Economic impact of the NBA Lockout?

November 4, 2011

There is always that question of the economic impact sport has, and the common answer given by economists is that there is little/no economic impact from sport on a region.  The research done in peer reviewed journals backs this up, and it has been something which has been discussed here any number of times.

Thus, I was pleased when I came across this post at NBC’s ProBasketballTalk blog today.  They note that there is no economic impact of the NBA lockout, as the discretionary income used to buy tickets will go to other goods and services in the community.  However, they do note a group that is hurting from the lockout, workers at Orlando’s Amway Center where the magic play.  The article states:

(Community Food & Outreach Center director, pastor Scott) George estimated that between 40 and 75 game-night workers have used the Community Food & Outreach Center’s services over the last few weeks. He said he’s unsure of the exact number because some game-night workers are afraid that if they say something, they might not be able to go back to their jobs when the lockout ends.

While this is less than ten percent of the workers for the Amway Center, and we don’t know how many of these workers already go to the Food and Outreach Center in the first place, it does highlight that it is the little guy/business that is often affected negatively by the lack of games.

I remember earlier this year THE SAME author at NBC’s ProBasketballTalk posted an article making the claim that the Lakers losing early in the playoffs would cost the Los Angeles economy $70 million.  This all traces deeper to the words of an economist, who actually notes that the loss could cost downtown business near the Staples Center around $70 million.  Of course, this doesn’t mean that LA is losing $70 million, but that the spending might be redistributed among other parts of the city/region.  Again, those who would be hurt would most likely be those business such as bars and restaurants that depend upon game traffic and large numbers of fans to help boost business.

I’m hoping that more of those in the media are paying more attention to what the academics have to say about economic impact and sport, though I’ll keep watching to see if NBC is keeping a new consistent message.

NBA Lockout Breakdown

November 3, 2011

Welcome to day 126 of the NBA lockout.

I feel a bit guilty about not having discussed the NBA lockout in greater depth, as I spent many posts discussing the NFL lockout.  The NFL lockout was settled in time for the season to begin on time, and while there seemed to be some bad blood between the players and the owners, the scope of the NFL lockout pales in comparison to the NBA lockout.

We are now several months into the lockout (the lockout is just over four months old) and the talks between players and owners hit a deadlock over splitting the revenue.  The owners want a 50-50 split of revenues, the players were willing to go as low as 52.5%, but have yet to say they will go any lower.  Not only has the talks between players and owners been heated, but some of the players have expressed anger at the union as well.  The big split seems to be between union head Billy Hunter and player rep Derek Fisher who seemed to have come to a disagreement over the revenue split.  It is reported that Kobe Bryant and Derek Fisher were pushing to accept the 50-50 split, and that Billy Hunter actually confronted Derek Fisher about this.  It came to the point where Derek Fisher had to bring in the lawyers and publicly make a statement that there is no split in the union.  Officially there is no issues in the union.

NBA veteran Jerry Stackhouse came out and disagreed with this on ESPN Wednesday, he stated:

“Not to say anything against Derek Fisher, it’s not that I don’t think he’s a great guy,” Stackhouse said, “But I don’t want him negotiating my contract. I want an agent who knows the lingo negotiating my contract. Derek Fisher, he doesn’t negotiate his own contract. He has an agent. So why would I want him negotiating something even bigger than his contract? This [Collective Bargaining Agreement] is something more important to everybody…

“David Stern, he’s made this league what it is,” Stackhouse said. “He’s one of the greatest commissioners in sports. He’s got that title, he’s got the NBA at the place where it is because he’s a shrewd businessman and knows how to work his way, play the media, play things up to get what he wants. We don’t do that. Players are emotional. Players get emotional. So no, I don’t necessarily, particularly want Derek Fisher or any of the executive committee negotiating a contract for me.”

So clearly there is a rift in the NBA lockout, which would seem to give some more power to the owners.  The NBA is also trying out a new tactic in the labor agreements: Twitter.  The NBA has a twitter handle now dedicated to posting the ownerships point of view in the labor lockout.  One player (Nazr Mohammed) pointed out that the players can’t talk to coaches or workout at facilities, but the NBA can send them harassing messages about the lockout through twitter (though it is Mohammed’s choice to receive these messages as well).

