Dialectic – the art or practice of logical discussion as employed in investigating the truth of a theory or opinion; logical argumentation.
The logical discussion that unfurls in the following text is a compilation of captious contentions elucidating the impropriety perpetrated by the owners in locking out the NBA players. The evidence will clearly illustrate that the claims of distress by the owners are highly suspect and that they, not the players, are more deserving of derision relevant to the current conflict.
This post serves as the rebuttal for the previous piece written in support of the owners. I hope that the contribution of this work culminates in a more educated and insightful perspective for the collective consciousness* of our BTSOS family (or at least that it doesn’t have a soporific effect).
If you agree with what Herbert Spencer said - “There is a principle which is a bar against all information, which is proof against all arguments and which cannot fail to keep a man in everlasting ignorance - that principle is contempt prior to investigation.” - then this might be right up your alley.
Then again, if you’re more of a Donald Sterling type of guy this might not be quite masochistic enough to satiate your appetite.
Work Stoppage Terminology
First things first. Before getting down to brass tacks, it seems that there may be a need to dispel a certain degree of confusion.
Strike (of a union or union member) – to declare or engage in a suspension of work until an employer grants certain demands (i.e. pay increases, improved pension plan, etc.).
Lockout – the temporary closing of a business or the refusal by an employer to allow employees to come to work until they accept the employer’s terms.
The current work stoppage is a lockout. It was initiated by the owners. The players did not ask for more money, benefits, or privileges. The players were content with continuing the previous CBA. The players were also willing to be pliable and make concessions, just not to the degree of being obsequious or servile to meet the unreasonable demands of management.
On another note, dictionary.com has 88 different definitions for the word strike – none of which are applicable to the present predicament because it is a lockout. Now for those tacks…
Currently the players get 57% of BRI (basketball related income). They have already conveyed their willingness to accept a lower allotment (54%) which would put them in accordance with the other major sports. They are merely reluctant to acquiescence to the preposterous demands (45%) of the ownership group.
This shows player share of total revenue to be 58% (NFL – 55%, MLB – 54%, NHL – 55%) for the 2009-10 season. If the players share is reduced to 54%, the operating income rises to $313 million and the profits increase to 8.2%. This would be commensurate with the profit margin for baseball. The owners, however, want the players to settle for 45%, which would swell operating income to $675 million and profits to 17.7%. This would dwarf the profit margin of the NFL.
If football and baseball can both operate under a system that awards a larger portion of revenue to their players, why is it that the NBA owners are claiming penury under the same parameters? What financial burdens inherent to basketball make owners unable to profit in comparison to the other sports?
The above figures have been disputed by the NBA, contending that legal accounting practices reveal losses of $300 million last year and $1.8 billion over 6 years. If this is an accurate portrayal and not financial gamesmanship, that means the NBA is running 13% below the Forbes estimates. If this is true the other leagues should ostensibly be running at similarly lower operating margins, meaning they’re all in deep trouble except the NFL (which is barely treading water). The percentages should still apply to other sports for the sake of this example since the other professional sports teams also presumably employ accountants. The NBA would have us believe that professional sports as a whole are going down in flames.
The CBA was agreed upon by the owners in 1999. It worked well enough that it was extended in 2005. If the NBA is running 13% below the Forbes estimates, they would have also been operating at a loss for each year between 1999 and 2005 (since their profit margin was never higher than 9.5% for a single season). Why did they extend a CBA that was so lopsided against them or what happened between then and now that caused the deal to go from satisfactory to unacceptable? It wasn’t player share of revenue – that remained static. The stygian picture being painted by the NBA seems meretricious in comparison to the outward appearance of professional sports pullulating with ever increasing revenue streams that show no signs of drying up.
