Wahlen
Mark Wahlen
Gary H. Howard
ENGL 2010
12/08/11
Portfolio 3
The Losers of the NBA Lockout
The NBA lockout not only lasted longer than Kim Kardashians’ marriage but it
also claimed the lives of 324 total NBA basketball games and cost the NBA, its’ owners
and the players more than 800 million dollars of collective revenue (Golliver, 2). Luckily,
the infamous and overly dramatic NBA lockout is coming to an end. The NBA, the team
owners and the players have agreed in principle to a new collective bargaining agreement
which will officially end the lockout on December 9th. Thankfully, we can finally stop
worrying and talking about things such as the split of basketball related income, a hard
salary-cap and anti-trust lawsuits and get back to talking about basketball. However,
many are wondering who won and who lost in the lockout. It’s time to declare a winner
and a loser; did the players or the NBA and its’ owners win? However, Before declaring
a winner and a loser, it’s important to understand why and how the lockout started.
One of the biggest and most publicized causes of the lockout was the split of the
basketball related income (BRI) between the players and the owners. The BRI is the
amount of money the NBA generates from various sources such as ticket sales, television
contracts, concession sales, arena advertisements and many other things (Zegers, 1). The
BRI money is split between the players and the team owners based on a percentage
agreed upon in the collective bargaining agreement (CBA) (Zegers, 1). In the previous
1
Wahlen
CBA, the players received 57% of the money while the owners received 43%. For the
new CBA, the owners proposed that the players received only 47% of the BRI while the
owners would take 53% for themselves. That would have been a 10% decrease in
revenue for the players, which roughly equates to 380 million dollars. The players
continually rejected the owners’ proposal of dropping their split of the BRI to 47%; this
created the first big obstacle in agreeing to a new CBA and ending the lockout.
The second big obstacle that contributed to starting the NBA lockout was a set of
issues that is often referred to as the “system issues”. These “system issues” included
many things but the biggest and most important one is something known as the “salarycap”. The salary-cap is a mechanism that limits the total amount of money teams can
spend on players (Beasley, 1). In the previous CBA, the type of salary-cap that was
utilized was known as a “soft salary-cap”. Having a soft salary-cap meant that teams had
the option of exceeding the monetary limit set by the salary-cap but if they did so, they
would be penalized by being forced to pay a penalty fee which is known as the “luxury
tax”. The luxury tax is implemented when a team spends more money than the salary cap
limit allows (Beasley, 1). Essentially, the luxury tax penalty forces penalized teams to
pay double the amount of money for each dollar over the salary-cap they go in total
player salary. The purpose of the luxury tax and the salary-cap is to try and prevent teams
that have more money (such as the Lakers, Knicks and Celtics) from signing all the good
players to their teams. In other words, it’s suppose to prevent all the best players from
playing for the same team which will subsequently give the smaller market teams (such
as the Jazz, Bobcats and Pacers) a better chance of winning a championship. For the new
CBA, the owners wanted to change from a soft-cap system to what is known as a “hard-
2
Wahlen
cap”. The difference between the two is that unlike the soft-cap system, a hard-cap
doesn’t allow teams to spend more money than the set salary cap limit, regardless of if
the team is willing to pay the luxury tax penalty. In other words, with a hard-cap system,
under no circumstances are teams allowed to have a total player salary payroll that
exceeds the set salary-cap limit. The owners wanted to implement a hard-cap system to
try and create more competitive balance amongst the NBA teams (Rishe, 2). However,
the players rejected the owners proposal of a hard-cap system because they believed it
would limit their ability to sign with, and play for their teams of choice (Rishe, 2). They
also believed that it would decrease the amount of money that players would be offered
by teams when trying to negotiate a new contract (Rishe, 2). The opposition the players
had towards the owners proposed new BRI split and system issues is what started the
NBA lockout.
So who won and who lost in the NBA lockout? Did the players or the owners get
what they wanted? First, let’s take a look at how the NBA and the team owners were
affected by the lockout. The NBA and the team owners lost their fair share of money
from the lockout with a combined total of estimated losses hitting somewhere in the ball
park of 400 to 500 million dollars (Rishe, 1). However, a few hundred million dollars
worth of lost collective revenue probably didn’t cause any of them to lose a nights’ worth
of sleep. You might be thinking, “What!? How could anyone not lose sleep over losing a
few hundred million dollars in revenue, even if they are a billionare!?” Well, you might
want to consider this; the NBA and the team owners managed to shift more than 1 billion
dollars worth of revenue away from the players pockets and into their own by getting the
players to essentially split the BRI evenly (49%-51% band) in the new CBA (Golliver, 2).
