The Wandering Chicken

On the NBA Lockout

In his latest column, “If I Ruled The (NBA) World,” The Sports Guy Bill Simmons returns to one of his favorite topics: how the NBA would be perfect if only he were in charge. His whole “Common Sense GM” thing is mostly tongue-in-cheek, but he goes to this well so often that you have to assume he believes there’s at least some truth in it. And admittedly it’s usually entertaining — parts rational solutions, cockamamie ideas, and willful ignorance of reality. And this latest column on the lockout indulges all of them.

Yet Simmons main problem is not that he has bad ideas, it’s that nearly all of them exist within a current system that is fundamentally flawed. He wants David Stern, the players and the NBA generally to embrace radical ideas but you can’t effectively do that if you’re stuck in the box to begin with. The best you can hope for is incremental improvement. It’s like the tax or healthcare systems in this U.S. Unless you throw the whole thing out and start from scratch, all you’ll get is change at the edges that does nothing to solve structural problems.

Here are a couple of things I know about the NBA (which incidentally are true of the NHL and MLB as well).

1. The NBA is nothing like the NFL.
2. There are not even close to 25 cities that can reasonably support a professional basketball team.
3. The NBA can do nothing to ensure competitive balance or that all of its teams are profitable.
4. The NBA Players Union has outlived its usefulness.

Let’s take a look at them one by one (after the break).

1. The NBA is nothing like the NFL.

Can we please dispense with this notion that the NFL is a model that the NBA, MLB and NHL can follow? The NFL is unique in almost every way. Its season consists of few games, all of which take place once a week, mostly on the same day. Each game (or Sunday) is by definition an event, and the NFL will always have a larger fan base because of this fact. There’s nothing eventful about game 47 on the NBA schedule or 118 on the MLB docket. It’s just much easier to be a casual fan of a sport that only has 16 games (plus post-season) and demands only one day of attention.

Because of its event quality, the NFL was made for television and therefore can demand a massive league-wide television contract the other leagues cannot. Looking at it broadly, the NFL is national and all other sports are regional. And so the NFL can divvy its pot more equitably than can the other sports where individual teams broker their own television deals. That fact alone makes the second truism of the NBA very real…

2. There are not even close to 25 cities that can reasonably support a professional basketball team.

The financial health of an NBA franchise is entirely dependent on local support. To aspire to profitability the team must sign lucrative regional television deals, attract corporate sponsors and fill its arena night in night out. There are just not many cities that offer the numbers and economic infrastructure necessary to meet these requirements. No matter how you try to game the system, teams in Los Angeles, New York, Chicago and Dallas will always have an economic advantage over teams in Memphis and Milwaukee.

Without addressing this problem the NBA faces one of two scenarios: 1) an endless relocation carousel among teams in the smaller markets, or 2) a number of teams that are simply incapable of making money and/or consistently fielding a decent squad.

In Simmons’ defense, he raises the issue and sort of advocates contraction and/or relocation of existing teams to major markets. In my opinion the league needs to eliminate a minimum of four teams, probably more. It’s the only way that you can provide a foundation that allows all of the teams to both be competitive and capable of achieving a return. Which brings me to point three…

3. The NBA can do nothing to ensure competitive balance or that all of its teams are profitable.

Every franchise is individually owned and operated. There is nothing the NBA can do to ensure their success, just as there’s no way for McDonalds to ensure all of its franchisees turn a profit. All business owners are capable of making bad decisions, throwing good money after bad, and on and on. All the NBA can do is establish the best conditions for the owners.

That’s what the lockout is about from the owners’ perspective. They want a better foundation. But no amount of trimming at the edges is going to have any demonstrable long-term impact. A hard cap, shorter contracts, all of it, does not solve the structural problem of operating teams in areas that are not suitable. They don’t ensure that some stupid owner doesn’t overpay a decent talent, only mitigates the problem when he does it. All these proposals don’t make it anymore attractive for some billionaire to consider buying the New Orleans Hornets.

And it certainly doesn’t ensure competitive balance because there’s nothing to prevent an owner from being miserly with the pocketbook (a la Donald Sterling). All something like a hard cap does is prevent a free-spending owner from spending freely. One can argue that maybe that helps create a league where any owner can put together a unit capable of winning, but it’s hardly a guarantee of that. It won’t stop players from leaving teams to go to others in places they find more desirable. If all the money’s basically equal, there’s not much incentive for Lebron James to stay in Cleveland rather than bail for Miami. A hard cap, shorter contracts, and maximum salaries just make that more likely.