The Incredible Appreciating Public Funded Asset
The bottom line for owners doesn’t just include a yearly profit. The owners have the added benefit of building equity in a partially public funded appreciating asset. Oklahoma City, Memphis, Charlotte, and Phoenix are four examples of teams whose arenas were 100% funded by taxpayers, not owners. Owners are buying into a safe business venture with nearly guaranteed profits and growth. Even during the global economic meltdown NBA owners still encountered burgeoning revenues and franchise appreciation. The NBA and professional sports proved to be somewhat recession proof compared to the pain that many people anguished in.
In 1996 Chris Cohan bought the Golden State Warriors for $119 million. Through his sound business practices and visionary entrepreneurship he transformed the franchise into a perennial cellar dweller, making the playoffs just once during his 15 year reign. As a reward for his incompetence he received $450 million for the sale of the team in 2010 (right in the midst of economic calamity across the U.S.). Want to hear something funny? Cohan had four offers over $400 million at the time of the sale. Here’s another belly splitter – he didn’t even accept the highest offer for the team. Larry Ellison (Oracle CEO – worth over $28 billion at the time of the sale) had already submitted a more lucrative offer than the one Cohan eventually accepted from Joe Lacob. This doesn’t exactly support the NBA’s claims of financial collapse.
Not close enough to home? In 1987 Jerry Colangelo led a group of investors that bought the Phoenix Suns for $44.5 million dollars. In 2004 the team was sold to Robert Sarver (aka Banker Bob) for $401 million. That’s $356.5 million in appreciation over 18 years, fairly commensurate with the $331 million over 15 years for the Warriors.
Sarver bought in to the league right before hard financial times hit, but Lacob’s deal was after the economic grease fire. Are we to believe that Sarver (with his infinite wisdom, acumen, and savvy) bought into a CBA that doomed him to diminishing returns? That Lacob overpaid to buy into a failing business hemorrhaging cash? Didn’t these guys do their homework? It seems a little suspect that such accomplished businessmen would participate in such careless casuistry.
Let’s summarize – the owners are buying into a business where a good portion of the physical capital is provided for them and paid for with public funds and which allows them to operate on a pathetically insufficient basis with almost no form of consequence and as close to a guarantee of long term profit as is possible in the investment world. And they want more?
The new revenue sharing plan concocted by the owners seems to be to take a chunk of revenue from the players and redistribute it to the small market owners. The precepts of their plan are to bankroll profit certainty for even the most inadequately inept ownership groups by gouging the players for a share of their salaries and creating a small market welfare network. This dynamic seems more like a redistribution of wealth than revenue sharing. A system that absolves owners of risk will also not necessarily create a more competitive league. What incentive will bottom feeding teams have to win if they are already promised an ineluctable profit margin regardless of performance? What incentive will front running teams have to strive for greater heights when faced with minimized profit ceilings? The current system is by no means infallible, but there are other ways to revamp and renovate the revenue sharing system in lieu of calling for a money grab straight from the pockets of players.
After all, there is no NBA without the players. The owners can’t replace them. The players are the labor and the merchandise in this equation. When a person buys into the NBA, he is basically buying franchise rights into a business that almost guarantees long term profits. It’s kind of like Subway on HGH for billionaires… The players are the backbone of that profit guarantee. The owners think they can trick the American public into taking their side because "the basketball players get paid too much money to live an insouciant life while playing a game" even though their demands in this negotiation (I use that term loosely) are completely out of line with the current agreements in the other major sports. The players have fought too hard through the years to earn their ability to collectively bargain for the share of the benefits they deserve from the fruits of their labor. They have clawed and scratched from the days of being team property and it would be reprehensible for the current players to relinquish the advantages won for them by the players that came before them.
The owners are all possessed of unique talents which they used to make a lot of money and buy into the NBA. The NBA players are also possessed of unique talents which they are trying to capitalize upon for profit. Should Robert Sarver be entitled to get over on the players because his talent is banking instead of basketball? There is something about cheering for big business over the common man that seems contradictory to the founding principles of the country we live in - and make no mistake, in a battle of billionaires versus millionaires the NBA players represent the common man…
I leave you with one final thought to ponder… anyone siding with the owners is also aligning himself with this fine, upstanding gentleman…