We’ve found ourselves a posting mercenary here at Seattle S&O as the lovely and talented master beard-grower himself, Sean Carr of “Carr Talk” has given us another guest post. This post is about the NBA Lockout and the finances behind it. The NBA is a point of apathy in many people’s eyes around here, but the inner workings of this lockout are more than interesting. Carr is somewhat of a financial specialist and has a knack for breaking down some of this type of stuff that neither Stanton or I are well versed in. This is also my personal impetus for an article detailing the departure of the Seattle Supersonics, and explaining the cultural and personal impact the departure has created. So without further ado…
“This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.”
Last week, nearly $5 billion disappeared from the recession-riddled economy, and there were no emergency meetings, congressional hearings, or half-hearted riots on the street (see post #3 on Occupy Wall Street). In case you hadn’t heard, negotiations attempting to resolve the NBA lockout recently disintegrated, with one side (the players union) deciding to disband and pursue a class action lawsuit. While the T.S. Eliot quote may be overly dramatic, the lights of the NBA world certainly went out with a whimper, the whimper being the cries of those who saw the damage this failure to negotiate will do. Even if you don’t miss the NBA for its entertainment purposes, you could still appreciate its value to the economy. If you have no interest in the economy either, then all I have for you are a couple of amazing videos (here and here; there could be a whole post on the potential outcomes of swimming while covered in NeverWet) to try and pique some sort of interest.
The NBA lockout is the period of renegotiation of an expired Collective Bargaining Agreement (CBA) between the players and the owners of the league. This may sound familiar to more aware readers, because there was a similar lockout over a CBA before the beginning of this year’s NFL season. The NFL bargaining agreement was sorted out in time, however, and the only consequences were missed practice time and a shortened free agency period, all of the games have been played on schedule. This is because the NFL deal, while over the same legal issue, was a completely different argument. Now the most popular sports league in the world, the NFL, is a cash monster. It has become a $9 billion dollar industry where everyone involved is making money. There were too large of profit margins on either side of the table for the risk of a missed season to ever be a reasonable worry. The NBA, on the other hand, has been struggling financially for years. Paying out huge contracts to players (Michael Finley made 20 million dollars in 2008, averaging 8 points a game), the owners claim that 22 of the 30 NBA teams are losing money at the rate of nearly 370 million dollars for year. The hilarious coincidence with this devastation is that the NBA has the highest average salary for players of any sports league in America, averaging nearly 5 million dollars a year to play basketball for six months, working roughly one of every three nights during that duration. The owners could not give into the players until they reached a deal that would help them balance their cash flow and stop losing money, the lockout was a considerable option for them. The players, on the other hand, make boatloads of money, and have short careers, and the Players Union for the NBA failing to reach some sort of deal has cost them a season, with a ripple effect that will cause much greater damage than a lack of good basketball to watch on Tuesday night.
Obviously the players were looking out for themselves in this situation, that’s how negotiation works. Do they really stand to gain from a missed season? Does anyone? Every year, roughly 13% of players in the NBA (mostly veterans) lose their jobs to free agents or incoming rookies. With a missed season, the number of incoming free agents and rookies from the draft doubles. That means over 25% of the NBA population will be replaced when the lockout ends, and that quarter of the NBA population will have received nothing but missed paychecks for their “valiant” efforts to strike. There are 450 players in the league, averaging $5 million in salary. That means 112 players will be losing a total of $560 million because they weren’t allowed to work this year. There is no compensation from any potential deal that could recover that.
Far above the personal lives of the players, but directly tied to the arrogance of the players union which decided to deny the final owner proposition, are many others who will be impacted financially by the lockout. Here are a few:
• $807 million in TV advertisements (last year’s total)
• $350 million in total player salaries
• $1 million per team per cancelled game. That’s about $2.5 billion over the entire season, not to mention playoff revenue.
• 2k Sports (video game 2k11 is the main NBA video game) claims $40 million in losses.
• Most cities claim that NBA teams bring around $100 million to their economy annually. That would be $3 billion for the leagues impact on the economy of its host cities.
• In the 23 days of lockout thus far, around 500 NBA employees have already lost their jobs, that’s already more than the entire number of players protesting. Expounding upon this fact, the Indiana Pacers ALONE have 909 full-time employees at their arena. What happens to them in a missed season?
• On an NBA game night, most sports bars etc. collect revenue in one night that equals what they would make in a week otherwise.
You may not care about basketball, but you should certainly care about its impact on the American economy. It’s never healthy for industries to completely disappear, especially not at the whim of 450 overpaid high school graduates.