Lockout lets league fix issues

By The Beacon | October 26, 2011 9:00pm

By Jason Hortsch

Before anything else, I'll come out and say it: the NBA lockout sucks. I want basketball back just as much as the next person, perhaps even more so. We are at a pivotal time in league history. The Shaq/Duncan/Kobe old guard formally handed over the reins to the next generation by failing to appear in the Finals for the first time in 12 years. We had the Durant, Rose, LeBron triumvirate make the Conference Finals. This could be Kobe's last legitimately elite NBA season. LeBron is now truly in his prime. Durant and Rose are just hitting theirs. Blake Griffin has reinvented the art of the dunk. New York could be basketball relevant again. All of these storylines and more would be lost in the event of a season-long lockout.

Despite all of this, the lockout is understandable. Yes, I think it will have many negative consequences. Yes, I wish it were not happening. And yes, I think there are too many egos involved. Before you get too riled up and try to drop the "it's millionaires versus billionaires" argument, hear me out. There is one little fact that is getting lost in this entire mess: the NBA is a business. Every sports fan knows this. Each time the ruthlessness of free agency sets in, a popular player is cut or a team has to declare bankruptcy, the fans are constantly reminded, "It is a business after all." And like any other business, the NBA's goal is to make money. While it may not be pretty, that is the truth.

Time for some facts: NBA owners are claiming a loss of $370 million a year. The players association (the group directly opposing the owners in this lockout), claims that up to $250 million of this is due to questionable (but not illegal) bookkeeping methods. An independent ESPN.com estimate said that this number is likely closer to $210 million, for a net loss of $160 million. Finally, another independent analysis published by the New York Times disputed both of these numbers, yet still conceded that over half of NBA teams are losing money. Even working with ESPN.com's middle-of-the-road estimate, which seems reasonable, losing $160 million a year is not a sustainable course of action. Even in the best-case scenario presented by the New York Times, over half of all teams were still losing money. No business can exist with losses of this magnitude.

Imagine if your favorite retail store slashed its prices by half and started paying its employees six-digit salaries. You loved shopping there, because its prices were unbeatable and the employees friendly. The employees loved working there, because they were earning far more than they could anywhere else. Things would go smoothly, until one day the owners of the store realized that despite their boom in customers and the store's popularity, their current business model was set up in a way where they could not make money. Something would have to give. Reasonable customers and employees would realize that if the store continued the way it had been going, there would soon be no store for them to work at or shop in at all.

Instead, customers and employees get riled up because they are accustomed to their precious status quo and do not want to see it changed. This phenomenon is not isolated to the NBA. Take the recent change in Netflix prices as an example. While the change was more nuanced, for simplicity let's just say that Netflix raised prices. They did this because their current model was not sustainable, due in large part to movie studios demanding larger fees. Even with a modest and frankly completely reasonable price increase, customers went nuts. What they failed to realize, though, is that an unsustainable status quo must change. Everyone would rather have Netflix than no Netflix, just like people want an NBA instead of no NBA. They sure do not act like it, though. If a business does not have a sustainable model, that model must change, or it will cease to exist. It really is as simple as that.

As we examined above, no matter how you slice the numbers, the NBA is in dire straits. Something has to change, and owners are turning toward the one expense they can directly control: player contracts. (This is opposed to fudging with ticket prices, since such changes are unpredictable and tickets are already expensive enough that most arenas do not get filled). To put it bluntly, players had too good of a deal during the last Collective Bargaining Agreement, the contract that governs owner/player relationships. Five or even six-year contracts with often times over 50 percent of that money guaranteed were simply too much. One injury could send a team into a downward spiral lasting for years (see: Steve Francis, Eddy Curry), just as one foolish contract could do the same (see: Rashard Lewis, Gilbert Arenas, Baron Davis). There is essentially no other career in which you have money guaranteed whether you end up working or not. I understand the high risk of injury NBA players face, so some guaranteed money is reasonable, but $60 million (which is roughly 75 percent of Brandon Roy's recent contract) is not.

Players are naturally protesting, with the crux of their argument being that they cannot be held accountable for foolish decisions made by NBA front offices. In their eyes, if front offices make bad contract decisions, the blame lies on them, not the players. I essentially agree with this. I believe in accountability. If a team makes bad personnel decisions, they should suffer the consequences. These consequences should not be severe enough to doom a team for years on end, though. One bad contract should not have the power to relegate a team to five years of bottom feeding. This is terrible for the league, and costs fans. I wish it were not the case, but if owners and front offices need to be prevented from making foolish decisions in the first place, it is in the best interests of the league to make sure this happens. Fans cannot exist in a bubble and say that front offices should just make better decisions, because, as evidenced by the recent rash of horrendous contracts doled out, this does not happen.

If fans truly love the NBA, they must understand that some fundamental problems in its infrastructure need to be fixed. Hopefully, as is the goal, these problems will be addressed during this round of labor negotiations. I am content to wait for this to happen, because when a deal is struck, I want it to be done right. I do not want merely a temporary "band-aid" of a labor agreement. I want a sustainable, fair and viable plan that will keep the league going for many more years to come. If it takes an extended lockout for this to happen, then so be it. It is worth the wait. Despite their whining, the average fan will be fine. I worry more for the concession workers and security guards whose jobs are now non-existent.