Wednesday, November 02, 2011

The economics behind the NBA lockout: paying owners' interest costs, and using the season as a bargaining tool

SB Nation NBA Editor Tom Ziller's had a couple of incisive pieces on NBA economics.

In a 10/31/11 article headlined In NBA Lockout Deal, Should Players Be Responsible For Financing Owners' Debt?, he observers that the players and owners, as of now, are fighting only over $100 million, now that rising operational costs have been taken care of:
The players' concessions cover more than 100 percent of those expense increases. That jibes with an older union claim that only half of the league's claimed losses came from actual operational issues, while the other half represented depreciation and interest payments.

Those interest payments? They are connected to owners' purchases of NBA franchises. And that's the cash that owners are holding out for: player concessions to cover the financing of the teams bought in the past decade or so.
Ziller concludes:
f you wonder why owners like the Heat's Micky Arison are agitating to get back on the court, consider another reason: unlike [Phoenix Suns owner Robert] Sarver, Cavaliers owner Dan Gilbert, or Celtics co-owner Wyc Grousbeck, Arison isn't stuck financing a bloated investment right now. Not only is he profiting because of the presence of a legit championship contender and the biggest star in the game, but his team was bought long before the price boom and economic collapse. Jerry Buss and James Dolan are in the same spot. This lockout is about investments gone wrong, and the fight for labor to pick up the burden. Remember that, no matter what Sarver and Stern tell you.
The season as a cudgel

In an 11/1/11 follow-up headlined NBA Lockout Bleeds Into Regular Season, And Fans Remain The Goats, Ziller writes:
If you believe Billy Hunter, the executive director of the National Basketball Players Association, it was always going to come to this, the owners always intended to chop off the front end of the regular season to ensure that players missed a paycheck and felt real pain. The season itself was the owners' greatest bargaining tool. (You'll remember that the owners wouldn't meet with the players' union in July, met once in early August -- just preceding a federal lawsuit -- and didn't get started negotiating in earnest until September.)
He breaks it down:
The lockout battle has never been about fairness... None of it's fair, but neither is business. This is the game that these owners -- most of them, at least -- are good at. Do you think that Paul Allen doesn't know a thing or two about holding an ax over someone's neck? Of course he does. Do you think that Dan Gilbert earned his fortune by being fair in business deals? Of course he didn't. Big business, big finance -- these are brutal, dog-eat-dog industries where fairness and integrity is something like No. 99 on the list of institutional priorities. With the sort of assets that are typically at stake, there's no time for morality checks.

No comments:

Post a Comment