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October 11, 2011

NBA's real issue: What is a "soft cap?''

Monday night they blew up the first two weeks of the NBA's regular season. Commissioner David Stern said there's a "gulf'' between the league's position and the union's.

I don't think the league and the union are massively apart on the key issues, so much as they're somewhat apart on a variety of issues. And it all comes back to the NBA's traditional reliance on a so-called "soft'' salary cap. Here's the problem:

The league sets a number, based on the previous season's revenues, that is supposed to define each franchise's maximum payroll. That number is habitually exceeded because the league has "exceptions'' -- specific situations that allow a team to sign a player beyond what the cap allows.

There were nine of those exceptions in the last collective bargaining agreement. The most famous is the "Larry Bird exception,'' allowing a team to exceed the cap to re-sign its own free agent. But there's also the mid-level exception, the bi-annual exception, the minimum-salary exception, etc....

And that's why the Dallas Mavericks and Los Angeles Lakers can keep adding free agents with no regard to the cap, so long as they're willing to pay the luxury tax. The NBA says that has to be more heavily restricted, or there's no chance the 30 franchises can have something resembling competitive balance.

That's good news for the Charlotte Bobcats....eventually, once a new system is in place. But it's understandable why the union is bucking these changes.

The NBA's negotiators said about a week ago they were pulling back from expectations for a "hard' cap. The NFL has something closer to a hard cap, where there's less distance between the highest- and lowest-spending teams.

The union looked at all the changes the NBA demands -- a higher luxury tax and various reductions in the impact of these exceptions (shorter contracts, smaller raises, a lower first-year base), and determined, understandably, that they add up to a hard cap.

In this new world, it would be harder for the Boston Celtics to sign a Rasheed Wallace or the San Antonio Spurs to sign an Antonio McDyess. That worries the union, because the market would reduce, if not dry up, for these guys.

It would be great for the Bobcats if the Knicks couldn't just outgun them in pursuit of a free agent like Chris Paul. But you can certainly see these as blood issues for the union.

I thought the urgency to avoid cancellation of games might get the league and the union to compromise on all this. But as it stands, their separate definitions of fair and reasonable are too hard to bridge.

Posted by Observer Sports on October 11, 2011 at 11:33 AM | Permalink


Rick, you do a great job covering these issues and they are newsworthy but I think I speak for the majority of people here in Charlotte when I say "nobody cares". I'm not trying to be insensitive to the arena workers and other businesses that are adversely affected by this but the average sports fan is indifferent to these negotiations. The NBA and the players union are jeopardizing a lot of goodwill they gained back last year and a lot of those fans they brought back over might not ever come back if they cancel the season.

Posted by: Diddy | Oct 11, 2011 1:10:13 PM

The fans are going nowhere. We love basketball with all it's flaws. They will get this worked out, as the pocketbooks will dictate. I just hope it is sooner rather than later.

Posted by: Mikey will eat anything | Oct 11, 2011 1:30:15 PM

Just go ahead and cancel the whole season,because it seems they don't care about the fans and the dollars they have put into there favorite team. This is nothing but GREED!!!!They need to get out and get a real job!!! and see what work is really about.All they care about is there self. Now with this lock out people are going to lose there jobs and do you thank they care that is a big NO!!!

Posted by: Debra Brown | Oct 11, 2011 1:30:15 PM

The funniest comments on articles like these come from people who shout "NOBODY CARES!" while reading a basketball blog during the middle of college and pro football season and during the baseball play-offs. We all know that football is king and November basketball pales in comparison to May hoops but if nobody cared there would be no comments here. In the spirit of football "C'Mon Man!"

Posted by: James | Oct 11, 2011 1:38:23 PM

eventually the Union will give in.

the players are a depreciating asset; like the rest of us they age so their salaries aren't an annuity. (this costs Kobe $350,000 per game and he can't recoup it by playing longer - his body has a finite life)

owners (collectively - not all) have deeper pockets and can pull in cash from other enterprises to fund any deficits caused by the lost games.

