Owners' CBA proposal detailed: $45 million hard cap

[jgod213]

i actually really like the 'soft cap' approach.  Why was this not working?

Here's the problem (at least in theory) with a soft cap:  there will always be "rich" franchises and "poor" franchises.  Some teams can afford to greatly exceed the luxury tax.  Others can't.  When one team can spend $50 million more than another team can, it leads to competitive imbalance.

A "hard cap" theoretically evens the playing field, making sure that both big and small franchises can compete.

Thanks, Roy.

I understand the theory, but i still don't really see why it's "not working." 

As ESPN said this morning, the Bulls/Heat game 1 was one of the most watched basketball games ever televised.  You just had an incredible series featuring Memphis and Oklahoma, who have 2 of the best fan bases going.  And we just witnessed the "old guard" (Bos/LA/San Antonio) topple.

Obviously no one wants a lockout, but with tv ratings at such a high and with the influx of terrific, young talent spread across the country it seems like a drastic change in "the system" could jeapordize all this recent success.  Especially since the NBA doesn't have the widespread core fan base that the NFL has and can count on to return.

[kozlodoev]

i actually really like the 'soft cap' approach.  Why was this not working?

Here's the problem (at least in theory) with a soft cap:  there will always be "rich" franchises and "poor" franchises.  Some teams can afford to greatly exceed the luxury tax.  Others can't.  When one team can spend $50 million more than another team can, it leads to competitive imbalance.

A "hard cap" theoretically evens the playing field, making sure that both big and small franchises can compete.

To level the playing field, you should also have revenue sharing. Surely a franchise in LA makes more money than the one in, say, Milwaukee.

[Who]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

[dlpin]

I think people all over are speaking to the owners' profitability without any knowledge on the subject. Obviously, the teams are losing money. The players union and the fans can dispute this but it's a very realistic scenario.

There are in all likelihood only a few franchises that make money on the way the NBA is currently structured(the Clippers come to mind). Player salaries are the easiest costs to manage and that's why the owners are going after them. Player salaries have skyrocketed over the past decade for no reason! It's not like players these days are any better than they used to be. player agents and unions just have the flexibility to hold teams by the cajones and demand more money. This does not foster a successful business environment.

I'm not even going to mention the ongoing macroeconomic events that I'm sure have put a number of sports franchises under pressure.

Let's face it. If anything is broken its the players union and player contracts. There's absolutely no reason that teams should be at the mercy of a Carmelo Anthony or a LeBron James who get whatever they want. In the end, they're not the ones who have a say in what goes on. They're simply performers, they're a product, they're employees. The people who cut their paychecks are and should be in charge.  

You say "obviously" and yet provide 0 evidence. And yes, there is a reason teams should be at the "mercy" of Lebron and the like. It is called supply and demand.


I mean, let's compare investment options for the guy who bought the warriors:

in 1995, he bought the team for 119 million. In 2010 he sold it for 450.

If he had bought 119 million in microsoft stock in 1995 he would have 400 million last year (and that is with 4 2:1 stock splits).

If he had bought 119 million dollars worth of gold in 1995, he would have about 430 million in 2010.

Which means that even if they are losing money, they more than make up for it in the valuation of their franchises.

Not to mention the fact that cash losses aren't actual real losses given the fact that you can not only count player contracts as costs, but you can actually depreciate them like any piece of machinery and get a nice tax bonus.

Again, if the NBA is such a money loser, why are so many owners dying to get into it? Why do we need a stricter cap to protect owners from themselves?

[nickagneta]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

Of course by doing it this way aren't you building incentives in to lose?

If a team wants it can spend $25 million on players and lose big time and then get a huge piece of the revenue sharing because their record is so poor. Some clubs do this in baseball and never reinvest the money back into the team and have sucked for years and years because of it while the owners turn a profit.

[Who]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

Of course by doing it this way aren't you building incentives in to lose?