Which leads directly into the fourth point…

4. The NBA Players Union has outlived its usefulness.

Player unions served a purpose when the players were essentially indentured servants. They’re not anymore; like actors in Hollywood movies, NBA players are the product. They’re the draw. They have all the power. All the union does, from my perspective, is limit that power. Why on earth would a players union agree to a limit on what Lebron James or Kobe Bryant can demand? How is that in those players’ interest? All the union does is drive up the salaries of their middling players, which is obviously great for Ben Gordon but pretty terrible for Dywane Wade.

I don’t get why star NBA players don’t make an issue of this. If I were them, I’d lock myself out, bust the union. In a completely free system, where owners and players don’t come to terms on arbitrary caps on salaries, what do you think Dan Gilbert would’ve offered LeBron James to keep him Cleveland? $30 million per year? $50 million? An ownership stake in the Cavs? In a world of independent contracts with no restrictions, you don’t think LeBron James could command that for a number of years and get it all guaranteed? Of course he could. And you know what? It probably would’ve been a good deal for Dan Gilbert. There’s no bigger draw right now than LeBron James. He guarantees you a spot in the playoffs. He makes your team relevant. By his mere presence he raises the overall value of your franchise.

Of course this kind of free spending seems at odds with the whole foundation for profitability thing, and maybe it is, but to me it’s a system that actually encourages ownership of a franchise, rewards good management and serves the players’ interest.

So what’s the solution?

Blow the whole thing up.

Imagine this: First contract down to 24 teams. Dissolve the union. No longer any need for collective bargaining. Every team owner is free to run their business as they see fit (if the league wants to do some kind of revenue sharing thing, fine). Every player can negotiate freely.

All of a sudden the NBA operates in the free market. Every player is a free agent and every team is able to come to terms with them individually. There’s no limit on what they can be paid or how they can be compensated. Equity in the franchise. Huge upfront bonuses. A lifetime pension. Guaranteed contract. All of it on the table. You know, just like in real life. And just like in real life as a business owner you don’t have to offer any of those things either. Sure, throw equity and guarantees at Dwight Howard, but Joel Anthony?

All of a sudden players are offered what they’re worth according to their potential employer, not some arbitrary agreed-upon rules. The true revenue-generating stars would command the big paydays they deserve while other players would earn whatever the market would bear. And if the second-tier player doesn’t like the offer he can try elsewhere. Really want a guaranteed contract that insulates you from being cut (or, you know, fired)? Well, have it at it. But there’s nothing that says you’re going to get it — unless you’re one of the very best players in the world.

Would a “system” like this give unfair advantage to Los Angeles or New York? Of course. But here’s the thing. They already have an advantage. Right now the Lakers can absorb the luxury tax and hold on to Kobe Bryant, Pau Gasol, Lamar Odom and Andrew Bynum — but only because those players can be paid some pre-set amount. In this world, there’s no cap on what anyone could be paid, and even the richest owner has to draw the line somewhere. Could the Knicks go out and get Chris Paul, Dywane Wade, LeBron James, Dirk Nowitzki and Dwight Howard? Absolutely. If the owner’s willing to bankrupt himself in the process. He’s competing with 23 other teams that can all offer whatever they want to each of those guys. To get all of them it’ll be huge guaranteed money, equity stakes, multiple years, and god knows what else.

But even if it does provide advantage to the bigger market teams, it offers opportunity for second-tier markets. They have more flexibility in putting together a very good, entertaining basketball team. Whereas today teams like Milwaukee have almost no shot at attracting a major star through free agency, now they do. And they’ll still have the ability to surround him with a strong supporting cast. With a smaller league, quality players are more easy to come by and, in a truly competitive market, ultimately cheaper to attain. Memphis won’t have to max Rudy Gay out $80 million, when they could have him or a  comparable player for less. And if they teams are smart they’ll have more roster flexibility because every guy on their team won’t have a fully guaranteed contract. (I should probably note that Milwaukee and Memphis would probably be contracted in my plan in any case.)

The whole thing is incentive-based. Without all the guarantees players are encouraged to work harder and play better to position themselves for the sort of rewards the very best players are likely to get. And management is incentivized to actually be smart about how they run their team — because there’s no hoping for the next CBA to bail them out from all of their mistakes.

Of course, this is all basically a libertarian pipe dream. But it works. For the players it’s a meritocracy. Some will lose assuredly, but excellence is rewarded and personal freedom is maximized. For the owners, it makes owning an NBA franchise more attractive because they’re not obligated to fork over some ridiculous percentage of their revenue to the players. They only have to manage for profit.