[Portland Tribune] Interview with deputy commissioner Adam Silver

Pretty interesting stuff.

[rquoter]TRIBUNE: How do you feel about the overall health of the league right now?

SILVER: From a revenue standpoint, things are great. We generate more than $4 billion a year, and growing, on a global basis. This season, (TV) ratings were up double-digits on all our networks. We’re seeing the same growth for local television rights. The Lakers just entered into a fantastic new television deal for the next 20 years. Global (marketing) expansion is terrific. Merchandising sales are going well.

We’re spending too much on (player) salaries, though, and under our current CBA, we pay roughly 57 percent of gross (income) to our players. At our meeting during All-Star weekend, we told them prospects are wonderful, but the model is broken, and no business is sustainable over time that pays out more than it takes in. By definition, if we pay out 57 percent of the gross, it has to cost us less than 43 cents to generate every dollar, and that’s not the case.

TRIBUNE: Why?

SILVER: Our expenses are up across the board. When I first came to the league 19 years ago, virtually every team had a waiting list for season tickets. The world has changed. There’s a ton more competition now for the entertainment dollar. In every one of our cities, there are a thousand-plus channels on most cable networks and unlimited amounts of programming on the Internet, and we’re competing against those things. The cost of marketing and selling are that much greater.

Having said that, under any new deal, our players will continue to be the highest-paid team athletes in the world, hands down. Shame on us if we can’t find a way to make this work. We are not only the only sports league, but probably the only business, that shares all its audit financials with its employees. That’s what we do with our players association. We’re open book. We’ve said, these are all the financials of our 30 teams. Here are our tax returns, just so there’s absolutely no issues over our financials.

But there is, maybe understandably, a fair amount of skepticism by our players. They ask, how can it be that these wealthy, highly successful businessmen are willing to enter into a business like this and lose the kind of money they are? My response is, they’re living up to the current CBA. I would expect nothing less of them. At the conclusion of this deal, though, they’re saying we need to negotiate a new deal.

TRIBUNE: Is basketball-related income the biggest negotiating issue?

SILVER: The BRI is one. Also, when it comes to distribution of revenue, more now than in any of the CBAs I’ve been involved in, there has been more discussion about competition. (In previous CBA negotiations), the key issue was the split of the revenue and not how it was distributed. We could give you the 57 percent and you can decide how to distribute it among the players.

Clearly, our view has changed. How that money is distributed among the players is a key component of competition around the league. In addition to our desire to create a model where all teams at least have the opportunity to be profitable, we also are focused on a model where all 30 teams have the opportunity to compete for a championship. There’s a recognition out there now that’s not the current model to the extent that we have a soft salary-cap system.

For example, a team like the Lakers has a payroll of $110 million when you include the luxury-tax figure. With the salary cap at $57 million, that’s not a balanced system.

What we’ve proposed to the players is a hard cap. We’ve looked at the NFL, and we’re not ashamed to say that appears to be a better system. There’s a lot more analysis we need to do with the players. I’m not suggesting we’re the NFL. But we believe through shorter contracts, less guaranteed money and a harder salary cap, we can create more parity among the teams in this league. We believe for the long-term success for the business, that’s important.

TRIBUNE: Are you proposing a system such as one employed by the NFL, with bonus pay but only one season guaranteed?

SILVER: What we’ve heard back from the players, it’s a non-starter to propose no guaranteed contracts. We haven’t proposed that. We’re saying there should be a balance between security for the player and flexibility for the team. Whatever the percentage of BRI we ultimately negotiate – something lower than it is now – we’re willing to guarantee that extent to the union, given that the contract isn’t fully guaranteed. By definition, that’s money going to a more deserving player.

Our view is, the players should want that same balance. They should want to see the money going to the highest-performing and most deserving players. There’s no reason why basketball players should be treated differently than employees in virtually any other industry, where there are incentives tied into contracts. It would seem to make sense that there should be greater incentives to win. Long-term guaranteed contracts aren’t the best way to create competition.

TRIBUNE: Currently, a team can offer its own player a six-year contract or extension, or a free-agent signee five years. What is the league proposing for the new CBA?

SILVER: Four years for your own team; three years for a free agent.

TRIBUNE: How many of the league’s teams are operating in the red?

SILVER: Approximately three-quarters of the teams are not making money.


TRIBUNE: And the biggest loss for a single franchise?

SILVER: The union has those figures. We don’t disclose them publicly. But it’s double-digit millions of dollars. The losses are real, and they’re large. The players are taking the position, these wealthy owners must be willing to incur those losses. Otherwise, why would they have bought the team? My response is, if that’s your view, we’ll end up with a work stoppage, because it’s going to be a test of will. If you really believe they’re willing to incur those losses, you must believe there won’t be a lockout, or there will be a short lockout, because the owners will cave.

TRIBUNE: In some cases, a team would fare better financially during a lockout.

