Covering Lockout Coverage

By:
Published: October 21, 2011

Sed quis custodiet ipsos custodes?
— Decimus Iunius Iuvenalis, Satire VI

I read alot.

Anyone who’s been around Hornets247 since Ryan pulled the “Hold this for a minute” trick on me with the news about 13 months ago, or around Hornets Report since we started our alliance about 5 months ago, has gotten a feel for this.

What this buys me (mostly) is wasted time, tired eyes, depression, and the satisfaction of making readers looking around my posts for the good stuff. Sometimes, however, I get a little something else.

This time I get an unapologetic knowledge that most analysis of this CBA struggle in the NBA has been lacking.

I’m sorry, but it’s true.

Clarification: The reporting that has been done on the lockout has been supurb. The reporters are out there in the action . . . at the venues . . . they wait . . . they huddle . . . the keep each other going . . . they have sources just on the other side of the meeting room door . . . they meter the information out just right to keep the public informed enough without scaring off the informer . . . I am nothing but impressed with the reporting overall.

The fact that millions of NBA fans were being led to believe these negotiations were much closer than they really were, however, was getting my hackles up big time. Now that the those millions are feeling hurt, including friends of mine, I just have to say something.

Bias and Ignorance

Sure, some sources were saying nice things, and those things were published. They also said not-so-nice things. These were ignored.

The Board of Governers’ meeting Wednesday evening and Thursday was poorly covered. These meetings were just as important as the CBA talks themselves, at least from the players’ perspective, as they insist on increased revenue sharing among the owners, a topic at the meeting, yet, they were dismissed.

One reason this was deprioritized was the perhaps mistaken perception that revenue sharing was a done deal and that it would satisfy the players. Whatever the plan was, it was not ratified, and the NBA said it would not be so until after the CBA was done because the wanted to share according to their costs. Another reason is like that the NBA told the media on several occasions that revenue sharing wouldn’t be the hang-up . . . “These are not the droids you’re looking for.”

Also, understandably, these guys were doubleplustired from the bonanza that was Tuesday.

Another reason is that the real meat here is boring.

Economics is a sad, half-formed semi-child of a standard education, and the good stuff is rarely sniffed by most. I’m not talking dollars and cents, here. I’m not talking bonds and derivatives. I’m not talked budgets and unemployment. I’m talking opportunity costs, markets . . . proper analysis, proper identification and flows of goods, resources, supplies, demands, and the basic math needed to get a feel for how a system is working.

The NBA being quite an interesting economic body is, therefore, ignored in most discussion on the Association. The fact the reporters often ignore these aspects amplifies the silence to a deafening level, as they are often taken as oracles . . . and if the oracle doesn’t say it . . . Larry Coon is a sort of lone wolf that is hung out there as a `cap expert’ since he is, sadly, a rare creature.

These omissions lead to a deficiency in the analysis of the effects of these quite obvious relationships. The hole where the analysis should be is filled commentary, assessments from people on the `inside’, and, sadly, shiny things. These are less perfect than rough analysis. As these warty truths are passed around, the warts are taken to be a normal artifact in the discussion, therefore true. Eventually, the world is needlessly surprised.

In this case, thousands of people felt tremendous disappointment due to the destruction of their false hope.

Some writers are going to write whatever it is that sells. That, to an, extent, is how you make the metaphorical doughnuts. You have to stay writing so you can be in a position to write the stuff that matters. Some just take it too far. Whatever. They are losers and they know it.

What happened here was also somewhat deeper than a basic self-interest. It’s a more complex self-interest.

This leads me to my opening quote. It is a quote from the Roman poet Juvenal, as his name appears in English transliteration. Juvenal was ruthless satirist, and the quote is from his most famous satire, Satire VI. The satires are all in dactylic hexameter verse, which is actually not all that impressive in Latin due to the flexible word order . . . that’s one reason Shakespeare is so highly regarded . . . the relative inflexibility of English, though Middle English was less well-formed . . . he cheated, anyway, as he actually helped slow the rate of change of Modern English (not the band), along with the King James Bible, and the printing press, and the language itself was warped by his pen . . . but I digress . . .

The quote translates as “But who will guard the guardians themselves?” Comic and movie fans will recognize the “Who will watch the watchmen?” phrasing. The context of this is an exploration of morality by way of a thought experiment of forcing fidelity on a wife through the use of guards. If the guards are corruptable themselves, then who guards them, and who guards the guardian guardians, etc.

