Posted by: Kingsguru21 | September 26, 2011

Hard Cap (Lockout) Rhetoric?

After Ken Berger informed us that the players and owners wouldn’t negotiate anything over the weekend, and wait until next week to get this stupid idiotic lockout settled (Wait Berger didn’t say that? I’m just projecting? Goddammit….and fuck you for ruining my fantasy), Berger also managed to pass along a piece from Newsday’s Alan Hahn (he was the first to break the LeBron James to Miami news). Before we go any further, just noting here that I’m not upset at Alan Hahn for passing this along. After all, the piece does make a point even if it loses itself in the rhetoric: “Those who cannot remember the past are condemned to fulfill it.” And while this knowledge wasn’t known before Hahn’s piece, it was worth remembering.

First snippet:

In September of 2003, former NHLPA executive director Bob Goodenow told me he was a firm believer in an “open marketplace” — in other words, a world without a hard salary cap — and felt that was “the healthiest environment” for a league that, team-by-team, was seeing massive revenue losses, a terrible imbalance of payrolls and a host of awful contracts to underachieving players.

This probably isn’t a convenient time to point out that Goodenow had won labor battles with the NHL using, you’ll love this, the NBA’s players finances as a reasoning. Yes, the NHLPA used the NBA players as a reason to get raises. Remember this, and remember I’m not shooting Hahn for the message (which was, and should be, that be careful what you ask for because you just might get it) either.

It should be noted here that Goodenow’s NHLPA was one of the strongest in pro sports, perhaps only second to the MLBPA, which, at the time, was run by Goodenow’s friend, Don Fehr (who, coincidentally, now runs the NHLPA). The NHL players were well prepared for a lockout and Goodenow dug in as it became reality, as predicted, in Sept. 2004. Goodenow needled NHL commissioner Gary Bettman by regularly referring to the work stoppage as “Gary’s lockout.”

Strongest in all of sports? Yeah, it was. That’s how they got away with using a stupid model that ridiculously outpaced revenue. The NHL has real, and really real, financial problems. The NBA has problems, but not like the NHL has problems.

In early December, Goodenow then made a bold move that was a cocktail of compromise and desperation: the NHLPA sent a proposal to the NHL that was based on a soft cap system, but, in an olive branch to owners crying about finances, offered a 24 percent rollback on all current contracts.

The players, who at this point just wanted to get back on the ice, were furious with Goodenow’s sacrifice. But it got even worse when Bettman and the owners rejected the deal and responded with a proposal that gladly accepted the rollback, but also included a hard cap system. (Again, does any of this sound familiar?)

Yes this sounds familiar, but there is a large difference: Those owners were losing a lot of money on the NHL. NBA owners, despite the rhetoric and nonsense that’s passed about these days, are not despite whatever is said. (I’ll prove this point but further below.)

The difference between the NHL and the NBA is that the NBA is not a fringe league like the NHL is. It has major impact in the pro sports landscape even if it’s not always showing up in the revenue column. Here’s the main difference between the NHL and the NBA: You can play basketball anywhere in any climate. When you claim basketball is a world game, that’s because it is. You can’t play the NHL anywhere and you can’t do it without a certain amount of equipment. Yes, you need a hoop and a ball and a fairly flat surface to play basketball. Which is easier to create: A basketball court or a pond to skate on? Whether you like the argument, the NBA is still figuring out how to tap the rest of the world as an economic matter. The NHL is mostly followed in the US & Canada. (Parts of Northern Europe and Russia as well.) The NBA is followed around the entire world with some real potential revenue streams (Africa mostly) perhaps on tap in the next 10 years. That isn’t happening for the NHL despite what is being said.

As Derek Fisher emerged from the tony Upper East Side hotel Thursday in Manhattan, he wore a look I’ve seen before. Trevor Linden wore it during those tumultuous days before the NHL lost the entire season in 2004-05. It was the look of confliction and frustration and the look of a man who was starting to see how this is going to end, but wasn’t sure how it was going to get there.

“We’ll keep working at it until we find some solutions,” he said with a deadpan expression that was notably quite different than the anger he showed after last week’s meeting or the emotion he poured into his letter to NBA players the week before.

Yes, there is a lot at stake here; for him, for the players and, most especially, for Hunter, who conspicuously stayed off to the side while Fisher addressed the media. Hunter did chat with a few reporters, but slipped into his limo without making any statements. He has been quoted by others who reached out to him, but Hunter clearly left it to Fisher to represent the players with monotone comments.