The lockout has carried on so long to this point, that the league was forced to cancel games all the way through the end of November.  Each day that ticks by is another day lost, as realistically, to get players through camp and have the season ready to go would take about a month (30 days).  So while November is already cancelled, you can pretty much start ticking off the days in December.  The Christmas day NBA games are usually pretty popular, so I wonder if the the two sides might try to push for some resolution.  We know the season will already be shorter, and there is no way they can extend it with the 2012 London Olympics looming in the summer, I begin to wonder if there will even be an NBA season at this point.  While I have pointed out that the owners have stood strong, and there is fractions in the union, it is important to note that many NBA players are currently making money playing basketball overseas.  Utah Jazz point guard Deron Williams began the exodus of NBA players by signing to play in Turkey, and slowly players have moved to teams all over Europe and China.  So while the NBA has suffered bad PR form this lockout, many overseas teams have had the bonus of having the services and star power of some NBA players on their team so far this season.  The NBA has always looked to try and build a bigger global brand, and it is curious to see whether this lockout causing players to go overseas may help/hurt the league trying to become even more popular overseas.

Yesterday, Chauncey Billups had some strong words trying to show the solidarity of the players.  Billups said he was willing to forgo his $14.3 million contract for this season and sit out the entire year to make sure that there is a fair Collective Bargaining Agreement (CBA) in place for the future.  Billups noted that fair means that it would be economically fair to the players.

NBA players are the highest paid players on average than any other professional sport league in the world.  Their salaries have been the big target point of this round of CBA negotiations, as the owners feel they are taking a big hit having to pay such high salaries.  At the same time, the high salaries and lower number of players in the league seem to have created a case where many of the players can actually afford to sit out a season, where NFL players were not able to.  The availability of leagues overseas providing another avenue for players to earn money for NBA players has been another factor which has probably caused the lockout to be so drawn out.  To be honest, the NBA players are in a much better situation for the NBA players, and seem to be willing to take a loss for the time being in order to get a fair contract.  Both sides are losing money, and right now it almost seems to be a game of chicken to see how will flinch first.

Also, I would like to point out this post about the lockout over at The Sports Economist, another great read and take on the lockout from University of Chicago economist Kevin Murphy.

Comparing Win Efficiency in North American Professional Sports

October 25, 2011

NBC Sports’ ProBasketballTalk (PBT) must be quite bored, as they only have news about the lockout and the National Basketball Association (NBA) season potentially being cancelled to really talk about.  That said, they did post an interesting article today about the concept of win efficiency in professional sports.  The question they were asking, was whether NBA franchises had the best win efficiency, as determined by the number of wins generated by a teams payroll.  The calculation which they pull from a Bloomberg Business Week article is calculated by:

After calculating that “cost per win” number for each team across all four major sports over the last five years, Boudway found the standard deviation for each team within their respective sports. Using that standard deviation — dubbed “Efficiency Index” for the purposes of that particular post — Boudway was able to compare across leagues, and determine the spenders who are getting the greatest payoff per dollar spent relative to their competition.

You can click on this link to see the numbers.  One thing I had a question about was the differences in the number of games played.  Win efficiency is an interesting thing, as I have noted in previous posts about the Tampa Bay Rays, Oakland A’s, and the book Moneyball, there are some teams which are able to win games with lower payrolls.  I decided to play around with the Bloomberg numbers, and normalize them for the differing number of games played by each team.  This produced quite different values than the Bloomberg report.  In fact, it went from having a mix of teams from different leagues at the top, to having mainly NFL teams.  In this, when I corrected for the differences in number of games played, it displays that the NFL is clearer the most efficient at the top.  The problem is of course one of sample size.  The NFL has such a small number of games in a season compared to the other leagues, that it is hard to be able to truly compare a single season of NFL teams (who play 16 games) against MLB teams (who play 162).  Additionally, we have to take into account that the leagues have different structures in regards to salary cap rules (MLB has no salary cap, the rest do).  This thus creates the case where some teams are probably forced to be efficient because they don’t spend much, and because of low number of games for NFL teams, means they are able to seem to be very efficient.  I’m not going to say that the teams at the top of this list are better at money management, or have much more effective management, because those kinds of generalizations are hard to make when we are talking about leagues with different structures.

My numbers (sorry for the length).  First column is their rank, second is their rank in the Bloomberg rankings.

