NBA owners are seeking changes in the financial split of league revenue dedicated to player compensation. In the expiring collective bargaining agreement, players received 57% basketball related income and the NBA wants the number to drop dramatically.
In part, the NBA is arguing that small and mid-market teams can't afford to own a team because salaries are just too high.
As a result, the current system does not allow for the optimal level of competitive balance with big-market owners being able to significantly out-spend mid and small market owners.
It is true that competitive balance and parity are serious issues for the NBA. The past 4 NBA champions were large market teams with some of the league's biggest payrolls: Dallas Mavericks, Los Angeles Lakers (twice) and Boston Celtics.
As a result, the current system does not allow for the optimal level of competitive balance with big-market owners being able to significantly out-spend mid and small market owners.
It is true that competitive balance and parity are serious issues for the NBA. The past 4 NBA champions were large market teams with some of the league's biggest payrolls: Dallas Mavericks, Los Angeles Lakers (twice) and Boston Celtics.
By way of comparison, in the NFL four of the last five Super Bowl champs were from some of the league's smallest markets: Indianapolis, Pittsburgh, New Orleans and Green Bay.
How has the NFL enjoyed an unprecedented level of parity? A big part is revenue sharing.
As part of its robust centralized revenue model, the NFL shares about 80% all revenue from media deals, national sponsorships and merchandise sales.
Economic parity exists in the NFL because teams do not deviate widely in their revenues or costs. About 60% of league revenue is nationally generated and split evenly, with only a 40% window for teams to differentiate their top lines.
As far as gate receipts, the NFL has a 60/40 policy whereby the home team keeps 60% of gate receipts and gives 40% of receipts to a pool, which is then distributed evenly among the 32 teams. The NFL has the most comprehensive system of shared gate receipts.
What about the NBA you ask? NBA teams share money from national TV contracts and luxury tax funds. They don't share gate receipts. While NBA teams share equally in the league’s national TV rights fees, teams keep 100% of their local television revenues.
Overall, NBA teams shared about $60 million last year. In contrast, the Packers received $147 million in shared revenue in 2009.
The local television deals alone undermine competitive balance. The New Orleans Hornets make $8 million/year off their TV deal, while the Sacramento Kings make $11 million/year and the Portland Trail Blazers make $12 million/year. Portland's deal is worth $120 million over 10 years.
In stark contrast, the Lakers TV deal is worth $3 billion over 20 years - or $150 a year. That means that one year of the Lakers deal is worth $30 million more than Portland's entire 10 year deal.
The gap between the big and small markets is so large that the NBPA believes it undermines the stability of the NBA and the competitiveness of many of the teams.
It's no wonder the NBPA is saying that revenue sharing is a critical component in addressing what ails the NBA and can play a positive role in reforming the NBA.
No comments:
Post a Comment