NBA lockout and the Blame Game

 

Sportswriters and sports pundits have reduced the cause of the National Basketball Association lockout to simple bumper sticker fitting terms such as the billionaires versus millionaires spat or greed or in one case on ESPN.com, “Idiots”; but that’s too much of a sophomoric view of the labor dispute.

It is actually galling to read the sportswriters version of the NBA lockout and that David Stern is the dictator behind the labor action and caused the lockout. It is an owners’ lockout of employees and Stern is the negotiator on behalf of the owners.

If Stern was not pleasing the owners he would have been phased out of the bargaining. In 1994, Major League Baseball marginalized Richard Ravitch and replaced him with Randy Levine in the collective bargaining sessions.

Even more galling is to see a column about Stern lasting too long as a commissioner and that the lockout tarnishes his legacy. ESPN writer Ian O’Connor apparently failed to realize or didn’t do the research that Stern is employed by NBA owners and if those 29 owners were really upset with Stern, he would have been replaced. Major League Baseball fired Fay Vincent when they voted 18-9 in favor of no confidence in his leadership. Vincent resigned after the vote in 1992 and was replaced by an owner, Milwaukee’s Bud Selig.

Pete Rozelle, who in the 1960s helped enrich National Football League owners as Commissioner was really fired by the owners in 1989 although he submitted his resignation, because of flat television revenues and a series of lawsuits (Al Davis v NFL when the league refused to allow Davis to move his Raiders to Los Angeles and the USFL-NFL antitrust case) and two players’ strikes.

The commissioner serves the owners, not the fans or players and his (or her) main job is to maximize owner’ revenue streams. Stern has done just that and has enough league owners watching his back that he remains on the job.

The National Basketball Association lockout has roots in politics and bad decisions by politicians to become partners with the league by building arenas and stadiums for sports owners and endowing them with sweetheart leases in which the public picks up much of the costs in sports facility construction with little to show except some intrinsic pride in having a team or being part of the “big leagues”.

Sports leagues also got richer thanks to the 1984 cable TV legislation that created a basic expanded tier of stations and allowed multiple system operators to bundle cable TV networks like ESPN, CNN and The Weather Channel into that tier and sell it as one package to consumers (an action that skirted antitrust laws).

The legislation saved ESPN from oblivion and allowed cable operators and sports owners to build networks and collect subscriber money from 100 percent of the basic expanded tier universe instead of the few who might want to purchase a channel (the legislation has allowed news channels with scant audiences along with sports programming to prosper as there is a cable TV socialism where everybody pays for what a small percentage of the subscribers actually watch).

Because of population, New York, Los Angeles and Chicago get more cable TV money from local markets than Memphis, New Orleans and other small cities.  This creates an inequity in finances and while teams are committed to paying a set amount for salaries for players, other areas such as coaching, scouting and marketing vary between the franchises.

But there is some sort of pride in having a big league team in an area, at least that is what elected officials think as they spend taxpayers’ dollars.

Charlotte Mayor Pat McCrory offered one of the most inane statements ever uttered by an elected official as to why his city in 2003 needed to build an arena to get a replacement franchise after George Shinn took his NBA Hornets to New Orleans when the city would not replace the then 15-year old Charlotte Coliseum.

McCrory said the reason that city needed an arena and an NBA team was for exposure and for coverage on shows such as ESPN’s SportsCenter and you could not buy that type of publicity. Charlotte built a new arena after voters by about a two-to-one majority said no in an arena referendum. The NBA returned to Charlotte for the 2004-05 season, awarding an expansion team to one of the founder of Black Entertainment Television, Robert Johnson.

Financially, despite a new municipally-build arena with all the bells and whistles of luxury boxes, club seats and other potential revenue sources, the Charlotte Bobcats franchise is a disaster. The Bobcats franchise has limited corporate support and a small TV market.

One of the Bobcats owners Michael Jordan (the game’s biggest drawing card and individual player revenue producer in the 1980s and 1990s) was fined by NBA Commissioner David Stern for giving an interview to an Australian newspaper and pointing out the league needs a revenue sharing plan and a new owners-players agreement that insures cost certainty.

“We need a lot of financial support throughout the league as well as revenue sharing to keep this business afloat,” he explained.

Jordan spoke the truth but was under a gag order not to talk about the lockout and was fined by Stern.

Charlotte doesn’t have the wherewithal to support his team like James Dolan’s Knicks because you cannot compare the two cities’ corporate support or like Jerry Buss, who will have two Los Angeles Lakers TV networks next year, one in English and one in Spanish.

Miami, a midsized market with a limited television market and a poor corporate base in a very crowded sports city seems to be an outlier as is San Antonio. Miami gets support when there is a championship contending team in place as Heat games become the thing to go to.