3
Wahlen
This means that over the course of the new CBA (6 to 10 years) that the owners will
receive roughly1 billion dollars more in revenue than they would have received from the
previous split of BRI. That much money will more than pay for the losses they’ve
suffered from cancelled games due to the lockout.
Now let’s take a look at the players’ side of things. The NBA players not only lost
1 billion dollars worth of total shared revenue by dropping from their previous 57% slice
of the BRI pie to an essentially 50% split, but they also lost the battle on the system
issues. While the owners didn’t get their wish of implementing a hard-cap system, they
managed to get the players to agree to a system that essentially acts as a hard-cap. The
salary-cap system in the newly agreed to CBA will drastically increase the amount of
money teams will pay in luxury tax penalty fee’s if their teams’ player payroll exceeds
the set salary-cap. This new luxury tax penalty rate will cost penalized teams up to four
and a half times more money than the previously. With the new luxury tax penalty being
so severe, it’s unlikely that any team will dare venture over the set salary-cap limit; this
essentially creates the same effect that a hard-cap system aimed to do.
So which side came out of the lockout as the losers and who won? It would seem
that the players are the big losers since they not only agreed to give up 1 billion dollars
worth of revenue to the owners by agreeing to a lower BRI percentage split, but they also
agreed to a salary-cap system that will essentially act as a hard-cap. Simply stated, the
players not only lost every battle and they also lost the war. However, despite the
overwhelming evidence that seems to show that the players lost, they’re not the ones who
are the real losers of the lockout. In reality, the biggest losers of the NBA lockout are the
4
Wahlen
average NBA employees who depend on the NBA for their pay-checks and the local
business surrounding NBA arenas.
Largely forgotten during the lockout, the men and women who are responsible for
making NBA games possible on a regular basis have been sitting helplessly on the bench
while billionare owners and millionare players played a seemingly childish and selfish
game of “who’s going to get paid more millions of dollars than the other?”. The NBA
arena workers, whose payroll is typically barely above minimum wage, won’t receive any
additional money or benefits from the new CBA, but they’ve certainly lost plenty from
the lockout. Many NBA teams have been forced to let large groups of arena employee’s
go and many have also drastically cut work hours for the remaining employees in an
attempt to try and make up the difference for lost revenue caused by cancelled games
(Portlock, 9). Local businesses that surround NBA arenas have also received a big
financial hit because of the NBA lockout. NBA games are important in promoting and
sustaining local businesses and boosting economic growth. When NBA games started
getting cancelled because of the lockout, local businesses felt the impact. The Miami city
area alone was expected to lose roughly 200 million dollars worth of local business
revenue as a result of the 324 total NBA games that have been cancelled (Portlock, 9).
While team owners and NBA players will eventually make-up the money that they lost
during the lockout from things such as endorsements, arena advertisements and multimillion dollar television contracts, the arena workers and local businesses will never be
able to earn back the money that they lost during the lockout.
In the end, the real losers of the NBA lockout will remain largely ignored and
underappreciated while the media begins to dissect and analyze the effects that the new
5
Wahlen
CBA will have on the NBA, the team owners and the players. Many different people and
media outlets will probably declare the team owners and the NBA as the winners while
labeling the players as the losers but it’s important to not forget who really lost the most
during this lockout.
6
Wahlen
Works Cited:
Beasley, Adam H. "At the Buzzer: an NBA Settlement - Miami Heat –
MiamiHerald.com." MiamiHerald.com - Miami & Ft. Lauderdale News, Weather,
Miami Dolphins & More. Web. 07 Dec. 2011.
Golliver, Ben. "NBA Lockout's Winners and Losers - CBSSports.com." Sports –
CBSSports.com Sports News, Fantasy Scores, Sports Video. CBS Sports, 27 Nov.
2011. Web. 07 Dec. 2011.
Portlock, Sarah. "In Newark, NBA Lockout Hurting Small Business and
Arena Employees | NJ.com." New Jersey Local News, Breaking News, Sports &
Weather - NJ.com. 27 Nov. 2011. Web. 07 Dec. 2011.
Rishe, Patrick. "NBA Lockout Costs League $800 Million...and Counting; Players
Justified to Fight in Courts - Forbes." Information for the World's Business
Leaders - Forbes.com. 11 Nov. 2011. Web. 07 Dec. 2011.
Zegers, Charlie. "What Is BRI?" About Basketball - NBA and NCAA Basketball News
and Commentary. Web. 07 Dec. 2011.
7
Wahlen
8