Brainstorming Ideas for New CBA in the NBA

07 Nov

I have no illusion that anyone can “solve” NBA lockout mostly because IMHO lockout is not about “fair shares” or “equal partners” or anything like that but it’s a negotiating tactic in a battle of wills.
It’s like two people pulling rope in an opposite direction, there’s no right or wrong there, it’s simply about which one of them is stronger and/or better skilled etc.
So I write this post simply as a way to present [and hopefully discuss] some CBA-related ideas…

Tackling NCAA vs NBA puzzle

NBA’s “solution” is simply to raise the age limit to enter NBA draft which IMHO is ridiculous on many levels but I shouldn’t commit the sin of attacking someone’s ideas without offering alternatives of my own so…
Everyone after high-school [or 18 years old] can enter NBA draft but with this wrinkle:
if they are drafted their new team can assign them to NBDL with max salary set for example at 50-150k$ per year range [depending on draft position] and paid by NBA team. This situation can last up to 3 years and every season in NCAA would shorten that max by one year. If a player is called up from NBDL to NBA his salary becomes typical rookie scale contract and it can’t be lowered again to previous value.
So to sum up, players could earn money playing basketball in the USA right after high-school but it wouldn’t hurt NBA teams financially and there would be a very strong incentive to stay in the NCAA if someone was not ready to contribute in the NBA right away.

Which side would be screwed in this scenario?

Seriously, Why Team’s Prices aren’t a Factor in this CBA?

Even though I wrote about this topic on July 6 thanks to a very informative interview with economist Rodney Fort on Wages of Wins I think I finally put a finger on two things: what’s technically wrong with Roster Depreciation Allowance from player’s point of view even though it’s perfectly legal procedure and how to easily fix it.

From league’s financial point of view every change of ownership creates huge losses and zero revenues.
The first part is understandable for everyone involved [again, I highly recommend that podcast] but I think the second part should be under heavy attack from NBPA. Why? Thanks to league’s growth and/or player’s actions someone earned hundreds of millions and league have nothing to show for it? What?
What’s more, EVERY change of ownership is actually hurtful to player’s bottom line? Again, whaaaat?!

You can find all those ownership changes here but I think this one couldn’t be more fitting:
in 2001 Howard Schultz bought a majority of Seattle SuperSonics for around 250M$ [adjusted for inflation].
5 years later [not a coincidence by the way, before 2004 RDA could be used for 5 years!] he sold it to Clay Bennett for around 380M$ [again adjusted for the inflation].
Here’s the catch: in the NBA books you probably could find both of those prices as a cost spread out over longer period and you couldn’t find anything about really impressive profit earned on this change of hands!

As far as I know every such transaction in the NBA has to be approved by them…
so why not create a 10-25% tax from every such transfer and put it into the BRI?
Shouldn’t NBPA fight over that and not over every percentage point of BRI?
Especially when you consider information like this tweet from Larry Coon: my guys have boiled it down to a formula — X points in BRI means $Y increase in average franchise value.

Owner’s incentives to increase team’s revenue

IMHO current CBA in the NBA if is bad for owners it’s not because of those publicized [and alleged] losses… but because of a strange model of incentives. Efficient and good owners put more money to BRI than bad ones… and usually they have to pay additional luxury tax! It means weak incentive to be good, creative and create any new revenue streams because they pay all the expenses and have to put it in a shared pool to finally gain at best 43% of rewards so here’s my idea how NBA could improve that:
The owners would receive 15-20% of all league-wide internet and TV [local, national and international], 70-75% of all arena-related revenues [sponsorships, tickets, luxury boxes, concession sales etc] and 50% of any other revenues minus cost of creating it. The rest would go to the players. By my count it would create a similar financial environment as it is but if I’m wrong you can adjust those percentages accordingly.

Here’s my explanation for this: TV contracts are pretty much fixed revenue from year-to-year which doesn’t depend on team’s quality that much. All other revenues are pretty much performance based… so why not reward those owners who try hard to win, promote game and are good at it?

Obviously there are couple of caveats and assumptions needed here:
– there has to be a fixed number of games on the schedule [but they can be used in any manner possible, like longer playoffs, “entertaining as hell tournament” etc],
– revenue sharing should be in place because obviously arena-related revenues depend on the location,
– there has to be clearly defined difference between arena’s and other revenues so owners wouldn’t have a chance to hide anything there or mislabel any revenue for their gain.

Do you think it would work? If not, why?

And finally a very radical idea with zero chances of even being discussed by the NBA but I’m curious am I the only one who think it could work well for everyone involved…

Contracts revolution: Team Slots

Before every season team’s GM would create and publish a list titled “how we value our players” from #1 to #10. Here’s an *example* of such scale:
#1 franchise player with 4 years in one team [15+M$/y]
#2 franchise player [12-15M$/y]
#3 sure-fire all star [9-12M$/y]
#4 borderline all star [7-9M$/y]
#5 above average starter [5-7M$/y]
#6 below average starter [4-5M$/y]
#7 Sixth man [3-4M$/y]
#8 above average bench guy [2-3M$/y]
#9 below average bench guy [1-2M$/y]
#10 end of rotation guy [0,5-1M$/y]

Every team could have as many #1s, #2s etc as they wish but obviously it would set their salaries for next year accordingly. So from team’s point of view every player should be counted as a #10, right?
Well, here’s a catch: at any time team could lose any player to other team which has offered 1-on-1 trade with player valued 3 or more slots higher. With multiple teams involved original team would have right to choose. Would it create incentive to put players in higher brackets than they deserve as a trade bait? Sure, but GM has to be certain there will be player ranked 3 slots lower which is better than his… because if he’s wrong he will simply badly overpay for a player.

BTW, I haven’t even mentioned why math in this system would add up: because particular salaries for each level would be determined league-wide! So if it turns out that league has 100 #1 guys on any given year, their salaries will be very low etc.

Another important point, it obviously would mean that players’ salaries could change from year-to-year but they would have guarantees in their contracts about their floor level. For example, typical contract would be like this: “4 years at minimum #2 level”. Also with those tools in hand NBA could easily control any competitive balance issues [you can’t have more than two #1 and #2 or more than three #3 or something like that].

With all of that in place IMHO there would be way less dead weight and salaries would waay closer reflect player’s contribution to the team as viewed by their bosses. On the other hand players would have a very strong incentive to simply perform better and they would be instantly rewarded not only after a contract year without giving up guaranteed income. What’s more, players underappreciated by their own team could very easily find a job somewhere else. And I haven’t even mentioned how fun it would for fans to discuss those lists alone… ;-)

What do you think about this point?

1 Comment

Posted by on November 7, 2011 in Unanswered Questions


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One response to “Brainstorming Ideas for New CBA in the NBA

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