Posted by: bobfan1 | Oct 11, 2011 1:42:28 PM

Thanks for the comments captain obvious.

Posted by: Thanks Diddy | Oct 11, 2011 1:45:30 PM

Bravo to Stern and the owners. Get a system that creates a more level competitive balance and insures small market teams (like Charlotte) have a reasonable chance to win championships (if we don't screw up our draft picks). Let the players pull from their savings for a while; it will bring them back to the table in due time (mortgage due, Porche payment due, love child support payments due...)

Posted by: Bassman | Oct 11, 2011 1:53:39 PM

I care. I love basketball, I love the NBA, I love the Bobcats and I care that there will be many impacted by this immediate furlough (? if that's what you'd call it to all those affected by a cancellation period). But here's where I don't care - I don't care that the players feel put upon to make their salary components work better in a system that they all profit from. I (and I am sure hundreds of thousands like me) took a pay cut to help my company stay afloat back in 2008-11. Do these folks have a connection to reality?

We really need this sobering moment in the NBA - the contracts are horrible and the system in place perpetuates that. That any team with deeeeeep pockets can buy talent away from lesser markets makes for a crap league. I want there to be an NBA season in 2011-12 but if we can come out of it w/ a more humbled group of team players by cancelling the season, I will be happy with that. I, for one, do not think of the owners as the money hungry guys that they are oft depicted by - there are too many of them in markets like ours that are simply unable to compete (and I don't think they should have to go deep into the luxtax to simply get an 8th seed in the playoffs).

I have very little sympathy for the players on the north end of the bad salaries. I vote for a luxtax on the salaries - for any player that makes more than 2x the avg of the team's player's salaries have a luxtax on the portion over that threshold - pay that the same way teams currently have to pay the luxtax on payroll. That would keep the single player huge contracts from being so out there as well as give him a personal disinterest in the guys coming in at league minimums to help him the team buy a championship.

This might not be the best (or even good) ideas but I am frustrated by what seems to be such a huge disconnect to both the fanbase and reality.

Posted by: Adam | Oct 11, 2011 2:06:16 PM

the only thing holding the bobcats back thus far has been bob johnson and michael jordan/rod higgins. hopefully that had ended with rich cho being brought in but it will take years to know given that we are back at square one.

as restrained as the bobcats budget has been they still found a way to spend something around 13 million this past year and this coming year on guys who don't even play. at all. as in they are inactive most of the year.

the way it is structured now SHOULD make it a bit more fair....new york and LA can get the stars they deserve because the ticket prices in those market demands it......but the owners have the spend the luxury tax and the non taxed owners get their split of that money. that's VERY fair. and i don't see the mets, dodgers, angels, or yankees or red sox or any of those teams still standing in the baseball playoffs. and they have no cap.

every championship team has been built through the draft except for the recent celtics and pistons championships. and those were 1 ring teams and still had draft picks as intricate parts of those teams. and every year several bottom half payroll teams make the playoffs. the argument is FLAWED. stop printing that ish.

the mcdyesses and wallaces of the league SHOULD be signing with contenders. part because they are taking a huge paycut to do so so they can chase a ring which is well within their rights. and because teams like the bobcats aren't trying to sign those guys because they need more than 6 months from a guy, they need 6 years. they need to develop talent, not plug in a guy temporarily.

and chris paul isn't signing here. that has way more to do with charlotte not being new york or la or miami than anything. charlotte can't compete with new york in real life so why would sports be different?

Posted by: charlottean | Oct 11, 2011 2:07:10 PM

I care. Rick, here's my issue. I think the lockout has highlighted a problem with basketball. The lockout reminds fans that they have no importance in the decisions or functions of a team; we're just invited to watch. So, having hometown love and loyalty is, at best, an illusion and, at worst, a farce. That's why it seems more and more people are abandoning the pros for college teams, the adoration of which has its own negative consequences.

I hope they resolve it soon because it will be a long winter without it.

