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Your NBA Labor Negotiations Primer

Friday, 1 Oct 2010 | 2:58 PM ET

Describing what’s going on on a court is a lot easier than doing a play-by-play of what’s going on behind closed doors.

Basketball
Basketball

That’s why it’s tougher to explain exactly what’s happening in the labor negotiations over thenew collective bargaining agreementbetween the NBA and the union.

Will there be a lockout on July 1st?

Or will new terms be forged before then?

Well, we’re a long way away from that point, but let’s make sure you know your stuff for the water cooler chat.

I’ve spoken to people on both sides and created a mock dialogue to present the issues.

Is the NBA healthy financially?

"Owners": No. We’ve lost $200 million every year of this collective bargaining agreement and last year’s totals come to $380 million.

"Union": Yes. You’re coming off the most profitable offseason in history. Our numbers seem to reflect that you’ve sold nearly 50,000 new season tickets, which by our calculations equals nearly $170 million in new money. Media reports alone suggest that the Bulls, Knicks, Thunder and Bobcats are up more than $50 million in sales versus where they were a year ago and LeBron has added at least $14 million to the Heat’s coffers in season ticket sales. Are you really willing to risk a lockout after this incredible financial success of an offseason?

"Owners": Season ticket sales aren’t an indicator of health. They’re an indicator of tickets we’ve been able to sell ahead of time. That doesn’t mean that our attendance is going to be much better next year. Last year, we were at more than 90 percent capacity, maybe we’ll be up a couple percentage points this year. Selling tickets on a season basis only means that there’s fewer tickets you need to sell on an individual basis.

"Union": Your reflection of money lost isn’t accurate. First of all, it includes depreciation on your assets. We don’t think it should. It also includes interest on loans you’ve taken out to purchase the team. Add that all together and that’s $150 million lost right there. Plus, there’s appreciation when an owner sells a team, so are losses really losses? Why did Mikhail Prokhorov buy the Nets at the price he did and why did Joe Lacob and Peter Gubar buy the Warriors at the price they did if this was really a losing business? Finally, many of your losses are a result of costs that have nothing to do with our salaries – you’re spending more on coaches, referees and in other areas.

"Owners": Of course depreciation of assets should be included. If a team builds a practice facility for $20 million, it has the right to spread that expense over a period of time. If you want us to, we could include it in the financials of a single year, but the money spent on improvements to our arena and team have to be reflected somewhere. As for new purchases, these owners have factored in that we’d have a more sound collective bargaining agreement when they made their purchases. As for our costs, we’re not recklessly spending in any areas. Our owners don’t want to lose money. If there are line items for certain teams that don’t make sense, we’ll look at them, but we’ve had teams layoff a bunch of employees in the last couple of years.

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Should The Players Take Less Money?

"Owners": Yes. We currently give 57 percent of our gross revenues to players and we believe that we’d be more healthy if they took either less of a gross or a percentage of net income.

"Union": The net income number we can’t take from because again, we don’t think we’re directly the result of your costs.

"Owners": If you want, we can agree to set fixed limits on certain items such as limits on coaching salaries, etc., so that our operating costs won’t be out of line. We have given you our audited financials. No other league has been as open with their books as we have.

"Union": We don’t think we should take next money. We’re already restricted by so many parameters. We have a rookie wage scale, a salary cap, our contracts only go up to five or six years and over the last five years of the agreement total money distributed has only risen 2.3 percent a year.

Should There Be A Hard Cap?

"Owners": Yes. That doesn’t mean that top players are making less money. It limits the flexibility, but it makes sense for us.

"Union": Of course there shouldn’t be a cap. We already don’t have a free market system. Owners should be able to value our players as they see fit and not have any additional restrictions. We already have all the restraints mentioned above, plus a luxury tax and an escrow tax.

"Owners":The escrow didn’t kick in this year, but the luxury tax of course did and our final four teams in the playoffs paid that tax. We think competitive balance is important to our sport and we think a hard cap will solve some of those issues.

Questions? Comments? SportsBiz@cnbc.com

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