If a team wants it can spend $25 million on players and lose big time and then get a huge piece of the revenue sharing because their record is so poor. Some clubs do this in baseball and never reinvest the money back into the team and have sucked for years and years because of it while the owners turn a profit.

Money goes to the winners. Not the losers.

Chicago Bulls finished with the league's best record and homecourt throughout the playoffs. They'd be the team that receives the largest share from the pooled revenue. San Antonio had the second best record, they get the second most.

Who was it, Cleveland who finished with the worst? They get the least. Minnesota. Toronto. Washington.

Teams should be rewarded for fielding strong teams.

[nickagneta]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

Of course by doing it this way aren't you building incentives in to lose?

If a team wants it can spend $25 million on players and lose big time and then get a huge piece of the revenue sharing because their record is so poor. Some clubs do this in baseball and never reinvest the money back into the team and have sucked for years and years because of it while the owners turn a profit.

Money goes to the winners. Not the losers.

Sorry, Who. For some reason my brain was registering that the wrong way.

[Brendan]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

Of course by doing it this way aren't you building incentives in to lose?

If a team wants it can spend $25 million on players and lose big time and then get a huge piece of the revenue sharing because their record is so poor. Some clubs do this in baseball and never reinvest the money back into the team and have sucked for years and years because of it while the owners turn a profit.

Money goes to the winners. Not the losers.

Sorry, Who. For some reason my brain was registering that the wrong way.

I think some formula like that makes sense.

Put the shared revenues into a pot share ~75% evenly across all teams, then share the rest based on record. Regardless of luxury tax you should still get revenue sharing. The winning teams make the league profitable.

[Kwhit10]

If they bring in revenue sharing, I hope it is proportional to a team's record.

I don't want to see 15-25 win teams get an equal share as 50 win teams. Teams should be rewarded for fielding winners.

Build in an additional incentive for owners to try to win.

Of course by doing it this way aren't you building incentives in to lose?

If a team wants it can spend $25 million on players and lose big time and then get a huge piece of the revenue sharing because their record is so poor. Some clubs do this in baseball and never reinvest the money back into the team and have sucked for years and years because of it while the owners turn a profit.

Money goes to the winners. Not the losers.

Sorry, Who. For some reason my brain was registering that the wrong way.

I think some formula like that makes sense.

Put the shared revenues into a pot share ~75% evenly across all teams, then share the rest based on record. Regardless of luxury tax you should still get revenue sharing. The winning teams make the league profitable.

I must say I'm 100% on performance based revenue sharing.  I think that's a fantastic idea. 

[KGs Knee]

Let's face it. If anything is broken its the players union and player contracts. There's absolutely no reason that teams should be at the mercy of a Carmelo Anthony or a LeBron James who get whatever they want. In the end, they're not the ones who have a say in what goes on. They're simply performers, they're a product, they're employees. The people who cut their paychecks are and should be in charge.  

Personally, this statement sounds like some kind of communist/dictorial idealogy.

Practially, it is false.  The players, as you even admit, are a product/service.  Just because the owners have the money to finance the league doesn't make them in charge completely.  The owners can not just replace the players if they won't agree to the terms they wish to be enforced.  Nobody is going to want to watch a league full of guys they play with at the YMCA.  It is a partenership.  Sure, the owners could shut down for good, but some other group of rich peolple would just take over.  When their is product to be profitted from (the players), their will always be.

[Arok325]

I think people all over are speaking to the owners' profitability without any knowledge on the subject. Obviously, the teams are losing money. The players union and the fans can dispute this but it's a very realistic scenario.

There are in all likelihood only a few franchises that make money on the way the NBA is currently structured(the Clippers come to mind). Player salaries are the easiest costs to manage and that's why the owners are going after them. Player salaries have skyrocketed over the past decade for no reason! It's not like players these days are any better than they used to be. player agents and unions just have the flexibility to hold teams by the cajones and demand more money. This does not foster a successful business environment.

I'm not even going to mention the ongoing macroeconomic events that I'm sure have put a number of sports franchises under pressure.

