No, the NBA's New TV Contract Does Not Mean There Will Be a Work Stoppage

The media's immediate reaction to the NBA's new nine-year, $24 billion television contract with ESPN and Turner Sports was not to congratulate the league in the midst of a historic moment. Instead, it was to characterize the league and its players—driven, of course, by supreme greed— as being on the brink of yet another work stoppage. Neither side anticipated this windfall of cash, but now both sides would covet it.

The influx of money into the league will indeed be enormous. With the new deal, which goes into effect in 2016, the NBA will almost triple its yearly television income from $900 million to almost $3 billion. The money comes with all sorts of ramifications. Most importantly, it feeds into a category labeled in the Collective Bargaining Agreement (CBA) as Basketball Related Income (BRI), which essentially is anything that generates revenue; from ticket sales, to parking, to concessions, etc.

The most recent CBA—signed in 2011—awarded the players anywhere from 49-51 percent of annual BRI, depending on the income generated by the league in a particular year. BRI also helps determine the salary cap. Currently, the cap is set at 44.74 percent of BRI. The predicted rise in BRI because of the new TV deal could reportedly cause the salary cap to rise from $63 million this season to almost $92 million in the first year of the deal, although details of how the money will be spread out throughout the years of the contract has not been revealed publicly.

According to various reports, the players want a higher percentage of BRI in light of this new television deal, and the owners want to lower that percentage even further. The players had a 57 percent share of BRI in the previous CBA. This disagreement seems to point to a potentially cataclysmic conflict.

"The owners are going to be in for a long winter," one source close to the union said about the possibility of players giving back any percentage of revenue. "It's inconceivable to me given the give ups in the last deal that owners will seriously come back and want to have more. It ain't happening."

But ultimately, neither side seems to want a work stoppage. For that reason, reports of an inevitable long labor war in 2016—the year either of the two sides are able to opt out of the current CBA, which runs through 2022—may be premature.

The major talking point so far for star players who have spoken out publicly about the TV deal has been the elimination of the max contract. This change would only affect a small percentage of players, but also have a massive impact on the overall way the league's payroll structures are arranged, since players in that scenario could ask for any sum.

But would the middle and lower classes of the National Basketball Players Association (NBPA) be willing to potentially sacrifice a season for provisions that would not affect them? Not likely. They make up the majority of the NBPA, and the fight will revolve around their needs, with the star players playing a visible, albeit removed role.

"What's the basis for changing them?" the source close to the union said of eliminating max contracts. "That area is working fine."

He added: "I don't think those kinds of issues are likely to be the focal point. I think the focal point will be the split over revenues and over licensing rights."

So for all of Kobe Bryant's and LeBron James' bluster about wanting total free agency, we aren't likely to see dramatic changes to the contract system. The superstars will get their money with the increased salary cap, but they likely still won't be able to make limitless demands.

The players want to get back the revenue percentages they gave up in previous CBA negotiations. The owners want a bigger share of the television deal they recently negotiated. But does that mean either side is willing to risk sacrificing what they already have by jumping into a labor fight? A new round of CBA negotiations would have serious consequences. It seems that analysts are jumping too quickly to conclusions about the extent of a possible labor fight.

"I don't think there's an obvious choice," said Michael LeRoy, professor at the University of Illinois' School of Labor and Employment Relationsand College of Law. "On the owners end I could well see them wanting to opt out to drive down that ceiling or the cap. I don't think anybody imagined a TV deal this big. And the players are in on this bonanza too. I could see ownership trying to opt out, but on the other hand, they need stability to make a deal work. Provoking a labor dispute when you have a big TV deal on the hook is not a good idea."

The source close to the union said the players would almost certainly opt out of the current deal. Then the fight will be to see just how much the players will try to get back of the percentage of revenue they gave up in the previous deal. But such a fight hardly belies the doomsday scenario many have predicted.

"I don't necessarily think it's the reality," the source close to the union said of the possibility of a much predicted bitter labor dispute. "I think it depends how folks act over the next couple of years."

A significant work stoppage seems unlikely at a time when most, if not all, the teams are profitable. The concessions the players made in the 2011 CBA discussions—the lowering of their share of the BRI being the biggest—were mostly based on the league's claim that 22 of the 30 teams lost money during the 2009 season.

"They're not going to be able to claim that anymore," the source close to the union said.

The new TV deal and the recent sale of the Los Angeles Clippers for $2 billion seems to indicate that franchises have never been more valuable.

"There's never been a better time to be an owner of an NBA franchise or frankly any professional sports team," Washington Wizards owner Ted Leonsis said at the press conference announcing the new TV deal.

Then again, the players may not want to get into a prolonged fight because they haven't necessarily benefitted from them. To look at what has emboldened owners so much, one need only look to the past several CBA negotiations.

The only major concession the owners have made in the past 15 years of labor negotiations was giving the players a 57 percent share of BRI in the CBA signed prior to the 2005-06 season, and even that was short lived.

The 1999 CBA particularly seems to haunt the players. In that negotiation, the players gave the owners an unprecedented concession: the first cap on individual contracts in American sports history. To this date, basketball is the only major American sport with a maximum on a player's salary. Now it's become a huge bargaining chip for the owners in any future CBA negotiations.

Dallas Mavericks owner Mark Cuban spoke about the possibility of major contract restructuring on Tuesday with reporters: "It was discussed during the lockout time among owners but never got anywhere. So it was just one of those trial balloons. I'm not offering this as a negotiation, I'm not suggesting it. All I'm saying is that was something we discussed before, and max contracts are always big question, guarantees are always a big question."

Of course Cuban wants to talk about eliminating max deals—a regrettable decision the union made in the first place during the 1999 CBA negotiations—because the owners would then get a sizable return on the tradeoff, perhaps even something as significant as the implementation of non-guaranteed contracts.

The owners have never feared a work stoppage because they have continued to collect television revenue during lockouts. Meanwhile, the players did not earn wages during the stoppages.

It's unclear whether the new television agreement includes a provision that would enable the league to keep collecting revenue during a lockout. An ESPN spokesman declined to comment on that issue. The NBA did not return a request for comment.

"I am not going to get into the specifics of our deal," Turner Broadcasting spokesperson Sal Petruzzi said. "However, we have accounted for the possibility of a work stoppage in our agreement."

Ultimately the biggest question surrounding the NBA labor discussion becomes why either side want to jeopardize a financial windfall during such a profitable time for both sides?

"The system is working," said Scott Rosner, sports business professor at the Wharton School of the University of Pennsylvania. "If you're going to try to get [massive changes], you're going to have a year without basketball potentially. The question for the owners, as in any collective bargaining dynamic, are you willing to shut down the sport for an entire season to get what you want? You should only see that kind of work stoppage occur, any prolonged work stoppage, if you're seeking a fundamental change to way things are working now."