Pacers urge Stern to go for the jugular in labor dispute

The National Basketball Association labor dispute is a four-sided, not a two-sided, fight.

And the Indiana Pacers are taking a strong stand as one of 10 teams asking David Stern to go for the jugular in this increasingly bloody battle.

Yes, the owners and players are certainly on opposite sides. But there are also two distinct camps of players and owners forming.

Some players are willing to take a 50-50 split in basketball related revenue. Another camp, spurred by their agents, wants more and is asking union leaders to take the fight to court.

Owners are split mostly along small and large market lines, with poorer teams like the Pacers demanding that Stern stand strong in not giving a penny more than 50 percent of revenue.

In fact, some teams—including the Pacers—think 50 percent for the players is too generous.

According to sources within the NBA, the league’s labor relations board received a letter from 10 owners strongly opposed to the final offer Stern put on the table offering a 50-50 split.

Owners for Indiana, Atlanta, Charlotte, Denver, Memphis, Milwaukee, Minnesota, Philadelphia, Portland and Sacramento said in the letter that they feel that a 50-50 revenue split represents a bad deal for the owners.

Each percentage point in this fight is worth $40 million annually. If the players accepted the 50-50 split, that would represent a $280 million annual savings for team owners. In the collective bargaining agreement that expired following the 2010-11 season, the players got 57 percent of basketball related revenue. No one is arguing that some decrease in that formula isn’t reasonable.

Pacers owner Herb Simon and his cohorts want stiffer luxury taxes for teams over the cap sooner than year three as the latest deal forwarded by Stern stipulated. They also want the maximum length on guaranteed contracts shortened by three years, not one as Stern’s deal does. And they don't like a $2.5 million midlevel exception and sign-and-trade options included in the last deal Stern put on the table.

Once a year, teams are allowed to sign a player to a contract equal to the average NBA salary, even if the team is over the salary cap already, or if the signing would put them over the cap. This is known as the mid-level exception.

It’s easy to point fingers at the players as they walked away from a deal that projected league-wide salaries averaging $7 million in year seven of the agreement.

But there’s this. When Larry Bird and Magic Johnson took the league to new heights three decades ago, the NBA was a 23-team league. The league and its owners got fat off new franchise fees in the subsequent years.

Now four of those seven teams are among the lowest six in team valuation. So now the league is awash in financially bad teams. It’s not entirely reasonable to expect the players to totally make up for those bad business decisions made by owners.

According to Stern’s own figures (the league lost $340 million in 2009-10), the savings from moving to a 50-50 split wouldn’t be enough to completely erase the financial losses for teams like the Pacers.

Depending on whose figures you believe, the Blue and Gold would still be anywhere from $10 million to $20 million in the red annually after the savings of a 50-50 split is realized.  

While lots of teams are losing money, eight NBA franchises last year made more than $20 million, according to Forbes magazine. The Chicago Bulls made $51.3 million and New York Knicks made $64 million. More revenue sharing is clearly a huge part of righting the NBA’s business model.

With this labor fight apparently headed to court, it’s difficult to say how and when it will be resolved. Court cases like this usually last months rather than weeks. Maybe that notion will be enough to scare the sides back to the bargaining table. Maybe not.

The more intriguing question may be what happens after the lockout ends. Specifically, will fans steer clear of NBA venues?

If the owners can translate the new deal to substantially lower ticket prices, I think most fans will find the wait worthwhile.

If the owners don’t follow that course, they’ll need much more help in marketing and public relations after the fight than they ever needed in legal aid during it.