The Path To A Permanent Peace Between NBA Players And Owners

This guy is a good thinker. And this makes perfect sense. Hence, it will not even be considered.

http://www.realgm.com/src_feature_p...rmanent_peace_between_nba_players_and_owners/

 

Elrod Enchilada
RealGM.com Writer

July 20, 2010 2:57 AM
Very dark skies lie on the horizon for the NBA, its players, and for basketball fans.

The NBA collective bargaining agreement (CBA) is to be renegotiated in 2011, and all signs suggest the owners are going to attempt to make a series of fundamental revisions, including the possibility of a “hard cap,” similar to what is found in the NFL. The owners claim the economic crisis c*m depression has left some, perhaps many, of them exposed and in apparent financial jeopardy.

It is almost certain the players will oppose these proposed changes, as they will be all about reducing their incomes to the benefit of the owners. The players will look at how even allegedly poor franchises, like Memphis and Atlanta, spent money like drunk sailors in the 2010 off-season. Golden State sold for a record amount. If teams are going broke, they have a strange way of showing it. Any way you slice it, to use yet another metaphor, the waters look pretty treacherous for the NBA and its fans in the not-so-distant future.

Fans, too, have a distinct stake in these negotiations. The soft-salary cap system has served the NBA very well over the past 25 years. It has allowed players’ salaries to skyrocket and has kept franchises is the black. It has also allowed teams to retain their stars, and given the sport a stability for fans that has eluded baseball and football in recent years. Logic would suggest the status quo is worked pretty well, but the owners seem to want to reshuffle the deck, and they might be willing to sacrifice as much as an entire season to increase their share of the revenue pie.

The owners do have legitimate concerns. The system is increasingly problematic today because of the economic crisis. As total revenues stagnate or decline for the next several years, in a deflationary environment, the long-term salaries the owners are obligated to pay will weigh heavily upon them, especially those contracts for players who are not producing anywhere near what they are being paid.

“There’s a lot of changes on the horizon,” Kevin McHale said. “I think good changes. I think that the whole thing has taken on a life of its own. I think our guarantees are way too long and way too much money. Corrections need to be made. We’re kind of in the Fannie Mae/Freddie Mac era. What do they call them, sub-prime loans? There are some sub-prime contracts.”

In the current system, players rationally want to protect their long-term guaranteed deals, and these are increasingly unacceptable to the owners. They also are going to be understandably reluctant to let their share of the pie decrease. Something has to give.

Is there a solution to this impasse? Can we avoid another deadly players strike or owners lockout, like took place in 1998 or that devastated the NHL and MLB over the past 15 years?

The answer is yes, but from the looks of things at present, only if the NBA owners and players are willing to radically change the nature of the CBA to acknowledge the problems that have emerged in these times of depression. Normally, this would be close to impossible, but because we are entering a serious economic crisis, the opportunity now exists to put the NBA’s salary structure on much sounder footing, in a way that benefits both owners, players, and fans.

To do so, the NBA has to scrap the current system in toto. It has to get off the endless treadmill of strikes of lockouts every five or ten years. It has to take the salary cap principle to its logical conclusion. I call this a “full Garvey” after the former NFL Players Association head Ed Garvey, who first proposed the system for the NFL three decades ago. In Garvey’s vision the NFL players would split 55 percent of the league’s revenues evenly amongst themselves.

At the time, a very unsympathetic sporting press characterized Garvey as a bomb-throwing radical and possible terrorist intent on destroying professional football, if not motherhood, the missionary position and the constitution. Ironically, the NBA adopted one of Garvey’s basic premises when it developed the salary cap a few years later. As then-commissioner Larry O’Brien joked with Garvey: “When you proposed a guaranteed percentage of the gross revenues, you were a communist. When I propose it, I am an enlightened businessman.”

I call what I propose a “modified full Garvey,” because I think the best players should be paid the most. I think that would be the only acceptable system.

What do I mean by this? The league needs to eliminate individual contracts between players and teams, and establish a salary structure that encompasses every player. Agents will play a smaller role, but I doubt many people will shed tears over that.

In broad terms, the league should maintain roughly the current amount – 57 percent of the basketball-related income (BRI) – effectively allocated to player salaries. This will become a hard cap, with all 57 percent of BRI going to the immediate salary pool for players. All labor costs will come from this kitty. Management will divide the remaining 43 percent between the team owners.

(This will also be a logical time for NBA teams to institute a formal revenue-sharing program. Much of league income and expenses will now be handled out of a central office, rather than the separate teams. The terms of that program will have to be worked out between the owners.)