So, the traditional media in this case act as a guardian of the love of the game. The media protects the game, the players, and the various stakeholders from mobs of fans, their demands for autographs, and suggestions to `improve’ things. They allow a sense of intimacy and brotherhood to be maintained `backstage’. They can allow to private highs and private lows since they knew they can always get the quote next time.

They also protect the fans from the all that other stuff. They allow fans access they wouldn’t otherwise have, while filtering out some of the baser aspects: tempers, arrogance, greed, and downright contemptible behavior. They allow the fans to follow the game without traveling all over the country. They can give a long-term perspective that may not be clear to those only able to follow intermittantly, allowing for greater appreciation of all things basketball.

They are, however, corruptible, in the sense of vulnerability, not in the sense of immorality, since their livelihood and their presitge stems from the existence of this very love. Therefore, they may not be objective with regard to seeing the possibility of it vanishing, even if for only a time. They do a great job at many things, but they fail in their charge, like Frodo at the Cracks of Doom, in hour of the greatest darkness and greatest need: when the game is at risk.

They instead look to the positive. Some of this is just the need to produce copy, as mentioned above, a subset of whch is due to some of that immoral sort of corruption. Some of it, however, is the product of the vulnerable sort of corruption.

Once the truth is revealed, the grief aspects evolve beyond rigid denial. We’ve seen the doom and gloom. Berger is depressed and angry. We’ll see some bargaining . . . “Why don’t you guys just . . .” Acceptance will come, maybe, before the deal.

That is where your friendly neighborhood blogger comes in. Most of us do this for free, or even negative money. We love the game, but our food isn’t tied to it. Our rent doesn’t depend on articles, views, or citations. We are often forced to maintain a distance, and that perspective comes in handy sometimes, such as times like this. We don’t get the access the standard guys do, and most of us couldn’t use it as often as them, but we can make lemonade from those lemons by providing a different service.

The role of a blogger is constantly disputed, but I know my situation, and I’ve heard a few others talk about theirs. This is exactly the sort of thing we are around for: Cold, hard, stark, clear analysis.

This is not some puff piece intended to puff up bloggers, my colleagues here at Hornets247, or myself. I’m trying to explain why it’s understandable that the analysis has been bad. It just comes with the territory. It’s part of the system. Look at the supply, the demand, the economics, and it’s plain.

Going a step farther, as a Hornets blogger, we don’t have an owner and we’ve not had a team play in New Orleans in 5 consecutive season since the Jazz. We have been threatened constantly with relocation and repeatedly called out for our allegedly poor economics. All of this leads to a very healthy distance that is available to those who can wield it properly.

Not to be accused of pointing a problem and saying, “That’s a problem,” I’d like to offer up some of what I think has been missed.

Facts and Analysis

Let’s take a quick summary of the situation. Of $3.8B in BRI last year, about $2.2B went to players and $1.6B went to owners. Keep in mind, the $2.2B is the players’ salary. The owners ended up spending $1.9B plus all the non-BR-I, or at least incurring costs in that amount, above the player salary, leaving a loss of $0.3B. The losses naturally fall outside the scope of BRI and made up, at least in part, of interest and fees that owners are paying off long term. This, for instance, is exactly the situation the New Orleans Hornets are in. They are saddled with long-term debt from relocations, not from operating the team in New Orleans.

There certainly are costs of doing business far beyond player salary, but the costs fall outside BRI, which is where player salary comes from. Since the players don’t see the benefit of that income, they are reluctant to pay the costs that come in its place. Right or wrong, that is the perspective.

In order to make up the $0.3B from players, the owners need to reduce the players’ share to $2.2B – $0.3B = $1.9B. The owners’ share would then be $1.6B + $0.3B = $1.9B. This happens to be a 50-50 split, which sounds nice, but really has nothing to do with fairness; it has to do with running a business and making no profit, which is stupid. It is, however, required from a certain point of view. The owners can cut other costs, I’m sure, but this is big source of cash right here, and the players need the NBA to get their checks, and they need this in short order. The players need to go to 50-50, and the owners need to let the players’ take-home slide up over time, not down, whether it be through a constant split of increasing revenues with a floor to support their pay, an increasing BRI split, or some other mechanism. In the end, the owners get paid, partially, to assume financial risks. Players’ salaries need a floor, owner’s profits do not.