“There’s always reason to talk,” Fisher said. “We’ve said that the entire time and we’ll keep at it. We’ll keep communicating with our players, making sure they’re aware of what’s going on and that we’re all on the same page. We’ll keep talking until we figure it out, until we get a fair deal done.”

Reality is this: a majority of fans, who can’t relate to bickering over other people’s millions, don’t care about what defines a fair deal, just as long as it doesn’t result in lost games. And even then, the travesty isn’t losing games as much as it is the realization that those games didn’t have to be lost.

Now, for a lot of reasons, I included this whole blurb to finish this out and get it on and over with. While Hahn’s point that the NBAPA could be walking it’s membership into a bad spot, the differences between the NHL and the NBA are huge. Unless the NBA owners are absolutely willing to walk away from a complete season (something I personally doubt, and the NBAPA has to believe is not likely given their current strategy), it’s not as if the NBAPA does’t have any power here.

NHL = 2.929 Billion in Revenue & NBA = 3.805 in Revenue

Look at those 2 numbers and recognize a few points. Number one, these are based off Forbes figures for the NHL & NBA 2009-10 seasons. That means in worse situations (re: economy) for sports leagues, there was less money. The NHL’s money situation hasn’t likely changed for the 2010-11 season and the NBA’s revenue went up. Forget Miami for a stretch, let’s focus on the Lakers, Knicks and Bulls revenue here. The Lakers revenue likely stayed where it was for the 2010-11 (from the 09-10 season) due to bowing out in the 2nd round due to Dallas getting hot and summing up the gods to finally beat the almighty Lakers in a playoff series. But the Knicks and Bulls due to their seasons and what not? That brought about significant additional revenue, and I’m betting the Bulls might end up having the highest operational income of any team in the NBA for the 2010-11 season. Why? They weren’t paying luxury tax for one thing. For another, the Bulls made the Eastern Conference Finals for the first time since Michael Jordan was baggy shortsing it around the United Center. The Knicks due to getting Amare Stoudemire and Carmelo Anthony saw renewed interest emotionally and financially in their enterprise. Sometimes this stuff isn’t rocket science despite what some would have you believe.

None of that mentions likely increased revenue for Miami, Oklahoma City (due to 9 playoff games), Memphis (due to 6 playoff games themselves), and even the LA Clippers likely made a significant amount of money due to the Blake Griffin effect. (The Clippers have been profitable before Griffin so with him they are likely to see a major increase.) I doubt the Kings lost much money (or any) due to their league low payroll, but that’s another story.

The point here is that while the NHL’s highest revenue teams are (shockingly) in big US cities and traditional Canadian hockey cities. The NBA has profitable teams all over the place. That isn’t going to change. And, remember, the NBA drew nearly a billion dollars more in revenue in a time where teams (and fans) weren’t spending out the gazoo. What’s going to happen with that revenue gap when higher interest like the 2010-11 season comes around? I can say that 500 times in this piece, but I’d like to point that out.

In otherwords, I feel that is why Hahn’s piece, while cautionary and reasonably so, doesn’t necessarily have a ton of insight to the current situation the NBA is facing.

******

Now, over the weekend I’ve made a typical complain I usually make about fans and the hard cap: I don’t think fans understand that the NFL (because most fans see the NFL making more revenue because of the cap–not true at all) makes a lot of revenue for one reason. That reason? It’s the most popular sports league in the world outside of a few soccer leagues in Europe.

Let me repeat: The NFL is the most popular American sports league, and one of the most popular in the entire world. It makes 9 billion in revenue not because of a hard cap (even if fans believe increase the teams chances of winning a Super Bowl), but because fans love watching football. Fans love the violence. I watch the NFL and I don’t even find it boring like some. But do I love it to the point that if NCIS or any form of NBA comes on it that I won’t drop it in a second to watch hoop? You bet your ass I’m watching hoop first. I’m a hoops fan and I watch football when I have nothing better to do. Literally. While I watched the Falcons-Eagles game on 2 Sunday nights ago, and almost the whole way through, I did so because I felt somewhat compelled to see how the game would turn out. The Eagles and Falcons are both quality teams. Last night? The Colts (without Peyton Manning) took on the Steelers in Indy. I didn’t care about that game at all. Like I said? I’ll drop the NFL at a drop of the hat. I’m not a fan of any team. Yet, I still watch casually because I can.