Before we go any further, let’s put some hard numbers in play so you can get a sense of what we are talking about. For the 2010-11 season—based upon revenues from the 2009-10 season—the NBA has set basketball-related income at around $3.643 billion. If 57 percent of that went exclusively to player salaries, that would be around $2.077 billion to be split among the 450 roster slots (15 players on 30 teams) in the league. If we went the full Garvey every player would get a $4.6 million salary. If the NBA players said, “Hey, let’s go back to 12 man rosters like we had from much of NBA history,” each of the league’s 360 players under a full Garvey would get a $5.8 million annual salary.

So there is a lot of money to play with. We are not going to pay every player the same amount, but every player will do well. The key is coming up with a system the rewards deserving players. That is the whole point of the modified full Garvey.

The big change the modified full Garvey introduces, is that player salaries are shifted almost entirely away from dead weight long term contracts, the kind of which proliferate in the NBA, to the players who are actually producing on the floor. This gives both sides the flexibility to make the modified full Garvey a success.

Both sides will have to compromise, but if they have patience and vision both sides will gain, and the future of the NBA will be on very solid fiscal footing. It will take a good six years, until 2016 when all current contracts expire, to fully install the new system, but once it is in place the system should be workable for generations. A transition plan could be put into effect as early as 2011.

There will be all sorts of logistical and second-order issues that arise to make the system work, and some will be vexing. But they are all solvable. The point of this article is to deal with the fundamental principles and explain why the plan is so attractive and rational for the NBA to adopt.

What do the owners get with the modified full Garvey? Guaranteed black ink, pretty much. The owners can have their financial flexibility, such that as their revenues decline, their labor costs do, too. They will not get hosed paying massive long-term contracts in a deflationary depressed economy.

General Managers can build rosters – make trades, sign free agents -- without any concern about salary. The “capologists” will be out of work. It will give the players added incentive to see that the league succeed, as they will all be the direct beneficiaries of increased revenues. They will become full partners with the owners. The quality of the competition will go through the roof, as the players will truly have a stake in their franchises.

What do players get with the modified full Garvey? Players can guarantee that they will continue to get the same percentage of revenues they currently get, even if many teams are struggling and eager to shed salaries and pay out well below the cap. The best players get the most money. Guys who do not produce, do not get paid big bucks. Period. Players will be able to use free agency more readily, and go to whatever team wants them. Salary concerns will not be a factor at all for individual teams as they recruit free agents. This is a huge victory for the players. It is a mixed blessing for fans, so steps have to be taken to prevent anarchic free agent hop-scotching.

Now let’s be a tad more concrete about what the modified “full Garvey” approach means. At its heart it means that the league and players set up a salary structure out of the revenues set aside to players that determines every player’s salary.

Let me provide an example of how a modified full Garvey model might work. Let me state emphatically that what follows is simply a prospective model meant to demonstrate how the system could function. This is presented for illustrative purposes, not as the final version to be voted upon. (I round the numbers slightly, so they may not add up exactly.) One could adhere to the principle behind the modified “full Garvey” salary plan, and use other criteria, such as a player’s experience, in determining salaries. I have used the criteria I think most fair and adequate, but this is obviously a subject for study, debate and negotiation.

For sake of discussion we will use the revenues total for the most recent figures provided by the NBA for the coming season, based upon 2009-10 performance, and mentioned above. The pot for labor will be $2.077 billion. I would take roughly 3.5 percent, $77 million, out for a fund for injured players, which I discuss below, leaving an even $2 billion for player salaries. This makes the math a lot easier for our illustration.

Player salaries will be determined by three criteria:

1. base/performance pay based upon how many minutes a player plays (70 Percent of total, or $1.4 billion)

2. all-star pay to reward the better players in the league (20 percent of total, or $400 million)

3. team pay, to reward players on the best teams (10 percent of total, or $200 million)

Base-Performance Pay: Every team is allocated 12 full salary slots, and then three half-salary slots, for a roster of 15. The three players on the 15 man roster who are on the 12 man game roster the least get the one-half of the base salary.

If a player only plays part of a season in the NBA, their salary is prorated accordingly

The players who play the most deserve to be paid more. Most teams have rotations that run no more than nine deep, so the 270 players in the league who play the most should be compensated. The criteria for this allocation is strictly the average number of minutes player per-game, for a minimum of 55 games. (If a player plays less than 55 games, their total number of minutes is still divided by 55 to determine their average. A DNP-CD counts as a game played.) If a player is injured for as much as 30 percent of a season he is not penalized.