So why aim for no profit? They shouldn’t, but that’s one of the least crazy position the owners can assume, yeah?

That is where competitive balance comes in. If the NBA can get more fans involved, the can grow the revenue so that their half, after expenses, is positive, not 0, even if the `target’ no profit in the BRI haggling act of this drama.

Where does revenue sharing fit in? Revenue sharing stabilizes franchises. It will allow historically poorer teams to compete financially with the traditional powerhouses. This will beyond the shadow of doubt lead to few wins for the traditional powerhouses. It should also lead to more revenue for the NBA . . . which will then be shared and mitigate the need for further such changes. It will also unify the fractured owners. They will all feel the burden of bad business to some extent, and all try to solve it rather than using the pain as a tool to extract more from their yacht-mates.

A real salary cap and all that other jazz fits in there, but this is the rough idea. This short, if boring, exposition is the lockout in fairly simple terms. This is why I’ve been so dour.

Moving On

Once this sinks in, the players will come to the table, but there was no way this was close when the players were at 53% of BRI. That’s a 7% relative reduction in salary from the old CBA. Going to 50% of BRI represents a 12% relative reduction from the baseline.

We get indignant when we get less than a 3% raise. Some people haven’t been getting raises, and this is infuriating to them and others, even if they still cover their bills. You get up early, you do what you are asked and more, you don’t screw up, and you get nothing for it. It’s a justifiable feeling.

A 7% reduction is a 10% absolute swing in pay from the expected 3% raise. How would that sit? What if it was to pay for the bosses’ screw-ups, not to pay for your own? The players realize things need to change, as evidenced by their moves to 53% BRI and beyond, but they are right to be mad. The point is, this is clearly a huge impediment.

I could write more on this now, but I won’t. Let it suffice to say that 30+ hours of talking to agree to a mid-level exception that is slightly less mid-level and slightly less exceptional should be a sign of the viscosity of the proceedings.

Pile of top of the BRI split: system issues, multiple filings with at least 2 legal bodies, contract amnesty, the handling of first-contract players with regard to their second contract, divided ownership, revenue sharing, a divided union, player organized games being scheduled, team sales that generate fees for the owners only going on the very day of negotiations, overseas opporunities, the NBL starting in Canada, the agents’ agenda, every option that is available to the players should they decertify, ongoing escrow payments, without even getting into issues between the participants themselves . . . we are supposed to believe that a deal was close?

Really?

No.

It never was close, and we know that because of what they said recently and how they said it. The happy faces are no longer donned.

Each time the group is small, progress is made among that group . . . when the group gets bigger, things regress, and this is totally expected to anyone who’s tried to go to dinner in a party of 8.

Any semblance of progress has been consistently shot down as soon as the larger groups were involved. At the last great moment of hope, it was the players that shot it down. This time, it was the owners. Things were just bee-bopping along fine (in this teeny corner of the world), then immediately after the larger group has a say . . . le fin. That’s exactly what was happening two weeks ago. Exactly.

The owners that have been ignored while they were bleeding cash for years. They have needs that will be met, even if the media has been ignoring them. They have voices that will be heard even if the media isn’t seeking to hear them.

The writing has been on the wall, and the exact same dismissal that led to this sad and pathetic display of a lockout is still going on. It will continue because the public moons over the players. That’s fine. That’s perfect in fact. It creates nonpaying jobs for analysts, and that’s fine by me.

11 comments
Diane
Diane

well kids if you were or still are there is the Baseball World Series and of course that sport I detest - football - or if you can get it - hockey. I still can't see me buying tickets - maybe one or two games, time will tell. Thanks to all that take time to write.

AgentZiko
AgentZiko

Wow. Great job on this 42. You really put in a lot of time doing this, and it's very much appreciated. When this first started, I really didn't see it lasting as long as it would. But as things went on and I got some of the information I was receiving out here, I realized how bad things were. I've literally tried to take myself out of basketball talk altogether so I can avoid feeling very upset about any of it because I knew it wasn't going anywhere. I am truthfully very much in favor of a Players League. Nothing against the NBA, because I love it more then I can explain, but I feel like I'd rather at least have basketball to WATCH right now, then JUST feel bad for all the small markets, loss of jobs to the thousands of people involved at the NBA stadiums, and all the kids wishing they could watch their heroes again. Seriously. Think about this. There's probably a kid in the make a wish foundation who just wants to come to an NBA game to watch CP, Kobe, Lebron, or Durant, but wont be able to in time. Thats the stuff I think about. And it bothers me. I don't care enough anymore to think about how bad this is. I've tried to pull myself out of it. But I wish there was an alternative. It's what I'm hoping and waiting for.