That’s why the NFL makes so much revenue. Because there are a lot of casual football watchers who make the championship rounds very profitable and the regular season exceptionally profitable for the higher revenue teams. Every team makes money in the NFL. That isn’t because of a hard cap.

If you think a hard cap makes a team money, you are wrong. A Hard Cap curbs expenses for every NFL team making some teams like the Cowboys, and teams like the Jaguars still make money despite not making anything near the money other teams do. From Forbes:

Owners will pay players 47% to 48% of total revenues under the new pact, down from 51% under the old CBA. We estimate the NFL’s 32 teams generated a total of $8.3 billion in revenue last year, which is a 4% gain from 2009 (our figures include the net proceeds the teams receive from sources like merchandise and NFL.com).

The NBA players had 57% from the old CBA, and are likely to end up somewhere with anywhere from a 50-52% split in BRI. What kinda cap? Who cares. The salary cap by any token will be tied to revenue and, as revenue goes up or down, so will the salary cap.

If you honestly think that a hard cap makes it easier for small market teams to compete, I’d argue differently. (That fellow’s twitter account I linked to is a like minded soul. Here’s another one who has written numerous posts about this at Denver Stiffs. If you limit the amount of money a lesser player (but valuable in a team context) can make, they will look for outside sources of income. Do you those outside sources of income will come in smaller markets? That’s what I thought. Yes, small markets are damned if they do and damned if they don’t. But, that’s the reality of the situation. If you don’t want to own a team in a small market, than don’t buy it. It’s just that simple when you cut away all the bullshit, rhetoric and other hyperbole that gets tossed around in times like these. (You know times are tough. Let me know when you’ve heard that one before. Oh, all your life? Me too.)

If you think that Dwight Howard increases your title chances you are right. If you think a hard cap makes it easier for teams without Dwight Howard to compete for a title, you’d be wrong. It’s really that simple. Personally, all I think a hard cap will accomplish is uglying up the games for the top tier teams with the Howards, LeBron James, Chris Paul’s, etc etc etc (I’m leaving lotsa players out–and most reading this know I can’t stand LeBron). If you decrease those teams ability to attract talent with money that the superstars are playing on, you’re not likely to have talent.

******

Where I differ from a lot of fans is that I don’t see my team as eventually winning a championship as a necessary ingredient for fandom. Would I like to see the Kings win a title in Sacramento? Of course I would. But due to the nature of the NBA, and how basketball is played, I know the odds are small. I don’t watch the games for an eventual payoff of a championship. I love basketball. That’s why I watch. And as LZ Granderson noted, I don’t love the game in the NBA because it’s only “high level basketball”. I love the sport period. If I could play for 8 hours every day, I really would.

I love watching the Kings because of the talent level, and I love watching a team that is by no means a simple team to enjoy. The Kings haven’t won much in their time in Sacramento. They’ve had 10 playoff seasons, and 16 non playoff seasons. Of those non playoff seasons, only 4 seasons happened to have 30 wins or more (1994-95, 96-97, 06-07, 07-08). I’m used to losing. I don’t enjoy it, but I’m used to it. I acknowledge it happens (50% chance of winning and losing for every game played between 2 teams yes?) and I’ve acknowledged that playing in Sacramento decreases the chances for being a highly visible team in the NBA all the time. I’m okay with that. I’d rather have the process of a full rebuilding cycle, a team making the playoffs and eventually competing for a championship. Do you think Laker fans know what that’s really like? Celtic fans are whiners when their team is down. New York fans are intolerable because many are Yankee fans and that automatically qualifies you for the 7th ring of hell. Try being a Royals or Pirates fan for a decade. Than we’ll talk. I don’t care how long you’ve been a Yankees fan or anything else. Not all Yankees fans are bandwagon fans necessarily, but many are. I just don’t think that it’s that trying or hard being a fan of an upper tier team. Or a bottom tier team for that matter. In fact, fandom is entirely voluntary. Nobody puts a gun to your head and forces you to like any team. If you aren’t a fan for your own reasons, you’re missing the point I think. This is a nice way of putting fandom from an older Kings fan who has seen a lot more NBA games than I have.

So if the Kings rebuilding years bother you, it bothers you. I find it to be an interesting not to mention necessary process.

