiculous money and "overpay" marginal players and, if you did that, many smaller market teams simply could not make any money.  No one is in business to lose money so the system had to change and now it has.  Only time will tell whether or not it changes "too much", but ultimately, as long as its above minimum wage employees (players) work for what management is willing to pay or they are free to find another line of work or start their own league to compete with the NBA.



Since: Jun 25, 2010
Posted on: November 28, 2011 2:01 pm
 

What's in the deal and how it got done

Many are saying that all of this does not matter to the average fan, but in one important way it does - league balance.  I am tired of the NBA being a league of several Harlem Globetrotter teams and a large collection of Washington Generals.  This should be a more evenly balanced league like the NFL, not another Big12.  I am still trying to assess how league balance is impacted by this deal.  It sounds like it will improve, but not as much as it should have improved.



Since: Sep 5, 2006
Posted on: November 28, 2011 11:55 am
 

What's in the deal and how it got done

montsho11 - of course you're right, but unfortunately Joe Meatball doesn't let facts ruin a good story. Let me break it down through their eyes: NBA players are rich + NBA players are young and black + NBA players sometime have ink + owners are old white people that know how to manipulate morons = NBA players are greedy thugs that should play for $20.00 an hour. The owners instituted this lockout and triggered a shortened season because they don't know how to run a basketball team. They often don't hire people that know how to run a basketball team (see: $120 million for Joe Johnson on the eve of a lockout caused by GMs stupidly handing out deals like $120 million for Joe Johnson). The concessions the players have made between this CBA and the 1998 CBA are staggering.



Since: Sep 4, 2007
Posted on: November 28, 2011 11:26 am
 

What's in the deal and how it got done

So the owners caved.  Whats sad is that alot of posters on this board still do not get the fact that the issues they were crying about were really non issues.  They did a good PR job getting you to believe everything they said.  I have long said the players cause is your cause if you are an employee.  Some of you still dont get it.



Since: Sep 27, 2011
Posted on: November 28, 2011 10:37 am
 

What's in the deal and how it got done

Having played and watched basketball all my life, I'm not going to lie and say that all is well between myself and my beloved NBA.  I've grown somewhat indifferent, through no fault of my own, but due to the incessant squabbling of millionaires / billionaires acting like a bunch of babies suffering from grandiose fantasies of entitlement.  God bless the NCAA.



Since: Jun 7, 2009
Posted on: November 27, 2011 11:03 pm
 

What's in the deal and how it got done

Who cares about "The Deal". We the fans are the ones who got screwed.
 No NBA on my tv this year, not going to one game and Im not buying any products endorsed by the overpaid carjackers.
 We the fans are the ones responsible for this mess and now its time to hit em in their pockets.
 Dont go, dont buy and dont care

 Go see some high school or college ball, thats where true players put it all out on the floor     



Since: Dec 1, 2008
Posted on: November 27, 2011 5:38 pm
 

What's in the deal and how it got done

I was hoping they would cancel the season.  I don't like watching guys that would be doing nothing but playing basketball in the streets if there were no NBA making milliions, and not being happy.  They are all ridiculous.  I hope nobody supports them when they come back.



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