Tbird topic: Ideas to help create a new Collective Bargaining Agreement
Written by thunderbird1245
In general, I hate reading columns like the one I am going to now write. I’d much rather be talking about basketball strategies, breaking down players, profiling interesting people, or discussing ways we can make the team or the league better. But today I can’t do that, because with this labor stalemate looking very much like it will possibly drag on for months it is becoming more and more likely that none of the above discussions will be relevant anytime soon.
By nature, I am a problem solver who enjoys trying to come up with new concepts and ideas to help craft solutions to whatever issues are important to me. Often times as a coach that is spent trying to solve some personnel related issue, trying to find that perfect play, drill, practice plan, lineup, or defensive scheme that best hides whatever inherent problems my teams might have. I find that fun and part of the intellectual thrill that comes with coaching.
Right now, my thoughts instead head to our Pacers, who have their season and maybe even their long term future on the line with the current CBA stalemate between the league and the players. Like most thorny issues of our time, my general view is that if the parties would get beyond their normal dug in partisan ideological views that they could better use their time to find common sense solutions. I think in general common sense can solve most issues if both sides are willing to apply it…..and the ideas I have come up with today and will advocate were created with that in mind.
Maybe somewhere, someone in some players office or some league boardroom will see some of the creative ideas and discussion that comes from this, and an idea will sprout on how to solve this mess so we can have our NBA basketball back in our lives come this winter.
Below, here are some of my common sense ideas for a restructuring of the NBA’s labor agreement.
Competitive sports leagues need to share revenue in order to have a level of “competitive balance”. In general, that means every team must somewhat be on a level playing field financially, so the entire cartel can grow and prosper. This isn’t a normal business…..the Lakers NEED the other teams to do well financially, it ultimately harms them if others suffer….it isn’t like they can just take over another team like some Wall Street baron might take over another struggling company.
So, it is time for the league itself to get a structure that can help the collective group grow the pie. That means working together more in a financial way to make everyone strong, in order to make the weakest link in the chain stronger than today.
Here are my Tbird ideas for revenue sharing and to grow the pie:
1. TEAMS SHOULD COLLECTIVELY POOL A PERCENTAGE OF THEIR LOCAL TV RIGHTS IN A 25%-75% SPLIT
Forget about fairness, it isn’t economically viable as a business model to have some teams have gigantic local TV deals while others do not. This is mainly a problem of geography, not competence…..no matter who the owners are in giant markets they will be able to sell their products easier and for more money that in smaller metro areas like Salt Lake City and Milwaukee. Again to me this is simply common sense.
Generally I think an owner should be able to keep a* percentage of his income from negotiating his own deal, that only seems fair as a fee for actually doing the work involved. But as of now all owners pocket 100% of their local TV monies, and that inherently means a giant income discrepancy right from jump street between big and small markets.
So my solution is this: Owners should keep 25% of their own local TV money, and the other 75% of that should go in a league wide pool to share with the other teams.
This makes sense to me. It isn’t like the NFL, where all TV contracts are negotiated by the league itself cutting the individual owners out of the loop. Of course, in the NFL there are no local TV rights, it is all national network money. So here I am proposing letting the individual owners keep 1/4 of the money, which should theoretically still motivate them to be aggressive and make as good a deal as possible, therefore generating maximum revenue.
However, if individual big market owners won’t agree to this, then I think the league should more closely follow the NFL model and negotiate all local TV deals themselves, cutting ownership out of the loop here, and then share 100% of the money instead of 75% of it.
2. TEAMS SHOULD SPLIT GATE RECEIPTS AT A 60%-40% RATE.
Currently it is my understanding that each individual team keeps all the money from their home games, and gets nothing from their road games…..it is every team for itself at this point. This means a giant discrepancy in per game revenue for each team…..successful teams make $3-5 million each time their doors open, and poorer teams like Indiana make about $750,000 for each home game.
This should end. My solution is that for every home game, you keep 60% of all revenue generated, and your opponent gets 40%.
This is common sense to me, and the results would be beneficial to the smaller markets. By my calculations, this would create an additional approximate$ 12 Million in revenue for our Pacers per year. Someone can double check my math, but if the average NBA team makes approx $1.5-2.0 million per game, and Indiana makes only $750000, then those approximate calculations hold.
41 games x750000 = 30, 750,000….that is what we make now.