Remember when Paul Westphal took over the Kings in June 2009? The best assets (ignoring the draft picks that were used on Tyreke Evans and DeMarcus Cousins) were Kevin Martin, Jason Thompson and Spencer Hawes. All were distances away from each other in terms of total value. None of those fellows were top tier assets in any way in NBA terms. And since assets are not how fans, or franchises even, value their own players, but how other teams value those players, trading players in the NBA is tricky. Was trading Kevin Martin a mistake? No, I don’t think so. Did trading Carl Landry for Marcus Thornton make up for moving Martin? No, I don’t really judge the Martin trade (even though I said so initially) by how the cap space was used and what happened with Landry. Those are entirely independent things of each other and deserve to be judged separately in my view.

The Kings also had many negative asset’s in 2009. Beno Udrih, Francisco Garcia, Andres Nocioni all had severely low or negatively value. Udrih was moved for John Salmons essentially. Garcia only has 2 years left on his contract and isn’t really that much of an albatross as some would like to believe he is. Nocioni was moved with Hawes for Sam Dalembert that was a quality trade given how little value Nocioni had. Petrie hit a home run on the Dalembert trade for any reason you slice it regardless of how Daly performed last season.

What does this all mean? It means that time is the only fix for a roster that is short on asset’s. Hard, soft, flex, or dipshit caps won’t change that.

Right now the Kings have 2 young players in Evans and Cousins that have at least All-Star potential (I see Evans as the more likely franchise player at this point), and some other interesting pieces that certainly given one potential interest. Jason Thompson, JJ Hickson, Jimmer Fredette, John Salmons just to name a few. Their is cap space to sign a player like Nene or someone of that caliber. Whether it happens? It’s so hard to say with so many variables up in the air right now.

But, I know that if you take away Sign & Trades, or if you take away exceptions because you’ve now instituted a hard cap, that diminishes the Kings ability to compete. If you think that teams will give away legitimate top end talent due to a hard cap, I think you don’t understand how NBA teams work. I believe that any hard cap will have a grace period for teams so these teams aren’t giving up talent without getting what they deem reasonable value for said players. (Or at least every opportunity for that anyway.)

I want the Kings to have the ability to compete. I don’t think a hard cap will do that. I want the Kings to have the ability to compete and do the best they can to acquire players that could, yes, win a championship at some point. That should be any professional organizations goal in my view. That doesn’t mean you’ll win a championship all the time, but that does mean you should always be working towards that goal. If that means rebuilding with high draft picks for 3 years in a row, thEn that’s what that means.

There is no way I can see a hard cap working in the NBA like it does in the NFL. The NFL’s hard cap limits the amount of top tier talent an NFL team can sign. But, in the NBA, there is no way that top tier talent won’t be signed. With the NBA, there is a psychological points to how you deal with your roster. One of those psychological abilities is being able to pay players.

*****

There are so many angles to this lockout that I think so many just want to see if a hard cap NFL style will work in the NBA. Even if it doesn’t work, some fans who argued for it will turn around and blame the hard cap as an excuse for their “team) problems. All many fans want is to see their team compete for a championship, and, that’s where I think I really differ. And because the NFL has always had the ability to have both parity and dynasties, that’s what you’ve seen in the NFL. Many NBA fans love the NFL too, and, unrealistically, think the NBA can be like the NFL.

This lockout has been, will be, and always will be about franchise value and money. No more or less. I don’t think the majority of owners believe a hard cap will bring parity. They want to either A) sell their franchises for more than they bought them or B) at least sell their franchises for a bit more than they bought them at the excessive amount (Grousbeck & the Celtics, Gilbert & the Cavaliers, Sarver & the Suns to name 3) those franchises were purchased at at the time.

What the owners want is profitability in both owning AND selling a team like in the NFL. And, well, when the NBA gets 9 billion in revenues, they’ll be able to do that. But if you’ve read any of the NFL forbes links, you’ll notice that their is a huge difference between the top and bottom teams. There will always be disparity and there is nothing you can do about that.

Even if you’re silly enough to force a lockout on a league that has growing revenue and what not. While reading Hahn’s piece, it strikes to me as a lot of rhetoric with sound points on the surface. If you know what this deal is about, it misses the point. Dan Rosenbaum made a great point in 2005 about the CBA and whether if favored the players or owners:

From the beginning, I have argued that the big enchilada in this deal is the change in how luxury and escrow taxes are distributed back to the teams. In the old deal the bulk of the $300 million or so a year (in luxury and escrow taxes) went to teams below the luxury tax threshold. This resulted in the first $3 to $4 million spent above the luxury tax threshold costing teams $3 to $4 million in luxury taxes and $8 to $10 million in lost distributions. That, in effect, was a 300 to 400 percent effective tax rate for spending just above the luxury tax threshold. That got teams attention and for some teams made the luxury tax threshold a “hard cap.”