  1. 4    New England Patriots    -0.3375
  2. 7    Indianapolis Colts    -0.3
  3. 12    San Diego Chargers    -0.27
  4. 20    Baltimore Ravens    -0.215
  5. 27    Pittsburgh Steelers    -0.1925
  6. 28    Green Bay Packers    -0.19
  7. 30    Atlanta Falcons    -0.185
  8. 1    Nashville Predators    -0.184420649
  9. 33    Philadelphia Eagles    -0.175
  10. 37    New York Giants    -0.1575
  11. 41    Chicago Bears    -0.1425
  12. 42    Tennessee Titans    -0.1425
  13. 5    San Antonio Spurs    -0.136935092
  14. 6    San Jose Sharks    -0.135830777
  15. 44    New Orleans Saints    -0.135
  16. 10    New York Islanders    -0.126996255
  17. 2    Florida Marlins     -0.126493546
  18. 11    Atlanta Thrashers    -0.120370363
  19. 3    Tampa Bay Rays    -0.115494108
  20. 13    Phoenix Coyotes    -0.111535841
  21. 14    Utah Jazz    -0.110431526
  22. 15    Los Angeles Lakers    -0.108222896
  23. 16    Pittsburgh Penguins    -0.10711858
  24. 49    Tampa Bay Buccaneers    -0.105
  25. 17    Orlando Magic    -0.100492689
  26. 19    St. Louis Blues    -0.099388373
  27. 21    Denver Nuggets    -0.093866797
  28. 8    Pittsburgh Pirates     -0.09349523
  29. 9    San Diego Padres     -0.092709556
  30. 52    Dallas Cowboys    -0.0925
  31. 53    New York Jets    -0.0925
  32. 22    Chicago Bulls    -0.091658167
  33. 23    New Orleans Hornets    -0.091658167
  34. 54    Jacksonville Jaguars    -0.0875
  35. 24    Detroit Red Wings    -0.08613659
  36. 26    Boston Celtics    -0.085032275
  37. 32    Phoenix Suns    -0.080615014
  38. 18    Arizona Diamondbacks    -0.071496352
  39. 35    Dallas Mavericks    -0.070676177
  40. 36    Portland Trail Blazers    -0.070676177
  41. 38    Carolina Hurricanes    -0.069571861
  42. 39    Atlanta Hawks    -0.069571861
  43. 43    Houston Rockets    -0.061841655
  44. 25    Oakland Athletics     -0.061282588
  45. 29    Washington Nationals     -0.058925565
  46. 31    Texas Rangers    -0.057354217
  47. 46    Anaheim Ducks    -0.053007133
  48. 34    Cleveland Indians    -0.051854497
  49. 47    Buffalo Sabres    -0.050798502
  50. 63    Denver Broncos     -0.0475
  51. 40    Kansas City Royals     -0.046354778
  52. 45    Colorado Rockies    -0.040855058
  53. 55    Minnesota Wild    -0.036442404
  54. 48    Cincinnati Reds    -0.035355339
  55. 50    Milwaukee Brewers    -0.032998316
  56. 51    Toronto Blue Jays     -0.032212642
  57. 68    Minnesota Vikings    -0.03
  58. 57    Dallas Stars    -0.028712197
  59. 58    Washington Capitals    -0.027607882
  60. 59    New Jersey Devils    -0.027607882
  61. 60    Vancouver Canucks    -0.02319062
  62. 61    Cleveland Cavaliers    -0.022086305
  63. 56    Minnesota Twins    -0.021998878
  64. 62    Detroit Pistons    -0.02098199
  65. 64    Oklahoma City Thunder    -0.017669044
  66. 65    Chicago Blackhawks    -0.016564729
  67. 66    Charlotte Bobcats    -0.015460414
  68. 67    Miami Heat    -0.014356098
  69. 69    Philadelphia 76ers    -0.011043153
  70. 70    Florida Panthers     -0.011043153
  71. 71    Arizona Cardinals    -0.01
  72. 72    Carolina Panthers    -0.01
  73. 73    Atlanta Braves    0
  74. 74    St. Louis Cardinals    0.005499719
  75. 79    San Francisco Giants    0.012570787
  76. 77    Los Angeles Kings    0.014356098
  77. 81    Baltimore Orioles     0.020427529
  78. 75    Houston Texans     0.0275
  79. 76    Kansas City Chiefs    0.0275
  80. 86    Houston Astros     0.029069945
  81. 91    Los Angeles Dodgers    0.036141013
  82. 78    Seattle Seahawks    0.0375
  83. 82    Boston Bruins    0.037546719
  84. 83    Golden State Warriors    0.037546719
  85. 84    Los Angeles Clippers     0.038651034
  86. 85    Colorado Avalanche    0.040859665
  87. 87    Indiana Pacers    0.043068295
  88. 88    Toronto Raptors    0.043068295
  89. 89    Montreal Canadiens    0.043068295
  90. 95    Los Angeles Angels    0.043997755
  91. 98    Philadelphia Phillies    0.0487118
  92. 80    Cincinnati Bengals    0.0525
  93. 93    Columbus Blue Jackets    0.053007133
  94. 94    Tampa Bay Lightning    0.058528709
  95. 99    Detroit Tigers    0.061282588
  96. 96    Milwaukee Bucks    0.06294597
  97. 100    Seattle Mariners     0.06363961
  98. 101    Chicago White Sox    0.064425285
  99. 102    Washington Wizards    0.091658167
  100. 103    Memphis Grizzlies    0.097179743
  101. 109    Chicago Cubs    0.097423601
  102. 104    Sacramento Kings     0.103805635
  103. 111    Boston Red Sox    0.104494669
  104. 90    San Francisco 49ers     0.11
  105. 105    Ottawa Senators    0.110431526
  106. 92    Buffalo Bills     0.115
  107. 113    New York Mets     0.120993827
  108. 108    New Jersey Nets    0.129204886
  109. 110    Calgary Flames    0.143560984
  110. 97    Miami Dolphins    0.1475
  111. 112    Toronto Maple Leafs    0.152395506
  112. 114    New York Rangers    0.200985377
  113. 116    Philadelphia Flyers    0.228593259
  114. 121    New York Yankees    0.228631193
  115. 117    Edmonton Oilers     0.234114835
  116. 106    Cleveland Browns     0.255
  117. 107    Washington Redskins    0.2675
  118. 119    Minnesota Timberwolves     0.312521219
  119. 120    New York Knicks    0.314729849
  120. 115    Oakland Raiders     0.4825
  121. 118    St. Louis Rams     0.585
  122. 122    Detroit Lions    0.805