Assuming the average team makes 1.5 million in gate revenues then we have this:
41 games x1,500,000=61,500,000 x 40% revenue total for road games=24,600,00
41 games x 750000=30,750,000 x 60% revenue total for home games= 18, 450,000
Total revenue of 43,050,000 on 82 game nights under my plan, a net gain approximately of 12, 300,000.
Even if my guesstimate of an approximate profit amount per game for the average team on game nights is slightly off (I used 1.5 million) and even if you wanted to adjust the percentage around slightly (I used an NFL model of 60% home team share and 40% for the road team share) then you can still easily see that sharing revenue in this way makes sense.
Why I think the bigger market owners might agree to this?
I think this creates an environment where the entire pie can grow, therefore increasing net revenues in gate receipts for everyone. The leagues owners need to not think of the profit of the league as a static enterprise, instead they need to think of it as a business that can continue to grow and expand its marketshare, therefore making money for everyone.
REVENUE ENHANCEMENT OPPORTUNITIES
The key for the players in agreeing to make a smaller percentage is that the pie itself needs to grow, thereby letting everyone profit more than they are now. That means growing the game and looking for more ways to make the game both more marketable and popular….and by proxy improving the actual product on the floor.
Here are some ideas for doing that….and I look forward to hearing some your feedback in this area as well
1. TRAINING CAMPS SHOULD BE SLIGHTLY LONGER, AND OPEN TO THE PUBLIC
Every year droves of fans flock to NFL training camps, to watch teams practice while sitting in the blazing sun, often driving from miles and miles away. Who knows how many new fans are created each July for our Colts while little kids clamor for Dwight Freeney autographs and Peyton Manning jerseys?
NBA training camps should be mandated to be 21 days long, should all be held outside of their home cities in a nearby market/college campus, and should be modeled to be extremely fan friendly and profit driven simultaneously. The cities themselves would bid for the right to host this stuff in my vision….it wouldnt cost the teams much at all. And imagine the fan interest and news you could generate each October by having each NBA host a public training camp somewhere in each state?
You increase the training camp length and profile, cut the exhibition season to 5 games instead of 7, and start growing even more generations of fans.
2. ELIMINATE THE UNBELIEVABLY STUPID AND SHORT SIGHTED 75 MILE RADIUS MARKETING RULE
This has become somewhat of my pet peeve thru the years as many of you know. For those of you that don’t, NBA rules now dictate that a franchise cannot actively market its team outside of a 75 mile radius of its home town. That means that our Pacers can’t market themselves in Larry Bird’s hometown of French Lick, or in the northern or southern areas of Indiana. Really now, how freaking stupid is that?
The league should eliminate this rule altogether and instead encourage teams to market outside their own city limits. How much of America isn’t currently marketed to by the NBA? Instead of being so worried about marketing the league in Berlin, London, and Barcelona, maybe we should try and market a bit closer to home…..just a thought. How many season tickets or merchandise could be sold in Evansville, Cincinnati, or Louisville? Maybe it is time we found out…..
3. NEUTRAL SIGHT GAMES
NBA teams should one home game a year to a neutral sight near them. This would help grow the national brand of the league in general and the regional brand of the team in question, and open up the league to new fans. If it goes extremely well, maybe the experiment could be expanded a bit in the future even. For our Pacers, one home game a year on a rotating basis could be played in cities like West Lafayette, Bloomington, Cincinnati, Evansville, Fort Wayne, Louisville, etc.
I believe these games could be packaged into one single weekend, or on 2 single dates in the calendar, and become a high level marketing event that the league could really sell and market, much like MLB does with interleague play. Again, the publicity, interest level, and marketing chances to create new fans would be immeasurable and give us a chance to grow the profit pie.
BASKETBALL RELATED INCOME DIVISION OF PROFITS
1. DIVISION OF REVENUE SHOULD BE AT A 49%51% SPLIT BETWEEN OWNERS AND PLAYERS, WITH THE PLAYERS GAINING PERCENTAGE POINTS BACK STEP BY STEP BASED ON THE GROWTH PROFIT OF THE LEAGUE.
Let’s agree that the entire league Basketball Related Income (BRI) was the reported figure of 1.9 billion last year. Under the old agreement, the league paid the players 57% of this figure in salary and benefits. On it’s face, that seems like alot of money to pay just your labor force when you factor in other costs of doing business (stadium costs, management costs, marketing costs, building and debt interest, etc). I can see where certain low income generating teams would have difficulty making a profit under those circumstances, and contrary to many I don’t see the word “profit” as being a dirty word. Owners invest the money and inherit all the risks, they should have a business model that at least gives them a chance to make money.
