In The Wealth of Nations Adam Smith professed the importance of “public diversions.” These diversions, he argued, are central to the health of a capitalist state: by amusing the public through “gaiety and good humour,” spectacles of sport can help divert the attention of the masses away from the ills of capitalism and direct their attention toward camaraderie and enjoyment. As a result, the public dismisses the curmudgeonly spirit of revolution, and the state remains safe. In Rome, there were gladiators; in the United States, there is the National Basketball Association.
For over three months, the owners of the NBA and the union officials of the National Basketball Players Association (NBPA) have butted heads in a labor dispute that threatens to cancel the NBA season. Players want more money; owners want more money. Rich teams want to stay rich; poor teams want to a chance to compete against their rich neighbors.
Today, the players union and the NBA owners remain locked in a stalemate. Delayed negotiations have forced Commissioner David Stern to cancel the first two weeks of the season—the first time the NBA has lost games in more than 10 years. In a press conference earlier this month, Stern pointed out that the success of the negotiations would determine “whether they have a season or not, and that’s what’s at risk.” Since then, the NBA has assigned George Cohen, director of the Federal Mediation and Conciliation Service, to help end the dispute. Cohen is a veteran when it comes to large-scale negotiations—he is largely responsible for the end of the NFL lockout earlier this year—yet even he has not managed to push the NBA closer to resolution.
Over the course of the dispute, the NBA has inadvertently provided a rare window into the inner workings of its capitalist structure. For the most part, fans and analysts turn a blind eye to the money that floats around in professional basketball. But every once in a while, the very mechanism that capitalism employs to “divert” its masses falls victim to the capitalist system itself, and the dark underbelly of professional sports is made visible.
MO MONEY, MO PROBLEMS
Between the larger-than-life stadiums, the over-the-top commercials, the corporate endorsements, and the $10 nachos, it is obvious that professional basketball is not a poor man’s game. Teams profit from lucrative TV contracts, expensive tickets, and a whole host of merchandise—last year alone the league collected over $4 billion in revenue. Yet even this amount of money is not enough to keep the league afloat: the NBA reports that 22 of its 30 teams are in the red. Altogether, the NBA had a net loss of $340 million in the 2010 season, a figure harped on by owners. With these astounding losses, it is clear why conflict might arise.
The current labor dispute is two-pronged—Players vs. Owners, and Teams vs. Teams within the ownership circle. The first is a matter of dividing income. Players currently receive around 57 percent of the team’s revenue; owners receive 43. In order to correct the balance, owners have put forward a 50/50 proposition. The players have haggled, submitting a 53-47 split as their compromise without surrender. But the owners, unsatisfied, have merely upped the ante, increasing their demands to a 47-53 split in their favor. Concessions of two or three percent may seem minor, but a five percent drop by the players would put over $200 million back in the pockets of the owners, making up for most of the losses of the past season.
The other major conflict between owners and players centers on the possibility of strengthening the salary cap from the current “soft” cap—which enables teams to spend over the cap under certain circumstances—to a “hard” cap, which does not. A salary cap is exactly what it sounds like: with a cap, teams cannot pay their roster more than a certain amount, which is decided upon by the league administration. Such a policy, owners argue, would help shift the balance of capital back to the organization, preventing teams from paying players beyond the means of the organization.
For fans and analysts outside of the player-owner division, it’s unclear where sympathies should reside. On one hand, the hardline stance of the NBPA sends a progressive message that reverberates far beyond professional sports. As unions all over the country fight to maintain influence in the workplace, the NBPA has the opportunity to show solidarity with all American workers struggling in the post-Recession economy, themselves shuttered from employment.
Moreover, many would argue that basketball players who compose the NBPA are merely trying to make a living. Unlike most workers with careers that can last many decades, an NBA player sacrifices most of his working life for only an average of 4.7 years in the league. And when he finishes his career, he cannot fall back on professional training because many basketball players never finish college. Considering the fast-paced and short-term nature of an NBA career, the NBPA’s lack of compromise seems justified.
On the other hand, owners have to account for much more than their own salaries. They are responsible for the financial well being of the franchise staff and management—who all suffer from losses to the team—in addition to the hundreds of workers that maintain the stadium, from vendors to ushers to janitors. And the losses of these teams are very real: whereas players are still making an average of $5.5 million with a median of around $2 million, the bleeding economy of the NBA poses a far more immediate threat to the livelihood of many workers involved with the organization. If fighting the salary cap means the purchase of another Mercedes-Benz for LeBron James, the owners may have it right.
Most importantly, for teams with smaller markets—Oklahoma City, Toronto, Minnesota, for example—the salary cap would not only provide monetary reprieve, but also a step toward a more balanced distribution of talent. This is the second prong of the conflict: wealthier teams can outbid the others and accumulate the best players. This is a problem that pervades most major league sports—certainly the Yankees have been hearing about the unfairness of their big wallet for decades. Yet among them, the NBA is perhaps most egregious: since 1984, only eight teams out of the league’s thirty have won the championship—Tim Duncan’s San Antonio with four, Michael Jordan’s Bulls with six, Magic Johnson and Kobe Bryant’s Lakers with a total of eight. This is why the NBA is often described in terms of dynasties. Good teams can accumulate star power and dominate the league for very long stretches of time. Today, dynasty building is more evident than ever, with Lebron James’s noisy decision to join two other superstars in Miami, and the Knicks’ acquisition of both Amar’e Stoudemire and Carmelo Anthony. We are in the era of the “Superfriends”—stars teaming up to generate a dynasty. However, this system, many owners argue, is only able to survive because of the vast economic disparities between teams. The amount of money the Miami Heat pays its three super stars alone—upwards of $47 million—is almost the exact amount of money that the Minnesota Timberwolves franchise pays its entire roster.
Thus, the salary cap that players argue has been a source of oppression is quite the reverse; it is a means through which players themselves have come to oppress teams starving for a championship. In a more fairly distributed system, the NBA would arguably become a much more exciting league for fans—with every team having a chance—and the ensuing increase in fandom might very well result in the increase in revenue that the NBA seeks.
THE REIGN IS OVER
Every month the lockout continues, the league loses around $350 million. Every day that the lockout continues, more and more players leave the league to join teams overseas, where they can make money during the 2011-2012 season. Tony Parker, J. R. Smith, Deron Williams, and over 60 others—from rookies to all-stars, the NBA lockout is pushing its talent to places like China, Turkey, and other European countries.
Even if negotiations finish in time for an NBA season to take place at all—which remains a major “if”— it is hard to imagine that the league will ever be the same. Beyond the players who have actually left their teams, there are hundreds more who have expressed interest in leaving the league as a result of the lockout. And after years of living underneath the NBA, Euro-leagues now yield lucrative contracts and field competition barely below the US, standing by to steal away our talent.
The international basketball community will continue to bombard NBA players with overseas offers throughout lockout, and siphon our homegrown labor supply. That is just basic Adam Smith economics: when a domestic market has a shortage of labor demand, the international market will be willing to import that talent, at a going wage for hungry ball players.
Thus, it appears that fans have more to worry about than a one-year hiatus. It is very possible that the current labor dispute—and the entirely unsustainable economic system that caused it—has finally burst open the floodgates.
DAVID ADLER B’14 is locked out.