James Online
James Online

On the face of it, subtle complexities aside, it appears that the small market teams are making it difficult for the big market owners to sign off on a deal. With so few teams taking all the championships over the past many years, and with the financial struggles of the Hornets, Kings, Grizzlies, and others so well known, this gives face validity to the owner's position. I'm concerned with the "good of the game." That principle can only be enhanced by greater equality of opportunity spread among all contenders. Yes, revenue sharing must be part of the solution, but the financial structure related to player compensation and movement must also be aligned with this principle for the league to be viable as sports competition, not just Vegas-style entertainment.

paul
paul

42...I bow low to you. I am in utter glory reading your thoughtful and artful words. Not many people cannot just think this, but write it. Very well done. The whole journalistic/sports thing to me reminds me of the coverage of Hollywood and Washington DC. There is a sort of inner breeding that goes no. IF you do not cover your celebrities as they want to be covered, you are shouldered out of the night parties. No more dinner invitations come in the mail. No more calls from the podium when you raise your hand with a question. So you learn. You soon realize the "whole truth" is not your job. Your job is to write a story...not print truth. All the total nonsense I read about players BEING the game makes me want to hit out at something. The GAME is special and so much more than the clowns on the floor at any season. It is a business, an entertainment business, but a business. And it is the present of all the past. It has stories and heroes from a long past. People who gained and lost fortunes building the present. So enough about the glory boys of the moment. Any time a player association want to dissolve and actually pool its monies and start a league...they can. Nothing stands in their way, except their own coward selves. Deep in their minds, they do know they are NOT the warriors they are told by their hanger-on posies. As a last note...I think this is why most actors are screaming liberals ranting at us to give all we have to whatever issue they have taken on. You see, they are weighted down by the ghost of their own guilt. They are pretenders and they know it. They deep down know they are playing the system, so their guilt forces them to do penance in front of cameras. Guilt....what a wonderful drug.

Seattle Needle
Seattle Needle

This is what I don't get. $3.9 billion divided by 30 teams is $130 million. If they are losing $300 million, that's $10 million per team. They're saying it costs, on average, $140 million per team to operate an NBA franchise. With the players getting $73 million per team, the league is saying that $67 million of the costs are from non player expenses. That is just impossible.

42
42

It's more complicated that, too, since you are just looking at BRI. There is other I as well. The operating expense stuff here will help: http://cache.deadspin.com/assets/resources/nbafinancials/hornetsfinancials.pdf There are long term liabilities, but in the short term these will help. Then I'd look as cash flows. Then there's the deeper financial stuff . . . amortization, depreciation. We can talk more about it, or, if you like, I'll dig through these (been meaning to) and gin up a post.

Seattle Needle
Seattle Needle

Thanks for the link. I have seen it before as well and I mentioned in the above post a lot of non player expenses and they were right there in the link. It only comes out to around $30 million which is what I read in article somewhere. All the other financial stuff has 2 sides to it. There is depreciation of assets but there can also be appreciation. There are long term liabilities but there are also tax writeoffs. And most importantly, most of these teams sell for more than they are bought for. In the end, it all evens out unless you are someone like Shinn who makes bonehead decisions and then pays for them down the line. There was the oil deal gone bad. There are loans that he takes out because he didn't manage his business well. That's something that you can't just write up as a loss. Had he been smarter with his dough, he wouldn't be paying all that interest on the loans he got. You can't just start taking money from the players because you mismanage your non basketball related stuff.

Joe Gerrity
Joe Gerrity

League has a lot of overhead.

Seattle Needle
Seattle Needle

Oh yeah, I realize that. But $67 million. I know there's advertising, travel expenses, jet fuel, lodging, coaches, front office people, the 100 or so employees that sell tix and what not, insurance, legal retainers and the like but it doesn't come out to $67 million on average.

yogi
yogi

You hit the nail on the head - the establishment reporters are so dependent on the players for information, that they are actually taking sides in the dispute. The coverage has therefore been more like propaganda than any actual reporting - pretty disgusting, actually.