Let's face it. If anything is broken its the players union and player contracts. There's absolutely no reason that teams should be at the mercy of a Carmelo Anthony or a LeBron James who get whatever they want. In the end, they're not the ones who have a say in what goes on. They're simply performers, they're a product, they're employees. The people who cut their paychecks are and should be in charge.  

You say "obviously" and yet provide 0 evidence. And yes, there is a reason teams should be at the "mercy" of Lebron and the like. It is called supply and demand.


I mean, let's compare investment options for the guy who bought the warriors:

in 1995, he bought the team for 119 million. In 2010 he sold it for 450.

If he had bought 119 million in microsoft stock in 1995 he would have 400 million last year (and that is with 4 2:1 stock splits).

If he had bought 119 million dollars worth of gold in 1995, he would have about 430 million in 2010.

Which means that even if they are losing money, they more than make up for it in the valuation of their franchises.

Not to mention the fact that cash losses aren't actual real losses given the fact that you can not only count player contracts as costs, but you can actually depreciate them like any piece of machinery and get a nice tax bonus.

Again, if the NBA is such a money loser, why are so many owners dying to get into it? Why do we need a stricter cap to protect owners from themselves?

First of all, the gains you speak of are not "real" gains unless the owners sell the franchise. It's not so simple as saying the value of the franchise went up so the teams are becoming profitable. There is cash flow involved and that's a more valuable component to owning a franchise than capital ppreciation.

Second of all, You assume I can provide evidence to the inner operations of an NBA franchise which I cannot. The NBA is not a publicly traded company so it's not as simple as looking up stats on yahoo finance or something like that. I'm simply saying that businesses do not make moves such as CBA negotiating for s and giggles. They are "obviously" doing it so that they can make more money. It doesn't take a genius to realize they are making this push to restructure their cost model because the current system is unfavorable.

Finally,you cannot simply depreciate salaries. It doesn't work like that. They are a real expense. A salary is not something that can be depreciated like any piece of equipment. It is a real expense that is not reduced in any way. I think you mean to say it's not a cash expense which doesn't really have any impact at all.

[LooseCannon]

One problem with a hard cap is that it will create a situation where players are either big contract guys or minimum salary guys (or rookie scale guys), with nothing in between.

The league needs a middle class, both among teams and among players.  Any society has problems if it is composed of some haves and a bunch of have-nots with nothing in between.

I'm fine with the current system of a soft cap and total player salaries capped at a certain percentage of revenues.  I would like to see a limit on guaranteed contracts, but something more along the lines of capping guarantees at four years or $40 million.  I would like to see the retention of a tool like the mid-level exemption, but with a cap of perhaps three years on contract length.  I would like to see a limit on the number of players you can sign to a "Bird rights" contract at one time.

[LooseCannon]

Let's face it. If anything is broken its the players union and player contracts. There's absolutely no reason that teams should be at the mercy of a Carmelo Anthony or a LeBron James who get whatever they want. In the end, they're not the ones who have a say in what goes on. They're simply performers, they're a product, they're employees. The people who cut their paychecks are and should be in charge.  

Personally, this statement sounds like some kind of communist/dictorial idealogy.

Sounds more capitalist ideology to me. (I am not a hardcore capitalist.)

[Roy H.]

One problem with a hard cap is that it will create a situation where players are either big contract guys or

That hasn't happened in either the NHL or NFL, though, has it?  The CBA would have to cap "max" salaries, as well, but in both the NHL and NFL there is a robust "middle class".

[Donoghus]

One problem with a hard cap is that it will create a situation where players are either big contract guys or

That hasn't happened in either the NHL or NFL, though, has it?  The CBA would have to cap "max" salaries, as well, but in both the NHL and NFL there is a robust "middle class".

Yeah, in both instances (NFL & NHL), the market adjusted itself in regards to salaries after the imposition of a hard cap.  Salaries readjust and there is a solid "middle class" in both sports. 

I would expect the same to happen in the NBA if a hard cap was realized.