You will notice that in both rankings the Detroit Lions are dead last.  When you lose most of your games, you just can’t be considered to be very efficient unless you are paying your players close to nothing.  While adjusting for the number of games changes things a bit, there is still a 0.95 correlation between Bloomberg’s rankings and my adjusted ones.

City of Memphis contemplating suing the NBA over the lockout

October 20, 2011

The Memphis Grizzlies, the cities National Basketball Association (NBA) franchise, currently play at the FedEx Forum.  However, with the NBA currently locked out, and looking more and more likely that there is going to be a big cutback in the length of the season (or possible no season at all), the city of Memphis has started to worry.  The reason?  The FedEx Forum is actually paid for through revenues produced by the team.  However, if there is no team playing there, then that means the city will have to make the bond payments.  Fox Memphis say the City Council is estimating that these will be somewhere in the neighborhood of $18 million.  Those who will have to bare the burden?  Most likely the local taxpayers.  Things are getting urgent, city councilwoman Julie Fullilove notes:

“Should this lockout stay until December, then there’s a very big bill there that the city of Memphis will be responsible for, and whether or not we file a lawsuit, which may set precedent among other cities in this nation, is something we’ll have to wait and see. But it’s only being proactive that’s he’s offering this resolution.”

So with less than a month and a half away from the deadline when Memphis will start having to cough up some cash to make bond payments, the city has started to look at the potential for a lawsuit against the NBA.  Curiously, when Fox Memphis talked to the individual in charge of the bond, he noted that there is currently a surplus in the account to pay the bond through 2028.  He  even notes that he is confused where the city got the idea that they needed to pay up $18 million soon, and that it would be the taxpayers who would have to pay it.

So there we have it, the City is thinking of suing the NBA for being locked out, claiming it will cost them part of the bond payment.  The guy in charge of bond payments says there is more than enough money for the next decade and a half.  The $18 million doesn’t seem to add up that the city would have to pay because of basketball not playing, as they only receive about $3.5 million a year currently from ticket sales and revenue.  I think this may just be a political powerplay to help the politicians in the city council to look good.  I don’t think it really will do much, and I doubt that they have much of a case against the NBA.  Case in point to this being about politics, the City Council Chairman noted:

“I want the citizens of Memphis to know that we are not sitting by idly, waiting for this to hit us and for us to say we’re sorry.”

Still, it would be curious to see if cities can take action over lost revenue because leagues do not play because of a lockout.  I wonder, would the city sue the players if the players were on strike?

NBA Contraction or Expansion? How about both.