In 1986, President Ronald Reagan signed tax code reforms legislation that was crafted by the House of Representatives and the Senate. One of the provisions in the law dealt with stadium and arena funding. A local government entity could put up money for the construction of a sports facility and could offer a sports owner a lease that guaranteed the owner as much as 92 percent of the revenues generated in the facility. The federal government’s new law stated that just eight cents on every dollar made in a facility had to go to paying down the debt in the building which meant taxpayers not the team owner would be responsible for paying the bills.

It didn’t take long for sports owners to pounce on the new law. Cities which had no business being in the “big leagues” got franchises. The NBA added Orlando, Minneapolis-St. Paul, Miami and Charlotte in 1987 although that expansion was planned prior to Reagan’s signature. The NBA wanted to add only two teams. In retrospect the four team expansion was a poor decision although it netted the then 23 NBA owners $130 million to split equally.

Almost from the get go, the Orlando Arena was too small and lacked owners’ toys like luxury boxes and club seats. The same held true in Charlotte and Miami. In Minneapolis-St. Paul Timberwolves ownership could not afford the team and building an arena on their own dime. By 1994 they worked out a deal to sell the franchise to boxing promoter Bob Arum who wanted to move the franchise to New Orleans. The league blocked the move and found a local buyer while the city of Minneapolis took over the building. Charlotte moved; Miami got a new building just 11 years after the Miami Arena opened up.

In the 1990s cities built new arenas and stadium because the threat an owner would take his business elsewhere was real. The NBA didn’t move any franchises in the 1990s but a good number of new arenas popped up with virtually every franchise with the exception of the Knicks and New Jersey Nets getting either a new arena or a renovated structure. The cities that didn’t build the new buildings saw the local owner find that the grass was greener elsewhere.

George Shinn left Charlotte for New Orleans and found out that New Orleans  cannot compete with the big boys city pre-Katrina and post-Katrina and gave up his ownership of the team. The NBA now has the deed to the franchise and is beating the bushes to see if anyone wants the team and to keep it in New Orleans.

The Seattle SuperSonics franchise ownership got a renovation at the city owned arena in 1995 but that wasn’t good enough. Two ownerships later, after failing to get a new Seattle arena, the team moved to Oklahoma City where local politicians gave away everything not nailed to the floor to make sure Oklahoma City Thunder ownership could stand a chance of being in the same financial ballpark as the Knicks and Lakers.

The NBA needs an agreement with the league’s business partners—-the players—and on the owners terms because the league is in so many cities that really cannot compete with the Knicks template (arena ownership, franchise ownership and cable TV ownership) or the Lakers template (television network) that comes with massive corporate support. The rust belt cities like Cleveland, Detroit and Milwaukee have something in common with Sunbelt cities like Charlotte, Memphis, New Orleans and Orlando. Portland, Sacramento and Salt Lake City are in that group too. The owners need revenue sharing aid from not only the players but from James Dolan and Jerry Buss.

Even before the explosion of local TV monies through cable revenues that became possible in 1984, the NBA had financial health issues. The 1983 collective bargaining agreement with the players probably saved seven franchises that could have been contract including Indianapolis, Salt Lake City, Kansas City, San Diego and Cleveland.

San Diego Clippers owner Donald Sterling took his team to Los Angeles without league approval. Kansas City ownership sold the team to Sacramento interests. The franchise has skated on thin financial ice for more than 15 years and again the league is wrestling with the franchise’s future home. The Maloof brothers have been unable to secure financing for a new building in the California state capital and have threatened to move the team to Anaheim if they don’t get a new arena in Sacramento.

Getting a financial structure that works for the owners seems to be the owner’s goal. The players don’t want to have to protect the owners from making bad decisions.. But to just reduce the dispute to a bumper sticker slogan is a rather lazy approach to see the multitude of problems that were caused by cable TV legislation and tax code revisions.

Owners like Heisey wanted a team and took whatever was available. Heisey left Vancouver for what he thought was paradise in Memphis. It didn’t work out financially. In Indianapolis the Simon family got a new arena at the turn of the century but even with getting every conceivable revenue break from the city and the Capital Improvement Board, the franchise cannot charge New York prices in Indiana and doesn’t have the Knicks TV deal.

Oddly enough, all the politicians who have skin in the game, because games are economic generators for a city if you believe them, are strangely quiet about the lockout. You would think with cities having problems with finances and threatening to lay off workers and cut services that they would be pressuring the owners and players to get a deal done. New York, Philadelphia, Los Angeles and other cities are losing tax dollars every day from the visiting team players who perform in those cities. Restaurants and hotels are losing business but the sound you hear from politicians is that of silence. They created the modern NBA and sports but politicians are quiet and so are the corporations who buy the luxury boxes and club seats.

It seems the only people who care about the lockout are sportswriters, sports radio talk show hosts and the participants in the NBA.

Evan Weiner, the winner of the United States Sports Academy’s 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on “The Politics of Sports Business.” His book, “The Business and Politics of Sports, Second Edition” is available at bickley.com, Barnes and Noble or Amazon Kindle.

 

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