Posted by: long | Oct 11, 2011 2:33:40 PM

Listen people I have followed basketball for a long time. And it pains me to go through this lockout as much as every other fan does as well. But you have to understand. the league is just plain unfair. Yes players make millions as do the owners. But wouldn't it be great to have a marque match up of these two teams and be very competitive. Timber wolves bobcats, or rapters and kings. Only a quarter of all 30 NBA teams have a legit shot at winning the title. Now thats just unfair. A fair deal will ensure competitive balance throughout the league. imagine all that money many fans spend on season tickets to watch their team. Now imagine spending the same amount of money but on a team that has a chance to win a championship. What a difrence that would be.

Posted by: Isaac | Oct 11, 2011 4:12:47 PM

Diddy, you are squat. Please refrain from speaking for 'the majority'.

Posted by: eduardo | Oct 11, 2011 4:35:41 PM

The NBA and the players are a bunch of selfish & childish people. They make millions yet quibble about caps. Meanwhile its the guys working the venues and surrounding businesses that actually suffer. Why don't these players & owners quit being greedy, man up, realize how good they got it, and share that wealth with the venue workers?

Bet they won't do that! Bet its never crossed their mind.

This is why I don't watch pro basketball, baseball, or football. Buch whiny, overpaid, little girls.

Posted by: AnotherIrritatedCitzen | Oct 11, 2011 4:51:34 PM

Ditto Isaac. I'm tired of the same old teams being in the upper echelon of the league over and over again. If it takes a cancelling the entire season to get a system with some parity like the NFL. Then it's worth missing a season or two. The players dont care about the league or the fans, they care about their pockets. I hope the owners don't budge until they get what they need to make the league better.

Posted by: nucat | Oct 11, 2011 5:22:04 PM

Great comments here. I'm a big fan, but realize that the NFL has it right in terms of revenue sharing. A one or two year lock-out to force an equal playing field suits me fine. I'm sick of the Lakers, Celtics, Mavs and Heat dominating the NBA year after year. There are also probably four too many teams in the NBA. Sorry Rick, but perhaps you could write about the Heels national championship run this year instead.

Posted by: Dan | Oct 11, 2011 9:36:22 PM

The owners' don't want a new system for competitiveness. It's to make teams profitable or more profitable by cutting player salaries instead of revenue sharing.

Without revenue sharing providing small market teams enough money to be competitive, the big markets will continue to win. Any new system must take money from the large markets to prevent them from being able to pay more than small market teams.

The hard cap is not the reason the NFL works. The NFL works because the small market teams receive enough money to be competitive. Large market teams spend more money with signing bonus, gaurantees, or upfront money. How often does a big time free agent in the NFL signed with a small market team?

Posted by: Reggie | Oct 11, 2011 10:00:47 PM

I don't care how much money the owner's or the player's make...that's all a matter of supply and demand. What I do care about is creating a level playing field for every team in the league, just as the NFL has done. The large glamor markets would still have player appeal from endorsement opportunities, nightlife and national exposure, but with a hard or harder cap, the smaller markets would still be able to compete salary-wise.

Posted by: Bill Wilson | Oct 11, 2011 10:08:07 PM

I didn't expect those last moment talks this week-end to result in an agreement; the differences - especially on changing the salary cap system - are too serious. However, these differences are not "too hard to bridge" either. Just give them time.

They had plenty of time to waste this summer; there was no way to negotiate seriously then, as long as the money losses were not yet real (such losses were only theoretical, and not close enough, in the off-season).
Now, they're starting to lose money, that's pressure, and the players are definitely in a weaker position than the owners.
The players couldn't care less that the majority of the clubs paying their salaries were losing money, at the tune of hundreds of millions per year. Now, they have no choice but to compromise with the owners. It's against both sides' best interest to cancel this whole season. I wish they wouldn't push their dispute beyond the first half of December; then, they'd be able to start the short season early in January. But, both players and owners think long-term, each side wants a deal that's acceptable for themselves in the long run, so they may decide to push their dispute to its bitter end - which will be to mid-January - and then have a horrible stunted 50 games season in three months (same as in '99).