October 31, 2010

Earlier this week, David Stern was talking about the new labor agreement that he was thinking of for the NBA.  He discussed the potential of cutting player salaries by about one-third, quite a large chunk of change.  In discussing this, he also said that this was the starting point, and there is the need to negotiate between the owners and players to come to a new collective bargaining agreement (CBA) before the next season.  Though he avoided the subject, Mr. Stern did discuss the potential of contraction for the NBA, citing that there were some markets that no matter what the franchises do, can not sell enough tickets to finance their operations.  This would give the indication that the NBA may indeed be too big, or possibly that franchises are not in cities which are truly ideal for them.  In the days following these remarks, Stern sort of dodged any more questions about contraction, a word that fans always seem to get anxious about.  We have had discussion of contraction in Major League Baseball, and actual contract in Major League Soccer which turned out to be quite successful for the league, and allowed it to re-expand into other markets that were more inclined to come to soccer matches.

So many were surprised when David Stern discussed expanding the NBA to Europe.  That’s right, not only does Stern seem like the idea of teams playing in Europe, he seems to want a whole division of teams in Europe.  Stern states:

“I think we’ll have a division and I think the Heat will play in Boston one night and then they’ll go to Paris and spend a couple days on the Champs Elysses shopping and relaxing,” Stern said.

“And then they’ll go and play five teams. And when they finish that, they’ll play them again. Then they’ll come home, having had a nice trip to Europe and they’ll be finished with their European obligations.”

So the question is, how far into the future.  Again we turn back to Mr. Stern’s words:

“And now what I’m saying is, ‘It’s inevitable, it’ll happen in 10 years.’ But in terms of globalization, we’re going to see a desire for franchises in Europe – and in about 10 years, you’ll send me a postcard.”

So mark your calendars folks, David Stern is saying we will have NBA teams in Europe in ten years… Maybe he can move some of those teams whose aren’t doing so well financially overseas for a few years to see how well they fare there.  It would be interesting to see an international version of the NBA at some level.  While soccer does have Champions League in Europe which is spread through many different countries, I’d be curious to see how a sport league would do having teams placed on different continents.  The travel time and away time from home would seem to be a negative, and probably quite costly.

On a final note, it is possible that if the NBA and NFL do not both get their new CBA’s negotiated, that there would be no NFL or NBA next season.  I’m sure the NHL, MLB, and NCAA wouldn’t mind this.



Jazz Lawsuit

June 6, 2010

A very interesting lawsuit, from a sport finance perspective, was filed last week in Utah. A group of VIP Jazz ticket holders, called “the 100 Club” are suing the team for $19 million because of a change in the team’s policy about the transfer of season tickets.  The 100 Club has between 50 and 60 members who own the rights to tickets in the first five rows in the arena.  It was formed in the late 1980s to raise capital for the team when it needed money.  At that time, the members paid a one time membership fee based on location and received the rights to their seats, along with the right to sell or bequeath the seat after paying the team a $1,000 fee.  In effect, the 100 Club agreement converted a selected number of seats in the arena into assets under the control of the seat owner, not the team.  It’s basically a PSL.  100 Club members are also able to buy other season tickets at a 20% discount.  Presumably, these 100 Club seats appreciated significantly in value, but I have not seen any information about how valuable – the market for these seats may be quite thin.

Until recently, 100 Club seats were the only seats in the arena with this sort of property rights structure.  In January, the team started something called the “Transfer Marketplace” program that allowed other season ticket holders to sell the rights to their seats, as long as the team got 30% of the sale price.  The emergence of this substitute for Club 100 seats led to a decline in the value of Club 100 seats by 90%, according to the suit.  That amounts to $16 million in losses to Club 100 members, and led to the lawsuit.

The economics of this case are quite interesting.  The existence of these Club 100 seats represents a significant external financial benefit that the team would clearly like to capture.  I can’t imagine what was going on in the late 1980s that led the Jazz to form the 100 Club in the first place.  If they needed more revenues, why not just raise ticket prices?  Or take out a loan?  The creation of the new secondary market for season tickets, the “Transfer Marketplace” program, implies significant excess demand for season tickets to Jazz games, which implies that the team is not correctly pricing season tickets.  In addition, the team appears to have alienated their loyal VIP ticket holders in the process.

Details about the lawsuit can be found in this article from the Salt Lake Tribune.

The rise of Major League Soccer Attendance?

