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Explainer: The NBA Lockout

To owners and players: what gives?
by Mikey Agulto | Jul 5, 2011
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As of June 21, 2011, the NBA has locked out its players because the league and the players’ union failed to reach a middle ground for the new Collective Bargaining Agreement (CBA).
Here's what happened: the league wants changes on how players earn their money and how contracts are structured.

Players, of course, didn’t want that change.

The acceptable middle ground, where both sides win, has yet to be found. 

Now, we all lose. As of this writing, took out players’ profiles in their website, no trades can happen, and teams can’t even practice in their own facilities.

While the Finals should signal the end of an NBA season, off-season trades are still fun to check out. Now, it’s basically over-over; teams don’t get paid, we don’t see trades or summer camps, and owners don’t get revenue for their big-ass arenas.

Let’s have a look at some of the main points of the proposals and see how far off the players and the league are, as detailed in

The League
Basketball is a sport. The NBA is a business. And like any other business, the aim is to earn money. The league claims that the NBA is losing money overall; 22 of 30 teams are not performing up to par in terms of revenue.

With this, the owners decided to propose a re-structuring of their CBA with the players’ union, affecting how player contracts are made.

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Players also earn a percentage of the league earnings (gate attendance, TV deals, etc.), and this sharing will be affected by the leagues proposal as well. The aim of their proposal is to reduce the losses of owners by finding other sources of income. Here are the main points:

The “Flex” Cap
Every year, there is an agreed “cap room” that teams are given, to regulate the amount which a team spends for good players. This way, a small-market team may be able to compete with a big market team even though they don’t spend as much. However, in the event that a team will exceed that cap space, teams are asked to pay a dollar-for-dollar luxury tax.

This means that if there is a $50-million cap, and contracts total to $55-million, the team must pay $5-million as luxury tax, to be divided to teams that did not exceed the limit. The introduction of the “Flex” cap raises that initial cap space, but in turn, it eliminates the luxury tax.

Why owners want this: This makes it a more even playing field. Having a hard cap means teams must spend equally, so a team can’t spend for 4 max contract players. This benefits the smaller teams most, as they can’t spend too much on players considering their income, but can remain competitive considering the cap.

Why the players hate this: Things like “The Decision” can’t happen anymore because players can’t get to choose their destination anymore without sacrificing too much of what they’re making. If a max player wants to play with 2 other max players, they’re going to have to have a massive pay cut if they want to have enough money to pay for 12 other players to play with them.

Next: Explaining revenue sharing and player contracts

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