Players ranked 1-90: $6.5 million each
Players ranked 91-180: $5 million each
Players ranked 181-270: $2.5 million each
Players ranked 271-360: $1 million each
Players ranked 361-450*: $500,000 each
* the last three guys on each team’s 15 man roster

All-Star Bonus Pay: These will be determined by MVP votes and all-NBA team votes. The top 25 vote-getters in the MVP balloting will get paid bonuses. There will be ten all-NBA teams for each conference, so 20 five-man rosters and 100 players (two-thirds of all starting players in the NBA) will get rewarded. The voting procedures will have to be determined in the CBA, with the players and coaches the likely voters. Voting should be done immediately after the regular season so as not to penalize players on lottery teams. The top 100 players will be rewarded, sometimes handsomely.

MVP voting (25 players covered):
1st-5th: $5 million each
6th-10th: $4.5 million each
11th-15th: $4 million each
16th-20th: $3.5 million each
21st-25th: $3 million each

All-Conference (100 players covered):
1st team EC & WC: $4.8 million each
2nd team EC & WC: $4.4 million each
3rd team EC & WC: $4.0 million each
4th team EC & WC: $3.6 million each
5th team EC & WC: $3.2 million each
6th team EC & WC: $2.8 million each
7th team EC & WC: $2.4 million each
8th team EC & WC: $2.0 million each
9th team EC & WC: $1.6 million each
10th team EC & WC: $1.2 million each

Team Performance Pay: Players on the best teams should get compensated for contributing to a winning team. These shares are allocated equally to players 1-12 on a roster, with half-shares to players 13-15 in minutes played. Players on all non-lottery teams receive compensation, with the better teams getting the larger shares. The groupings are determined by how a team fares in the playoffs.

Players on Teams 1-4: $2 million each
Players on Teams 5-8: $1 million each
Players on Teams 9-16: $425,000 each

If you apply this system to actual NBA players for the past season, for example, you will see that the players fare well. The truly great superstars—LeBron James, Kobe Bryant, Dwight Howard, Dwyane Wade and Kevin Durant—all make in the $16-18 million range. The 20th-25th best player, an all-star but not a superstar, would get in the $13 million to $15 million range. From there players salaries would head down to the 90th best player, who is getting in the $8-10 million range, depending upon how his team fares.

The lower-level starter – not a top 100 player -- and the first sub off the bench, would make between $5 million and $7 million.

The journeyman deep rotation player, the 7th, 8th and 9th guy in the rotation, would make around $2.5 million, plus their team bonus.

The base pay for rookies who don’t play and marginal roster guys would be about the same as it is today, unless they were on a playoff team, then it would be better.

For most players, this will be a better deal, even a much better deal. At worse, it will be a wash. The reason is simple: All the money goes to the players who actually produce. No money at all goes to dead weight. That frees up, depending upon you count, several hundred million dollars. If some guy comes out of the woodwork and plays great basketball, he gets paid for it right away. If he stops playing well, he stops getting paid well.

Defenders of the status quo acknowledge many guys, especially younger players, are often underpaid, but say they will get theirs down the road. Later in their career they will get what they are worth. Well why shouldn’t they be paid what they are worth now? They have earned it now. What if they rip up their knees or get in a car crash and never get to cash in down the road? Then they are out many millions of dollars. And if they are good down the road they will keep getting paid exactly what they are worth down the road. The only way they lose is if they could sign a huge long-term deal and then begin to play at a much lower level, a la Wally Szczerbiak, Raef LaFrentz, Jerome James, Jared Jeffries, Vladimir Radmanovic, etc. etc. Do we really want a salary structure that funnels money to guys who are ridiculously overpaid and/or over the hill at the expense of the guys who are playing well?

It is a pretty simple concept, that accord to basic traditions of fairness. It is high time it is adopted by the NBA.

Seriously Injured Players:

There is one aspect of the modified full Garvey system where the players have legitimate concerns: What about players who get seriously injured, such that they miss most of a season or even have their careers derailed? Without a long-term deal, Grant Hill, for example, would have lost a fortune to injuries, through no fault of his own. Likewise, Chris Paul would have been clobbered this past season. It is one thing for a veteran player to get a lower salary because his play deteriorates, but it is another thing for a player to lose income because he is injured.

In this modified full Garvey plan 3.5 percent of the player salary pool --$77 million – is set aside to pay the salaries of seriously injured players. If a player misses over 50 games due to injury, he is automatically eligible for a salary that is 100 percent of the previous year’s salary, or the average of the previous three seasons’ salaries, whichever is higher. If a player misses over 35 games, they are eligible for 90 percent of the previous year’s salary, or the average of the previous three seasons’ salaries, whichever is higher. If injuries persists another year, and the player does not play more than 40 games, the player gets 80 percent the second season. Again DNP-CDs count as games played; this is for guys who are truly injured.