April 15, 2010

The MLS daily blog reported that as of this weekend, Major League Soccer has moved up the charts and now has a higher average attendance per game than the National Basketball Association or the National Hockey League.  The numbers of top average attendance per match for professional sport leagues in North America now sits at (as reported by the MLS Daily Blog):

1. NFL – 67,508.69 (2009 season)
2. MLB – 30,213.37 (2009 season)
3. MLS – 18,452.14 (2010 season, as of 04/11/2010)
4. NBA – 17,110.64 (2009/10 season)
5. NHL – 17,004.53 (2009/10 season)

Personally, I think this is more of a propaganda piece than anything else.  Sure the World Cup is fast approaching, which may help draw interest to soccer for the next year or so, but there are several things at work helping to shape these numbers.  First of all, the MLS has seen new teams in Seattle last year, and Philly this year.  The attendance for these two franchises has significantly helped raise the average attendance of a league, which still only has 16 clubs, compared to the 30 teams in both the NBA and NHL.  Due to this, a few strong teams with good attendance in the MLS can make a much bigger impact on the leagues average attendance.  Another thing of note, is that the MLS season is less than a month old, meaning most franchises have only played a handful of games, really the sample size for MLS attendance for the 2010 season is too small to really crown the league as the #3 attended sporting league in North America.

It is notable to consider that last years average attendance was just over 16,000 for the MLS, and that the league has hovered between 15,000 to 16,000 over the last few years.  This does point towards the MLS slowly evolving into a more stable and popular league, however, I would be curious to see about the revenues which are brought in on game day.  While the MLS may have a 1,000 more fans coming to games, many of these fans could be paying significantly lower ticket prices than if they attended an NHL or NBA game.

And then of course, we have to remember that the MLS is famous for having some franchises lie about their attendance.  While this is nothing new, the practice of reporting 50% more attendee’s at a match than actually came is not exactly standard practice.  For now, I’ll keep looking at the numbers reported by the MLS with a grain of salt, and look at other indicators as to the health and wellness of the league.

NBA Labor Update

March 29, 2010

Ken Berger at CBS Sportsline had an article 10 days ago regarding the NBA Players Association response to David Stern’s initial labor proposal. A quick review of Stern’s proposal can be found here.  The big picture is Stern claims that the league will lose about 400 million this season and radical changes must be made to control costs for the owners.  The Players Association believes this figure is inaccurate.  The head of the Players Association, Billy Hunter, said:

“The basis of our objection is just when it comes to general accounting principles,” Hunter said. “We think that there’s been an overstatement, that some of the things that they discount should not be discounted because they relate to non-operating expenses and related parties.”

This should come to no surprise to people studying the business of sports.  As Brad posted last year, Paul Beeston has been quoted as saying:

“Anyone who quotes profits of a baseball club is missing the point. Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss and I could get every national accounting firm to agree with me.”

If this is true, the players would seem to have the upper-hand in the labor negotiations.   It will be interesting to see the results from the Players Association investigation of the league’s finances and what their counter proposal will be.

NBA Labor Issues

February 12, 2010

Following up on Nick’s post one week ago regarding the labor unrest in two other NA pro sports leagues, there is an article on regarding the NBA’s current labor negotiations.

The league has submitted a proposal to the Players Association that would dramatically reduce the amount of money that is given to the players. Currently the players receive 57 percent of overall league revenues, and the proposal calls for players to receive less than 45 percent.

The league proposal also calls for players to take a big pay cut calling for a 33 percent cut in rookie salaries, a cut in the minimum salary by 20 percent, and the veteran maximum deal being less than 60 million over the life of the contract with most of that money being non-guaranteed. According to the source of the article, the proposal is designed to move the NBA from a soft salary cap to a hard salary cap.

I find it hard to believe that the Players Association would accept this big paycut and this situation will be interesting to examine in the coming months. What I also see here is not only the owners trying to keep more money from themselves, but also the NBA attempting to improve the competitive balance of its league. Fort and Quirk (1995) in their classic JEL paper say that the only league policy to improve competitive balance is an enforceable, hard salary cap. Research in competitive balance also shows that the NBA has the worst competitive balance among the four professional leagues in North America. This proposal I believe is a strategic attempt by the NBA to also attempt to improve the competitive balance of the league that would result in higher league revenues (which the owners would then pocket more than in the current collective bargaining agreement).  If the league is unsuccessful in its attempt to enforce the hard cap, which Fort and Quirk say is a big problem for the league, the owners still pocket more money.  Sounds like a win-win situation to me.


Get every new post delivered to your Inbox.

Join 59 other followers