NBA Avoids Lockout With ‘Common Enterprise’ Approach to Bargaining

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By Hassan A. Kanu

A contentious labor dispute between NBA players and ownership didn’t materialize last year, thanks to some new faces and a new approach to negotiations.

Most basketball commentators predicted heated negotiations and a possible work stoppage in the 2017-2018 season, potentially depriving fans of months of professional basketball.

Instead, a surprisingly new and creative approach to bargaining smoothed over the negotiations and resulted in a tentative agreement favorable to both the players and management, Paul Haagen, law professor and director of Duke University’s Center for Sports Law and Policy, told Bloomberg BNA.

“I would give a lot of credit to the leadership of Adam Silver, in that he is essentially attempting to create an understanding that the players and ownership are all in a common enterprise together,” Haagen said, referring to NBA Commissioner Adam Silver. “What you’re seeing is an articulation of a kind of partnership of ownership and players that’s really new in American professional sports, and I think this is the first concrete working out of that type of partnership.”

The collective bargaining agreement was ratified days before Christmas. As a result, fans won’t have to undergo a repeat of the 2011 lockout that left them with a season two months shorter than normal.

The finalized CBA hasn’t been released yet. The NBA and NBPA declined interview requests from Bloomberg BNA.

Innovative Labor-Management Regime

The tone and brevity of the negotiations were surprising given the underlying circumstances.

There is a fairly contentious history between the NBA owners and its players’ union. “It’s been a highly adversarial kind of relationship, and they’ve generally had high stakes, ‘nuclear option’ kinds of negotiations,” Haagen said.

League owners initiated work stoppages, or lockouts, in 1995, 1996, 1998 and 2011. Players have repeatedly threatened to decertify their union as a way of stripping the NBA of labor antitrust protections.

Both sides also entered this latest round of bargaining under new leadership. The NBPA in 2014 elected Michele Roberts, and Adam Silver now heads the NBA after the previous commissioner stepped down, also in 2014.

“When Michele Roberts came in, there was a little bit of a sense that the first woman head of a sports union was going to have to be tough—and she already has that reputation,” Haagen said.

Roberts did initially make some aggressive statements going into the negotiations, and repeatedly signaled the players’ concern about why sharp rises in franchise values weren’t being reflected in revenues or during previous negotiations.

But both leaders employed a much different and unexpected tone as the negotiations drew closer. Their novel philosophies and conception of the process, which they laid out in public statements leading up to the negotiations, largely accounted for its success.

‘Common Enterprise.’

“Rather than go down the route of threatening antitrust liability, strikes, lockouts, the idea became ‘let’s reach some kind of common understanding about what a reasonable and fair allocation of the profits might be,’ ” Haagen said.

Some of Silver’s statements emphasized a mutual undertaking rather than an adversarial battle by lauding the fact that some players, including Michael Jordan and Grant Hill, are now joining the ownership ranks of the NBA.

There was also a “fairly exceptional level of openness about the books” and finances from the owners. “I can’t say that openness didn’t come with qualifications, but the rhetoric, at least, was ‘you can see what’s going on, we’re partners in this,’ ” Haagen said.

The NBA and NBPA also established subcommittees to bargain over particular aspects of the labor contract. Haagen said the strategy was dramatically more efficient in this negotiation because player representatives were coming out of those meetings and saying that the owners were taking a more fair and open approach.

“I think that helped to create a broader buy in and real momentum towards the agreement,” Haagen said.

The more collaborative approach may also have been possible because owners are getting younger and are often coming out of the most dynamic parts of the American economy, like the technology sector.

Prolonged Talks, Strike Was Predicted

NBA analysts with near-certainty predicted a combative negotiation, and did so until early December.

In the 2011 CBA, owners successfully lowered the players’ share of “basketball-related income,” or BRI, from 57 percent to about 50 percent. BRI generally includes income from basketball operations, like money from gate receipts, sponsorships and TV broadcast deals—which are a large chunk of the league’s overall valuation.

The owners’ main argument for a larger share of BRI was that falling revenues at the time meant their teams were losing money. However, a number of teams later sold for multiples of what they were acquired for. Three years after the 2011 CBA was signed, the Los Angeles Clippers, which was acquired for about $12.5 million in 1981, was sold for about $2 billion to former Microsoft CEO Steve Ballmer.

The league in early 2016 also signed a $24 billion broadcast deal with ESPN and Turner Sports, three times the price of their previous contracts. Under their increased share of the BRI, the new television contracts generated an additional $1.3 billion for ownership. And those cable TV deals were on top of agreements with local stations that show hometown games, like Comcast SportsNet Mid-Atlantic in Washington, D.C.

Many players cried foul, and some of the league’s top stars did so publicly. The success of the latest bargaining round is more notable given these background circumstances.

Equal Share of Bigger Pie

Even when considering the differences in leadership though, the facts of the increased franchise values and that owners seem to be doing so well financially likely played an outsize role.

“You can have great tone and structure, but a very, very powerful piece here, was that ‘this is a good time, let’s not screw it up,’ and I think that has to be part of it,” Haagen said.

The new agreement maintains the 50/50 BRI split, despite speculation that both sides would seek a larger share. “Rather than squabble over percentages, what they did was try to figure out ways to increase the pot,” Haagen said.

“The most important difference may be that they’ve created the financial flexibility within a cap system to try to keep players with their teams and to hold teams together,” Haagen said.

Teams will be able to offer six-year extensions and more money to “designated players” in the year before their existing contract expires. The rule essentially allows a superstar’s current team to make a much more lucrative, long-term offer than others trying to attract stars to their roster. Minimum salaries will also be raised across the board.

The league shortened the preseason. Notably, the NBA will maintain the same number of regular season games but will extend them over a longer period. Those measures are designed to prevent injuries to players from the wear and tear of playing over 70 games a season. Haagen said he was surprised the league didn’t also increase the number of games played, given that the NFL and other leagues are considering adding games.

All in all, Silver and Roberts seem to have established an innovative conception of the relationship between management and players that bodes well for future negotiations. It would seem as though basketball fans can look forward to full, 80-plus-games a season for the foreseeable future—at least while the current TV contracts continue to line the owners’ pockets.

To contact the reporter on this story: Hassan A. Kanu in Washington at hkanu@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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