Now, the hardest part of the job begins. Making that final move of a negotiation — especially a $30 billion negotiation — is always the most painful, the step both sides state they will never make.
But it’s the one both sides always do make, unless they are fools.
And trust me, the people trying to close the deal on a new collective bargaining agreement for the NBA without losing massive chunks of the regular season — not to mention their jobs — are a lot of things, but they are no fools.
So while we wait for things to go wrong (which they most assuredly will) and for the rhetoric to increase (which it already has with the union saying, “The players made a stand,” in another letter to union members Tuesday night) — here is a breakdown of the enormous closing of the economic gap that happened Tuesday in Times Square and what is left to be done:
• The owners and players walked into the negotiating room $2.5 billion apart on a seven-year deal — the players at 54 percent of basketball-related income ($16.8 billion) and the owners offering 46 percent ($14.3 billion).
• By the time they walked out with their official bargaining positions on the players’ share of 53 percent (players) and 50 percent (owners), they had closed the gap by a whopping $1.6 billion. The owners accounted for $1.3 billion with their move on the players’ share from 46.
• So with the players at $16.5 billion over seven years and the owners at $15.6 billion, based on their formal positions, the negotiating gap is now $900 million.
Where do they go from here? They just keep going until they find the landing spot. It is going to be painful — in some ways, more painful than the $1.6 billion negotiation that happened Tuesday. Both sides will state they just cannot do it, and will pull out every piece of leverage they have — because leverage is still currency in these negotiations, until Sunday night, when money will be the only currency that matters.
Each side already has signaled a willingness to at least discuss 51 percent for the players in some form, based on the league’s informal offer of a 49-51 band and the players’ informal counter of 51-53. Each percentage point move is worth $300 million, based on a seven-year deal. The numbers are large, but at least the math is neat.
To figure out how much farther each side will go, you have to quantify how much they would lose by cancelling the first two weeks of the regular season. For the players, it’s $200 million — $140.6 million for the 301 players under contract, plus an estimated $53.7 million for the 129 free agents, $4.4 million for the 30 first-round picks and $1.2 million for the 30 second-round picks, based on calculations provided by a front office executive.
Tuesday, deputy commissioner Adam Silver estimated the losses associated with cancelling the first two weeks of games as being “in the hundreds of millions.” We know what the players’ loss would be, so let’s call it about the same $200 million for the owners. This doesn’t count the collateral damage that is difficult to quantify, plus the slippery slope of cancelations leading to more cancelations as each side inevitably hardens its position by trying to recoup those losses. Fighting to get the $200 million back results in losing $200 million more, and before you know it, $4 billion is gone.
So when the sides resume meeting — possibly as early as Thursday, with a league-imposed Monday deadline to reach a deal before regular-season games are cancelled — each one moves another $200 million. (They’d lose that money anyway by failing to reach a deal.) The bargaining gap is now $500 million over seven years, or about $71 million a year.
Here’s how they close it: They split the difference. The magic number is $16.05 billion, or roughly 51.5 percent for the players and 48.5 for the owners. Given the format already discussed by the two sides, this could be accomplished with the players receiving a band of 51-52 percent.
Is it foolproof? Hell no. For one thing, just as there are owners ready to make a deal (James Dolan, Jerry Buss, Micky Arison), there are those who will view less than 50 percent as a negotiating defeat. For another, the Super Seven — powerful agents who wrote to their clients over the weekend warning them about accepting a bad deal — were planning a conference call among themselves Wednesday afternoon to discuss the state of negotiations and what to do next.
“You have a reasonable idea,” a person connected to the negotiations said. “But you are not dealing with reasonable people.”
Indeed, according to a person with knowledge of the powerful agents’ strategy, there are some serious reservations about how the National Basketball Players Association negotiated its way from 57 percent to where they are now — a place that union chief Billy Hunter described Tuesday as “on the 2- or 3-yard line. The question is, can we punch it in?”
To do so, the union will have to find a way to appease the agents, who view the owners’ $1.3 billion move skeptically because of how low their initial bargaining position was — and how far the players had already come before Tuesday, giving up nearly $1 billion over seven years by going from 57 percent to 54. In addition, even though league negotiators have concurred to drop their insistence on a hard team salary cap and rollbacks on existing contracts while leaving the max salary structure intact, the devil is in the details.
The agents have been pushing behind the scenes for a more open and flexible system to grant for easier player movement, which they believe drives fan interest and revenue — as was overwhelmingly the case during the free-agent summer of 2010. The NBPA has been successful only in preserving system elements, not adding to them.
So the league could dig in at 51 percent for the players, and they could dig in pretty hard considering they just moved $1.3 billion in five hours Tuesday — not to mention relaxing the system elements they concurred to preserve.
Similarly, the players could dig in hard at 52 percent, having already made a $1.3 billion concession of their own by going from 57 percent under the previous deal to 53. Not inconsequentially, sources state 52 percent is a figure the most influential voices in the group of powerful agents would accept — though at least one of them has told associates he had be willing to miss a month of games to get it.
Will anyone care about the month of games? Probably not. Will anyone miss the $800 million it would cost both sides? You bet.
By the time negotiators reach that moment of truth, probably Sunday night, they will be standing on a hill insisting that they are willing to die there over 0.5 percent of BRI — or $150 million, less than they would lose if the first two weeks were cancelled Monday.
I’m not going to state my only question is which hotel am I going to Sunday, because there are dozens, if not more than 100, negotiating points still to be resolved. But it may be time to deliver a new cake, with new numbers on it: 51-52.
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Submited at Thursday, October 6th, 2011 at 12:01 am on Sports by robert
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