That is why I propose such a drastic shift in income split from 57% of BRI to the players to my idea of starting it at 49%.
However, the players cannot look at it this like it is a massive loss of income. Instead, they have to look at it is taking a smaller percentage of a much larger pie that the league should hopefully be able to make happen.
My idea insures this by making this proposal:
-At 1.9 billion BRI or below, the players are entitled to 49% of that.
-At 2.0 billion BRI, the players are entitled to 50%.
At 2.2 billion BRI, the players are entitled to 51%. (At this point, the players recoup all of their losses if my math is correct.)
At 2.4 billion BRI, the players are entitled to 52%.
At 2.6 billion BRI, the players are entitled to 53%
At 2.8 billion BRI, the players are entitled to 54%
At 3.0 billion BRI, the players are entitled to 55%
Maybe the math or the percentages can change, but this is how a deal can be structured so everyone can win….owners get short term relief, while the players profit in the growth of the league to recoup their money.
SALARY CAP RULES/CONTRACT STRUCTURES/RULES FOR COMPETITION
A SALARY CEILING OF $ 50,000,000 WILL BE SET IN YEAR 3 OF THE AGREEMENT, PHASED IN OVER THE NEXT 2 YEARS, TO TAKE PLACE ON JULY 1, 2013. PLEASE READ BELOW FOR DETAILS/EXCEPTIONS
- Teams will have until July 15, 2013 to get under the salary ceiling
-Players will be now hereby be categorized in the following ways:
A. ROOKIE CONTRACT PLAYERS
B. YOUNG VETS
C. PRIME PLAYERS
D. FRANCHISE PLAYERS
E. VETERAN PLAYERS
Here are the salary structures and rules for each category of player:
ROOKIE CONTRACT PLAYERS (RCP) WILL BE DEFINED AS PLAYERS ON THEIR FIRST CONTRACT.* Rookie contracts will be DRASTICALLY cut in this CBA proposal.
Under my plan for rookie contract players, THE NBA DRAFT WILL BE CUT TO ONE ROUND ONLY. The 1st overall pick will earn a salary of 3.0 million flat, the 2nd overall pick will earn a salary of 2.9 million flat, the 3rd overall selection will earn a salary of 2.8 million, and so on.
In addition, all drafted rookie contracts will be 3 years in length, with the 4th year being a team option, and the 5th year being a mutual team and player option. Each RCP will be eligible for free agency after either year 3, year 4, or year 5 in the league, and all of their first 5 seasons are fully guaranteed by the team if the options are picked up.
Each team will be reimbursed by the league at 50% of the value of a contract if a RCP is released, but the player will receive 100% of their money.
ALL “ROOKIE CONTRACT PLAYERS” IN YEARS 1, 2, and 3 OF THEIR CONTRACTS DO NOT COUNT AGAINST THE SALARY CEILING LIMIT.** This is an important point…..so remember it, these RCP DO NOT count against your cap until year 4, if you should as a team so choose to keep them.* If you should exercise your team option in year 4, they would count against your spending ceiling, but you would know going in of the cost certainty you would have with them.
“YOUNG VETS” is the name of any player who has reached the end of his RCP status, either with a contract extension mutual agreed to by his existing team or by the expiration of his rookie contract. By definition, these players will be playing in contracts that start in years 4, 5,* 6, 7, 8 of their* NBA contracts.
“YV” players DO count against your salary ceiling limit. A league minimum contract for players in this category is 1,000,000, and there would be a maximum limit on how much each individual player can make of $6,000,000. However, individual contracts would not be able to exceed 3 years in length, and would contain a standard buyout clause of 50% of the remaining value of the contract.
“YV” players can sign a contract beginning in year 8 of their career, and have it continue until the end of year 10, if such player and a franchise choose to do so.
“PRIME PLAYERS” are players who have their contracts end after year 8 of the NBA career. Their salaries are to be set with a minimum of 3,000,000, with NO MAXIMUM AMOUNT. Teams are able to sign “PP” individuals to whatever amount they feel appropriate, as long as they do not exceed their overall salary ceiling. Contracts are limited to a length of 4 years, with the final year being partially guaranteed with a standard buyout of 50% of the remaining value of the contract.