SILVER: There are several teams from a financial standpoint that would do better if we’re not playing games. And that can’t be a good state of affairs.

TRIBUNE: There has been much talk about the possibility of contraction, that the league might eliminate one or more of the less stable franchises.

SILVER: That’s not a possibility in the short run. The reason why that issue has come to the forefront is because the league now owns the New Orleans Hornets. The situation there was, you had an owner, George Shinn, who wanted to sell the team but could not find a buyer in New Orleans and could not continue to sustain the multi-million-dollar-a-year losses.

The league stepped in and said, rather than have a short-term catastrophe on our hands with a team that was shutting down, let’s buy the team and spend all our time working with local and state government to save that team in that market. There are three options long-term with that team – keep it in New Orleans, move it or to shut it down. We haven’t spent any time thinking about (shutting it down) right now. Our desire is to keep it in New Orleans.

TRIBUNE: And where are you with finding a new owner?

SILVER: It’s a process. Part of the issue are the negotiations for new CBA. The other issue is revenue-sharing. The union has raised that issue, and David Stern has acknowledged we need to share more revenue to have a successful 30-team league.

At the same time, if the league is losing more than $300 million (annually) in the aggregate, you cannot share your way to profitability. You could reduce the losses for certain teams, and those teams that are now profitable could made unprofitable by distributing their profits, but that won’t solve any problems.

TRIBUNE: It sounds as if revenue-sharing, though, will be written into the new labor agreement.

SILVER: We know that small-market teams that have less opportunity to create revenue will not be profitable on a stand-alone basis. The large-market teams are willing to share more revenue in parcel with the new agreement. We also have to insure that it’s not just teams writing checks to other teams. We need to write in built-in incentives.

For example, in New York, the Knicks are investing $900 million to renovate Madison Square Garden. The Nets are investing $800 million in a new arena in Brooklyn. There have to be appropriate incentives for teams to do that. If there weren’t, they’re not going to invest that kind of money.

We need a balance. We have a separate committee, a planning committee on revenue-sharing. We need to share more than we have now, but we also don’t want a system where teams are writing checks as a function of market size.

TRIBUNE: What is the possibility of a franchise-tag designation being included in the new agreement?

SILVER: The franchise tag is not something we have proposed to the players, but that issue has moved to the forefront this season. I recognize Miami has other attributes that make it desirable, but before LeBron (James) went to Miami, nobody was talking about Miami as a large market. It’s in the bottom half of the league in market size.

TRIBUNE: But it’s a desirable location for players in terms of weather and an attractive place for a young person to live.

SILVER: That’s true. There has to be a balance. Some people are treating this super-team notion as if they hadn’t heard of the Lakers and the Celtics of lore. Maybe there will always be certain independent qualities that markets have. Tim Duncan could have left San Antonio. He stayed there. There’s a reason why Kevin Durant extended in Oklahoma City. It was somewhere he wanted to be.

In addition to a franchise tag, which is something we could look at, we could create a greater differential between what a team can pay its own player and what another market can offer. In the last CBA, we changed the differential. You can do six years (in signing your player) as opposed to five. You can offer a 10 1/2 percent annual increase as opposed to 8 percent. We think continuity is good.

At the same time, there’s no question that player movement creates a tremendous amount of excitement in this league. Carmelo Anthony’s move (to the Knicks) has done that, and LeBron’s did, too. Having said that, leaving Cleveland in the situation it is in is untenable.

Denver approached it a little differently. The jury’s out. We’ll see how New York performs with Melo. We’ll see what the new Nuggets ultimately look like. Everyone around the league believes we need a system that creates a greater system for a star player to stay in their market. We think it’s good for the fans and good for the league.

TRIBUNE: Is global expansion still on the table?

SILVER: It’s still a thought of the league that, over time, we can add franchises in Europe. I’m going to London next week. For the first time, we’re playing regular-season games there (New Jersey and Toronto) next Friday and Saturday. It’s an experiment of sorts. We’ve had a lot of success with preseason games throughout the world.

One of the things David has said is, arena infrastructure must improve in Europe. And we’re starting to see that happen now. There are beautiful arenas in London and Berlin. We’ve met with the mayors of Paris and Rome. We were in Barcelona. It’s feasible from a geographical standpoint to have a division in Europe.

TRIBUNE: So do you anticipate a work stoppage?

SILVER: Both sides coming out of the gathering we had during All-Star weekend stated a renewed commitment to work around the clock if necessary to avoid it.

I don’t want to be Pollyanna-ish, though. There is an enormous gulf – not even a gap – that separates the players and owners right now. It’s going to require an intensive effort and a certain reality check on both sides of what’s at stake for the business. I remain an optimist, but to mix metaphors, it’s still a long putt. [/rquoter]

 

Sorry, forgot the link.

http://portlandtribune.com/sports/story.php?story_id=129859444827019000