This idea that teams would spend over the tax limit? Yeah, that was always going to be the case. The idea that it would cap every teams spending was silly. This limitation on spending would never happen as long as owners remain competitive. (Which is not the rhetoric you’re hearing now.)

But at the very beginning of the piece, Rosenbaum says this:

Shortly after the new deal was announced between the players and owners, I declared it a big victory for the players. But with a caveat. We shouldn’t pretend that the fat lady was singing until the fat lady was indeed singing.

And not a peep was heard from the fat lady until more than a month later when the final details were hammered out. Based upon what I am hearing, the owners did quite well. This deal is pretty even for both sides and the ultimate outcome will depend largely on what happens to revenue growth over the life of the deal.

The ultimate outcome? NBA Revenue remained stagnant allowing the owners to launch a two-year run of PR rhetoric in how the league was losing untenable sums of money that would make any player blush. The reality? The owners fully negotiated a bad CBA so they could ream the players on this CBA. And that’s what they have every intention of doing. But the players aren’t taking it and likely won’t extract some flesh from the owners in the process so they can institute this hard cap.

Maybe the season starts on time and maybe it doesn’t. But if it doesn’t because 1 side is so incredibly arrogant (the owners) and not willing to protect what is growing and becoming a special league for many teams, than I don’t know what to tell you.

I personally think the NBA may end up more competitive than some think because, unlike the NFL, the majority of the NBA makes the playoffs. That alone will give a few chances for teams to knock off a team that may not be ready. (The Grizzlies & Spurs 1st round playoff series in 2011 are a great example of this.) The history of the NBA says that’s unlikely, and may remain so, but history changes too.

What I want for the Kings is to have a chance to compete that gives them a reasonable chance to compete. I repeat (for the 8th billion time in this piece): I want the Kings to be able to compete. If a hard cap allows the Kings to do that, I’ll admit I was wrong. If it doesn’t work, I won’t spend time telling you I told you so. You won’t listen anyway so there is no point in saying “I told you so”. If you’re one of those rhetoric hyperbole hard cap people, you want it so badly that you will use anything to support your point. That’s just human nature.

What I want, and will always want is the games. And for the Kings to have a reasonable chance of competing if they play their cards right. That’s not too much to ask for. Profitability and parity? That’s not my problem or interest, and, at the end of the day, I will absolutely blast every single owner for being stupid enough to insult my intelligence. They will still get my money because I love the NBA too much, but, I will never side with the owners or players. I simply want my basketball. I don’t care about a petty fight between wealthy men whose egos extend will beyond their physical being. The fact that the owners can hold fans hostage should make it completely 100% legal to take a shotgun to every owners head fully loaded and threaten to blow their head off unless they sit down with the players and negotiate a deal. But life isn’t fair, and those who have the gold rule. Don’t like it? Move to Mars. In the meantime, pray that the owners aren’t as silly or stupid as their rhetoric suggests and that the players are willing to sign the deal. If you believe in God, you’re not anymore screwed than the rest of us who don’t.

If you’re wondering why I’m writing this again, it’s because I feel like it. If the NBA wants a new slant from me, maybe it’s time to end a lockout and start the games yes? That’s a refreshing newsline isn’t it? In otherwords: GIVE ME MY FUCKING NBA GAMES BACK YOU GREEDY DICKHEADS!


Responses

  1. You are over the top in this post Pookey and I can feel the frustration coming out of your words. You make some interesting and insightful points to say the least. “If you believe in God, you’re not anymore screwed than the rest of us who don’t.” Is this hinting at atheism? I thought David Stern was Judaism. Great post.

    • No hinting at anything religious. I am an atheist true, but it wasn’t meant to be anything other than a jab that the religious are different than the non-religious in this scenario. It probably seems a bigger deal than it should be. I don’t care what anybody’s religion is including Stern’s. (And, I was a bit surprised to see Stern celebrates his religion.) For whatever it was worth, the religion bit was aimed towards the fans who would (or wouldn’t) pray to get the games back.

      At any rate, thanks.


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