We'll see, but I don't expect agreement before late November or early December. Until then, the arguing, finger-pointing, posturing, the drama and playing brinkmanship will go on. And yes, as some fans have noted, that shows quite some disregard of those involved in the negotiations for both fans and the regular folks employed by these organizations.

Posted by: Sandy | Oct 11, 2011 10:33:19 PM

the league is not unfair. look at the playoffs last year, the year before, before that. every year there are contenders that aren't spending money. OKC had one of the lowest payrolls in the league last year.

the problem is in the nba owners not being smart, not in the system itself. there are several nba owners and gms that just don't know what they are doing. look at every team that is not competitive on a regular basis and you will see problems in the front office.

Posted by: charlottean | Oct 12, 2011 8:33:33 AM

Reggie- Small market NFL teams regularly sign big time free agents (minus the Bills). Sidney Rice signed in Seattle, Charles Johnson, DeAngelo Williams were both free agents and resigned with Carolina. Andre Johnson resigned with Houston, Drew Brees signed to New Orleans, Brett Favre signed with Minny a while back. We could name big free agents going to smaller markets all day. NFL spends more wisely and the hard cap keeps the large markets from being able to spend more. If the Heat, Lakers and Celtics all had to spend the same as Charlotte and what Charlotte could afford then each team wouldn't have 3 super stars.

Posted by: DanielTDenny | Oct 12, 2011 11:11:55 AM

Until they institute a Hard Cap, the NBA should stay out. The hard cap is the only way to maintain competitive balance between large and small market teams. If the players can't make it on 10 million a year instead of 20 million a year, then play in Europe for 2 million a year. Of course they have limits on foreign player numbers so there aren't as many jobs available. Heck, MJ only made 6 million for most of his career. (Diop?)

Posted by: Superguru | Oct 12, 2011 12:03:46 PM

Carolina has been one of the top 10 revenue generating teams in the NFL for most of their existance. They generated more revenue than the New York teams until they built their new stadium. So they have plenty of money to resign their players. NBA players regularly resign with their teams. LeBron, Wade, Melo, Bosh, Durant all resigned. Those are All NBA players, not Charles Johnson and DeAngelo.

New Orleans and Miami were the only teams to talk to Brees. He was coming off of a major shoulder injury. Miami medical team wouldn't pass him. They signed Culpepper instead. New Orleans was his only choice.

How many teams were bidding for the 40 year old Favre? Sidney Rice? I'm talking about players like Deion Sanders, Haynesworth, Nnamdi, Bart Scott.

The NFL didn't implement the hard cap until 1994. They had created "parity" years before the hard cap.

Posted by: Reggie | Oct 12, 2011 6:37:32 PM

The best thing for Jordan and the Bobcats is for the entire season to be cancelled. Wish it wasn't true, but it is!

Posted by: joe cool | Oct 12, 2011 9:16:03 PM

not really.....a young team that sits doesn't make it better. it could completely derail the development of some of the young guys.

the best thing for the bobcats is to learn how to price an empty arena AND THEN raise the prices. they're pricing the seats as if they sell out every game. they should be giving tickets away all the time to get people in the habit of going, then start charging them a little bit until the demand exceeds the supply. that hasn't been the case yet since the team was established.

Posted by: charlottean | Oct 13, 2011 9:21:27 AM

If you had a business that was consistently losing money and had a chance to negotiate a new labor agreement that could impact your business positively overnight, what would you do? The owners are doing exactly what they have to. The players simply don't want to give back "rights" that they currently have. A ridiculous stance considering how the world has changed since the last agreement.

Posted by: Money Talks | Oct 13, 2011 9:22:09 AM

I love the NBA and am a die-hard Bobcats fan. However, I am with the owners on this one. I have a feeling that most folks reading this blog would gladly quit their job (if they have one) for a two year contract at the NBA rookie minimum.

Posted by: jmurr | Oct 13, 2011 10:44:31 AM

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