NBA labor deal: Did it fix the league's biggest problem?

The tentative labor deal between NBA players and owners sought to address the financial disparities between small-market and big-market teams. Some of those issues remain unresolved.

Seth Wenig/AP
Billy Hunter (r.), executive director of the National Basketball Players Association, speaks to the media as Players Association president Derek Fisher (l.) listens during a news conference in New York Nov. 14. NBA owners and players reached a tentative agreement early Saturday to end the lockout.

Sports-labor experts are split over whether the new National Basketball Association labor deal tentatively agreed upon between owners and players' representatives will actually fix the main problem it set out to address.

Small-market teams such as Charlotte, Memphis, and Oklahoma City were increasingly concerned that they would not be able to compete under the old labor rules, which did not do enough to promote parity in the league, owners said. The flight of small-market stars such as LeBron James and Carmelo Anthony to Miami and New York last year was evidence that top players were leaving less glamorous locales at a competitive disadvantage, the owners added. 

To some observers, the new labor pact – which still needs to be approved by the players – is a clear attempt to slow this momentum.

“This deal amounts to a major bet on the prospect that evening out the ability of more teams to attract top players will be much better for the entire league than what has existed up till now,” says Marshall Babson, labor partner at Seyfarth Shaw, and a former member of the National Labor Relations Board, the federal agency charged with remedying unfair labor practices. 

But others say it does not go far enough. 

"Smaller market teams are struggling because of other issues that this agreement doesn’t address,” says Bob Boland, academic chairman at the New York University Tisch Center for Sports Management. Among these issues is the big-market owners' unwillingness to share their huge local TV revenues with small-market owners.

And besides, says Mr. Boland, “This still makes it too easy for players to want to change teams.”  

The deal's greatest selling point – to owners, players, and fans – is that it brings back professional basketball. Players saw their share of the league's basketball-related income drop from 57 percent to between 49 and 51 percent. (It could vary throughout the course of the 10-year deal.) Owners had to concede some financial terms that would have provided a hedge for the small-market teams.

The final details are still being worked out. According to NBA Player Association executive director Billy Hunter, those details could be finalized this week. The NBAPA, which dissolved as a negotiating tactic, would then re-form and vote on the deal. Either side could opt out of the deal after six years.

If the deal is finalized as expected, a 66-game regular season – 16 games shorter than normal – would begin Christmas Day. 

“While the players may have wanted a greater share of revenues, eventually they realized that 50 percent of something was far better than 100 percent of nothing,” says Karen Boroff, professor and dean emeritus at the Stillman School of Business at Seton Hall University, in an e-mail. “The owners – and far too many of them had losing financials – had the resolve to fix the revenue structure. They agreed that it was better not to settle with an expensive deal but instead fix the cost structure now.”

Although most analysts say the new agreement is closer to what the owners had wanted, they agree it is essentially a win-win for both sides as well as fans.

"The NBA agreement will hold and be roundly embraced because in the end, both sides finally realized there's no money coming in,” says Frank Shorr, director of The Sports Institute at Boston University, in an e-mail.  

Even though the NBA has already lost an estimated $300 million this year, the most lucrative part of the season is the playoffs, which will be saved. “Even with the shortened season, the owners will make money, the players will get paid.... There is a silver lining to this all," says Mr. Shorr.

Moreover, even with the players getting a smaller percentage of revenues than they have to this point, the greater health of the league – which was growing by leaps and bounds – could mean they will have more income than before, if such expansion continues.

“The argument is that if the players can live within this new, diminished percentage, the actual amount they take home could be much more if the sport continues to grow as a whole,” says Mr. Babson of Seyfarth Shaw.

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