“PP” players DO count against your salary ceiling, which is not to be exceeded.
“FRANCHISE PLAYERS” are to be considered the top of the line, elite level superstars in the league.
“FP” individuals DO count against a team’s salary ceiling. However, you can exceed the salary ceiling of 50,000,000 by 25% if you should so designate a player to be your “franchise player” for a period of 365 days. This designation is only to be given to a player who is eligible to be a free agent, and can only be given out 1 time per player.
For example, a player designated as a “franchise player” such as Lebron James last summer, would no doubt have been tagged as an “FP” by Cleveland.* In this case, the “FP” is entitled to a 1 year salary of 30% of the salary cap (15,000,000 in this case) or the average salary of the 3 highest paid players in the league, whichever is higher.
After a season being a “FP”, a player is then eligible again for full free agency. If such player leaves his original team, then said team is eligible for a “sandwich” draft pick held just after the lottery teams select in the following draft (in other words, pick number #15 as a compensation pick), plus the signing teams draft pick in the following draft.
“FP” players by definition are players who are within one year of their contract expiring, and can be designated by a team on a player of any contract status. For instance, if a team wants to designate a player nearing the end of “RCP” status, they can do so as long as they have the salary ceiling room to fit the contract needed to do so.
“FP” players are by definition players in the last year of their contracts.
“VETERAN MINIMUM” players are players who have reached the end of their contracts by the end of season 12 of service time in the league. These players DO NOT count against the salary ceiling, and can sign for a minimum of 1,000,000 and a maximum of 3,000,000 for a contract not exceed 3 years, with a standard 50% buyout and partially guaranteed the last year.
So, in summary…..
ROOKIE CONTRACT PLAYERS (players with 1-5 service time) don’t count against your ceiling.
YOUNG VETS (players with a minimum of 4 to a max of 10 years of service) do count against the salary ceiling, and have a mimimum and maximum salary.
PRIME PLAYERS (players with a minimum of 8 to a maximum of 15) do count against your ceiling, have a minimum salary but no maximum, and can make as much as you see fit as long as you fit them under the salary ceiling.
FRANCHISE PLAYERS (players on your roster with an expiring contract that you want to keep) can be kept for one additional year past their contract end date IF they are compensated at a minimum rate of $15,000,000 per year and if you can fit them under your “FP” ceiling of 5 million plus 50 million.
VETERAN MINIMUM PLAYERS (players not under contract with a minimum of 12 years service time) can be signed at anytime for between $1-3 million and do not count against your salary cap.
In addition, standard contracts will now have a 50% buyout/termination clause, should a team choose to exercise it. Also, at the end of every season, at the end of the 2012-2013 season, each team will be given an amnesty clause to get under the July 15, 2013 Salary ceiling required level, thereby being able to freely waive one contract from their existing books.
In addition to a salary ceiling, all teams will be required to stay above a “salary floor” of $40 million, being paid to all salary counting eligible players.
Thereby, it is estimated that the TCPS (total compensation player salary) will be $56 million per team in 2013-2014 (1.68 billion, 45 million in ceiling salary, plus RCP and VM players). If indeed that isnt the case, then teams agree to compensate the players in a general fund each year to that amount, to be paid out to the players at the end of each season.
As revenues grow, one key suggestion is to NOT increase the salary cap…leave it at the theoretical 50,000,000 level I invented for the sake of the above example….maybe that number is too high or too low, but it felt right as I looked at it. Whatever excess the players are owed should be invested in a general fund that would be paid out at the end of each NBA fiscal year. This should add stability to franchises, give them some level of cost certainty, and protect franchises against economic downturns.
The goal here is to somehow get every franchise to generate at least $75 million in revenues at a minimum, which should enable each franchise to make a little profit and be competitive, which is the goal for the overall growth spurt the league needs. A fair profit isn’t something a business should do without, a modest 5% or so profit on that much time and investment per year is reasonable, isn’t it?
I think the enhanced revenue sharing, opportunities for revenue growth, and salary structures I’ve thrown out there make some sense and give the owners/league a chance for cost certainty, which should help them grow their businesses and enhance competition.
At least, it should create some good discussion, should any of you be able to make it thru this 3500 word manifesto.
As always, the above is just my opinion.