So seriously injured players get two full seasons of pay at close to their peak salary after they have stopped being productive players. After two years the player should both be healthy and back in action or else the recipient of insurance benefits for a career-ending injury. In combination, the players are very well covered.

This will be especially valuable for young players who have debilitating injuries. It is possible that Stephen Curry will be a $12 million player in 2010-11 by a modified full Garvey plan. His salary under the current system for 2010-11 will be $2.9 million. Under the modified full Garvey, if Curry ripped up his knee in October 2011 and missed the 2011-12 and 2012-13 seasons, he would get paid $22 million in injury money. Under the current system he would get a fraction of that.

It is not clear if $77 million would be sufficient or excessive. The amount would have to be adjusted with experience. Because the money comes from the player’s pool, the players will not be especially sympathetic to a player seen as being insufficiently concerned about recovering from his injury. This should lessen the likelihood of bogus injuries.

 

Two issues arising from this model:

There are many problems that emerge from the modified full Garvey model, which would need to be resolved. Two spring immediately to mind.

First, there are logistical issues of when and how players get paid. For the base salaries and the injury fund, the league could collect the money and make all the payments, in collaboration with the union, or by itself. Or the individual teams could pay their own players, and receive funds from the league (or make payments to the league) if their player budget is greater (or lesser) than the league average. Teams would not be penalized for having lots of all-stars or benefit by having a roster of duds, since payment of salaries will be done out of a centralized system. There is no incentive for a team to have a low-paid roster. When the players would get paid is another matter to be resolved. But this is why lawyers were invented. It is solvable. The music industry deals with issues like this all the time.

Second, as mentioned before, there is the transition from the current system to the modified full Garvey in 2016. It will be tricky at points, because the old contracts will have to be grandfathered in. Again, this is where the lawyers get a chance to fatten their billings. The sooner this deal is agreed upon, the easier the transition can be mapped out.

Some Good News

With the modified full Garvey plan, General Managers no longer need to concern themselves with salary matters as they assemble their teams. GMs will simply try to get the best 15 players possible. The draft will continue, as will trades. When trades are made, it will simply be based on value. Salaries will be irrelevant. The teams with the best GMs, the best coaches, the best team cultures, will be successful. Teams from big markets will not have an advantage.

Free Agency

There is one major problem with the modified full Garvey system as it presented so far: players technically will be free agents after every season and can go to any team that will take them. This would be nice for the players in the short term, but it would be a nightmare for the quality of play, for fan enthusiasm and commitment to their teams, and ultimately to the growth and popularity of the sport. It would slam player incomes in the medium and long run. The hallmark of the NBA system of the past 25 years has been its “Bird” rule, which has permitted teams to hold onto their best players. If the great players of the league, not to mention the not-so-great players of the league, are switching franchises every year or two, the chaos would be potentially disastrous. I, for one, would lose interest in the sport, and I am a registered NBA fanatic. Fans need to identify with a team core of players or else the league’s popularity will flounder. This is important for all the stakeholders. My sense is the payment structure would always encourage players to go to teams where they would get playing time, so there would be a powerful leveling effect.

Because free agency would not be about raising a player’s income as much as it would be about finding a more enjoyable work location, this is an area where a compromise is possible.

This is what I propose. When a player is drafted or joins an NBA team for the first time, he remains the property of that team for five seasons, similar to the current system. (He obviously can be traded or released long before five years is up, and if he is released he is can join any team that wants him. Same as today. One key difference: they can be traded to any team regardless of anyone’s salary.)

If after five years, a player elects to join a different team, he is making in effect a four year commitment to that team. (Again the team can still trade him.)

Players can be released at any time by their teams and become free agents and their clocks start anew. If a player is released by a team and therefore an unrestricted free agent- say someone bouncing around the D-League-- when he goes to a new team he is making a four year commitment to that team.

So right away, we will have stability built into the system. Players spend the first five years effectively under contract to their first team (or the team they get traded to), and then make four-year commitments to the same team or a new team thereafter.

To protect players in a dreadful situation they can formally demand a trade after three years with a team. But if they are traded they start a new four year clock with the team they are traded to.

Once a player has been in the league for nine seasons, i.e. two contract terms, they have the right to limit their obligation to a team to three years when they re-up or move to a new team.

But that is insufficient.

