Players union reps unanimously reject NBA’s ‘cap smoothing’ proposal
NEW YORK — Player representatives to the National Basketball Players Association on Friday unanimously rejected a league proposal to gradually phase in the massive increase of revenues from the league’s new $24 billion broadcast rights deal, an idea referred to as “cap smoothing” that NBA Commissioner Adam Silver had floated in hopes of avoiding some potential headaches related to the TV windfall, but that players worry could have unintended longer-term consequences on their earning power.
“There is, and was, a concern about any proposal that results in limiting a player’s ability to realize as much income as they can,” NBPA executive director Michele Roberts said during a press conference following the annual All-Star Weekend meeting of union representatives, at which LeBron James was elected first vice president of the players’ union, moving him into the NBPA’s second-most powerful position beneath president Chris Paul.
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When the new television deal kicks in for the start for the 2016-17 season, the league’s annual take from TV rights will nearly triple. Because the league’s salary cap is calculated each year based on a formula that includes projected amounts of basketball-related income — which includes TV money — a giant infusion of cash would necessarily result in a monster year-over-year increase in the cap. Just how big a one-time jump isn’t totally clear, but some estimates have the cap line vaulting from roughly $66.5 million in 2015-16 to somewhere near $80 million or perhaps even $90 million in ’16-’17. (For purposes of comparison, the cap line increased by a little less than $4.5 million from 2013-14 to 2014-15, and that was considered a pretty sizable jump.)
“Such a leap would make it difficult for both players and teams to build long-term plans,” as Grantland’s Zach Lowe wrote in September. More than that, though, CBSSports.com’s Ken Berger reported in October that several small- and mid-market teams feared such a giant one-time increase in the cap “would give big-spending teams a get-out-of-jail free card with respect to luxury and repeater taxes,” raising competitive balance concerns.
This led NBA Commissioner Adam Silver to float a “smoothing” proposal that would deviate with the existing system for determining the cap figure laid out in the collective bargaining agreement between the league and the players, artificially increasing the cap by a smaller amount than the actual revenue numbers would typically demand over the span of a few years. As Silver sold it, all the players would get well this way without causing larger system issues.
“The players would receive every nickel of their 51 percent that year, but we would artificially lower the cap and then make a shortfall payment directly to the union,” Silver told Berger.
Evidently, neither the economists retained by the players’ union nor the player representatives were buying what Silver was selling.
“We spent quite a bit of time as a senior management team trying to evaluate the smoothing proposal that the league presented to us,” Roberts told reporters. “We retained the services of two forensic economics teams to advise us on whether the smoothing proposal that the league presented was something the league should consider. Both those entities recommended against adoption of the proposal, and this afternoon, the players, the board of player reps, unanimously voted to reject the proposal.”
As Roberts explained, the decision came down to concern that adopting the league’s proposal would have a damaging effect on the earning potential of players whose “shelf life” — “and that sounds awful,” she granted — “is limited.”
“The proposal that the league submitted was — frankly, let’s call it that — it was a proposal that would artificially deflate the salary cap,” she said. “And that, of course, meant that players’ salaries would not increase as much as they would otherwise were it not for smoothing. That pretty much was what killed it. It killed it in the eyes of the economists that made the recommendations, and it killed it in the eyes of the players.”
Another potential issue for the players: while a massive, one-time jolt that would leave all 30 NBA teams flush with cash to spend in the summer of 2016 would represent fantastic news for players who enter free agency that summer, it wouldn’t seem to do much for those players whose contracts extend beyond that summer. Wouldn’t accepting a smoothing plan that integrates the new money over the course of several seasons while giving the “shortfall” to the union to split among all the players, even those who won’t get to participate in 2016 free agency, seem like a more equitable distribution among the membership?
“The answer is yes,” Roberts allowed. “If you’re under contract and you’re stuck at the minimum, you can’t enjoy the new revenue that’s now available vis a vis the new TV deal. You’re also correct in noting that there will be what we all have been referring to as the shortfall. There’s going to be a shortfall whether we smooth or not. And if you are trapped in a contract, yes, you can enjoy the proceeds of that shortfall. This is what the players, and, as I understand it, the economists, focused on.”
There wasn’t actually a “but,” but the pivot came just the same.
“At some point, when you are no longer constrained by a contract, and you’re now available to negotiate a contract, if we smooth, the amount of money that you’ll be able to negotiate will be less than what would be available had there not been smoothing,” Roberts said. “In other words, players’ salaries do not increase as rapidly under smoothing as they would when there’s no smoothing proposal, and the amount of the contract you’re able to negotiate is going to be less.”
While the union’s representatives rejected Silver’s smoothing plan, Roberts left the door open to considering alternative options for dealing with the new television revenues and their impact on the salary cap.
“I have not found anything that the players are interested in yet, but I’m not here telling you that the players are completely adverse to something,” she said. “It’s simply that that proposal’s not acceptable.”
An NBA spokesman did not immediately respond to a request for comment on the union’s rejection of the commissioner’s proposal.
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