Labor disputes in the NBA have a way of producing strange and unintended consequences: $30 million contracts for backup centers, trades of retired players and David Stern's infamous beard, to name a few.
Thirteen years ago, the NBA locked out its players and started a protracted battle over the league's financial future. Owners wanted cost certainty and a hard salary cap. The players union resisted, as players unions always do.
After 204 days and hundreds of millions of dollars lost, the parties adopted a new labor deal, just in time to stage a 50-game season. When the standoff was over, the owners had won new controls on salaries. The union had secured a huge share of league revenues. And Stern, the NBA commissioner, had acquired a face full of gray scruff that stood as a frightful symbol of the 1998 lockout.
"As a basketball fan and particularly a fan of the NBA, I am elated," an unkempt-looking Stern said in January 1999 after adopting the new deal.
Asked last Thursday if the lockout had been worth it to get the deal he got, Stern gave an unequivocal, "Yes."
Eight hours later, Stern shut down the league again, claiming that the system he fought for was now broken. The owners, as before, are seeking a hard cap and an assurance of profitability. The players union, as before, is fighting to protect past gains.
It is 1998 all over again, except that the owners — claiming losses of more than $300 million a year — are more determined than ever to impose absolute cost controls.
How did a system that was once trumpeted as a huge victory for the owners become so burdensome?
"I think it was clear — even though that deal worked well for the times — that the holes in the cap were ultimately going to destroy its effectiveness," Russ Granik, the former deputy commissioner, said in a phone interview.
In fact, Granik said, the league "has been on a quest" since 1984, when the first soft-cap system was adopted, "to tighten the cap as much as possible." It has done so in nearly every collective bargaining agreement.
The 1999 deal contained three new cost controls: a luxury tax for high-spending teams, an escrow tax that capped the players' share of revenue and, for the first time, a cap on individual player salaries — initially $9 million to $14 million. (Michael Jordan, for perspective, earned $33 million in his final season with the Bulls.)
These were revolutionary measures, celebrated by owners and decried loudly by player agents, who were furious with the union for accepting the deal.
"In '99, the NBA achieved total victory," Arn Tellem, one of the league's most powerful agents, said in a phone interview. "There's not much more they could have achieved."
Initially, the owners seemed to get the desired results. In the first season that the tax system was in effect, 2001 to 2002, teams did not spend enough in the aggregate to trigger it. The next year, 16 teams paid $174 million in taxes (led by Portland, with an astronomical $52 million bill). The total number of tax-paying teams dipped to 12 in 2003-4, and the tax disappeared again in 2004 to 2005, when aggregate spending again fell below the trigger point.
As recently as 2006 to 2007, only five teams paid the tax — a dollar-for-dollar surcharge on payrolls that exceeded $65.4 million that season. But a year later, eight teams crossed the threshold, paying a combined $92.5 million in taxes. In 2009 to 2010, with the threshold set at $69.9 million, 11 franchises went over, paying a combined $111 million in taxes.
Only seven teams paid the tax this past season, spending a combined $72 million over the limit. Three teams were egregiously over: the Lakers ($20 million), the Orlando Magic ($20 million) and the Dallas Mavericks ($19 million), who won the championship.
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