In addition, teams should be allowed to spend $6 million annually of their own money to pay bonuses to their own free agents to make them formally commit to remain with the team. A team cannot use this money on other teams’ free agents, only their own. (The figure is set by making it equal to 5 percent of BRI, and dividing it by 30. Again, though, this money, unlike the salary pool and injury pool, comes from the teams’ own bank accounts.)

After a player has fulfilled his five-year apprenticeship, his old team can offer him some or all of the annual $6 million budget to remain on the team. If the player accepts, he is making a commitment to remain with the team and forgo free agency for an additional four years. (For the sake of planning and stability, a team can “extend” a player after his fourth season, which effectively keeps him with the team for nine seasons. A veteran on his second four-year contract likewise could be extended after his third season of the four-year deal.) The team is making no commitment to keep the player for four years; the player can be released or traded, but he gets to keep the bonus money. If a player is traded to another team, his rights to be extended by the team that trades for him go with him. It is in effect a four-year contract.

To be clear, if a team gave a player, say, a $3 million bonus to remain with the team, it would pay the player one-time a total of $3 million for the four-year commitment. It would not be an annual gift. The player would have to wait for four seasons to pass by before he could be a free agent and be eligible for another retention bonus.

Therefore, if a player decides to leave his old team, bonus or no bonus, and he signs with a new team, he makes a commitment not to file for free agency until he has played four seasons with the new team. Such a free agent who shifts teams is ineligible to collect a bonus from the new team until he has played four full seasons for that team. This gives the old team a decided advantage, but the money involved is not so great as to make players stay in places when they want to leave town. The lure of increased playing time is powerful in the modified full Garvey system. The new team can trade the player, and if it does his four year commitment is traded with him. Of course, the team can release him at any time, at which point he would be a free agent with a fresh clock.

Teams can bank their bonus money to use in a later year, for up to three years. But it can only use the bonus money on its own players. It does not need to spend the bonus money.

Players will still exercise free agency, and a player who wants to play on a specific team will be able to do so, assuming the team wants him. But this will give teams leverage to plan ahead and keep their core together. It will connect fans to their teams. And the modified full Garvey system will make it unlikely that a team will collect an inordinate number of great players, because the system gives players incentive to be on teams where they will have the opportunity to play. The franchises in the smaller and/or less desirable locales will remain attractive.

Teams that lose quality players to free agency should be eligible for compensation in the college draft. If a team loses a top 10 player, it could receive a no. 1 pick in the next year’s NBA draft, to fall after the third pick in the first round. If a team loses a player ranked 11-25, it should receive a no. 1 pick after the tenth selection in the first round. If a team loses a player to free agency ranked 26-50 it should get a bonus no. 1 pick in the middle of the first round after the lottery teams and before the playoff teams make their selections (i.e between picks 14 and 15). If a team loses a player ranked between 51-75, it should get a bonus no. 1 pick at the end of the first round. If it loses a player ranked 76-100 it should get one bonus pick in the middle of the second round.

These would be like “sandwich” picks in the baseball draft. The team that gets the free agent would not be penalized.

All free agency movement and bonuses should be restricted to the off-season. This will make for a terrific basketball hot-stove league. It should be emphasized that free agency bonuses are voluntary to teams and paid out of their own pockets. In truly hard times, teams can opt to not participate, and this could be a Godsend for a struggling franchise in need of liquidity. A team could remain formidable if it elected not to pay out any bonuses for a few years. But the expenses are such that it is probably most teams would find these expenses worth it business-wise, especially in flush times.

It is also worth noting that general managers would need to fine-tune their skills to work with the free agent bonuses as they build their rosters. It would give player agents justification for their existence. This would give amateur GMs, like yours truly, plenty to chew on as we follow the teams and the sport we love.

Conclusion

The modified full Garvey salary system is offered as way for NBA owners and players to be protected from economic stagnation and depression, and for the revenues generated by the NBA to be distributed to the most deserving players. It is a system that accords with the actual monopoly nature of the NBA. It provides a hard-cap, but does not penalize productive players to do so, or the fans. It is a long-run winner for the league and the sport.

It is a system that would work in good times and bad times, making teams solvent and players well-compensated.

The NBA owners and players need to be open-minded and creative and look long and hard at the modified full Garvey plan. It looks to me like the most rational, stable, flexible and fair solution to the difficult problems before them. And it sure beats a lockout or strike based on trying to modify the present deeply flawed model that appears impervious to reform. Such a work-stoppage might do grave long-term damage to the sport, and still not resolve the underlying problem.

 

The point of the system is it pays the most money to the guys that play the most minutes and are the most productive and win the most. That's what everybody should want.