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NBA on NHL Path, Not NFL

2011 August 23
by Brian Goff

John Chick from Canada’s CBC sports nailed the NBA lockout situation:

The impetus for the lockout was the owners deciding the league’s current financial system was unsustainable. Bettman wanted a link between revenue and salaries. And that’s exactly what is happening in the NBA today. While NBA revenues are higher than the NHL’s by virtue of a bigger marketplace and a more lucrative U.S. TV deal, it’s the basically the same story.

Even though a few found a similar feel to the NFL lockout, for example Mike Chen at SB Nation, most sports economist, myself included, predicted that the NFL situation would end without a protracted loss of games.  Chick suggests that lower salaries of many rank-and-file football players relative to NBA players drove the NFL deal.  That’s a possible contributor.  NBA median salaries fall around $2 million while median NFL salaries (a lot more players even though bigger salary pool) sits just below $1 million.

My guess is “financial sustainability” drives the difference more so.  As Gerald Scully discussed in detail long ago (Business of MLB – check out the team-by-team financials discussion at the end), sports team financials are really murky and tend to overstate losses.  Even third-party assessments can fall prey to these dark waters as this Forbes piece acknowledges even for Forbes’ own estimates.  Nonetheless, reading between, under, and through the lines, it does seem that a substantial number of NBA franchises have financial troubles just as with the NHL — too many to make league contraction an attractive option even for the wealthier teams.  NFL teams, on the other hand, all make money.  Big market, small market.  Good, bad.  Of course, owners would like to make more, and many may have not liked the direction of their financials, especially in the protracted recession/low growth economy since 2007, so given that the prior CBA expired, why not see what they can get?

The NFL dispute amounted to a tug-of-war trying to pull a few million this way or that way.  The NBA and NHL looked to reverse field position  — “regime change”.  No doubt, had the NFL owners pocketed the 2011 TV revenues and not been forced by federal courts to share, their incentives to hold out for more would have been much larger and maybe games would have been lost.  Without that enticement, however, they stood to lose a lot more than they could gain by shutting down for a season.  That’s not the case in the NBA just as the NHL.

There are some crazy ironies to the NBA/NHL situations.  Because the proposed shift in the field position of owners v. players is so large, players will be very disinclined to accept — for now.  The lure of Europe and other leagues bolsters them, at least in the short term.   How many NBA players can foreign leagues absorb and how much displaced salary replaced?  I’m not sure, but unless the number is large, NBA players will find themselves a year down the road much more willing to settle.  While a few owners may really be pinched, in the end, in a waiting game wealth and not just income matters and owners hold a huge advantage — individual  owners’ net worth runs into the hundreds of millions and billions while players run anywhere from a few thousand to tens of millions.  After 18 months, the NHL players found themselves accepting a worse deal than they could have had at the outset.  NBA players may find themselves in the same weird vise.

One Response
  1. August 23, 2011

    388 NHL players played overseas in Europe during the 1994-1995 lockout, but in many of those cases there were already relationships based on prior play for those clubs, and countries of origin. There are relatively few European-born players in the NBA (many stars come to mind, but it’s not the majority like it is in hockey). I just don’t see many players going overseas to actually play.

    I do agree that this lockout will be protracted, and that ultimately the owners hold the upper hand.

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