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2011 NBA lockout can trace its roots back to 1983

lockout_opt_copyBY EVAN WEINER
NEWJERSEYNEWSROOM.COM

Dear National Basketball Association fans:

A couple of weeks ago LeBron James told you like it is in sports when he said,  “All the people that were rooting on me to fail, at the end of the day they have to wake up tomorrow and have the same life that they had before they woke up today. They have the same personal problems they had today. I'm going to continue to live the way I want to live and continue to do the things that I want to do with me and my family and be happy with that. So they can get a few days or a few months or whatever the case may be on being happy about not only myself, but the Miami Heat not accomplishing their goal. But they got to get back to the real world at some point.”

James apologized for his statement even though what he said was true. But his rant was just the prelude to the next moment of truth in the world of a sports fan, an NBA fan. The owners and players don’t care if you offer unconditional loyalty to a logo or, as Jerry Seinfeld aptly says, dirty laundry. The NBA – and all sports -- are big business and if the NBA owners have to lock out the players to get a better deal, so be it.

The NBA is in a lockout mode. There will be teeth gnashing about greedy owners and greedy players but one day fans will have to be broken from their unconditional love, the face painting of colors, the tattoo team logo proudly displayed on some part of the body, the shirts, hats and realize that sports is nothing more than a business.

NBA fans really have not lost anything yet. Sure the rookie leagues have been cancelled and free agency is being delayed but there are still more than three months to go before the product disappears from the shelf -- pre-season games.

There is a question about the finances of the NBA. Commissioner David Stern, the owners’ front man, wants hundreds of millions of dollars in worker givebacks so that the league can be financially viable. Twenty-eight years ago, Commissioner Larry O’Brien was looking for givebacks to make the then 23-team league financially viable.

These were desperate time for the league, so much so that the owners of Madison Square Garden, Gulf and Western, somehow convinced New York City Mayor Ed Koch that the Gulf and Western’s subsidiary -- Madison Square Garden and the two franchises, the NBA Knicks and the National Hockey League Rangers -- could not compete with San Diego, Indiana, Cleveland, Salt Lake City for basketball players and Winnipeg, Hartford, Quebec City, Edmonton, Calgary along with Denver for hockey players.

Without property tax relief, Gulf and Western would relocate the Knicks to Nassau County and the Rangers to the Meadowlands. Gulf and Western never did like Madison Square Garden all that much and within four years of the building’s reopening in 1972, the company was considering moving both teams to an arena that would be built in East Rutherford.

Gulf and Western got the property tax break that the Dolan family, the Garden’s current owners, presently enjoys.

Despite the fact that both Larry Bird in Boston and Magic Johnson in Los Angeles were winning titles and a strong presence in Philadelphia where the old ABA star Julius Erving had won a title, the NBA was at the crossroads in 1983.

A good many franchises were losing money, the Collective Bargaining Agreement was up and the 23 team NBA was thinking of cutting as many as seven teams with Cleveland, Denver, Indiana, Kansas City, San Diego and Utah losing an enormous amount of money. Some teams fell behind on their deferred payments, estimated to be between $80 million and $90 million, which nearly prompted a player’s strike in 1982. 

There were rumors that Denver and Utah were going to consolidate into one franchise and that other teams would move. Donald Sterling moved the San Diego Clippers to Los Angeles following the 1983-84 season without the NBA's permission. The Kansas City Kings, a franchise that tried to regionalize itself in the 1970s by splitting home games between Kansas City and Omaha after leaving Cincinnati in 1972, went west to Sacramento in 1984-85. Utah attempted to solve some of its financial problems by playing a number of home games in Las Vegas.

The players and owners met for nine months and completely rewrote the Collective Bargaining Agreement from its foundations. The league opened its books and let the players see what the profits and losses really were and a deal was brokered.

“I think it just had a number of important consequences,” said NBA Deputy Commissioner Russell Granik who was part of the NBA management and negotiating team in 1983. “One, by having rolling around in that stuff, for the first time, I think that process in the nine months or the year of negotiations, was that the players for the first time got complete financial information. Everybody knew everything.

“That really, I think, sort of created a feeling of we are in this together as a partnership that maybe hadn’t existed between the players and the league. I think that was a great boast. The other thing by having the salary cap and the revenue sharing system in place, we were able to go out and attract new ownership in places that up until then we were struggling.”

Two franchises that were struggling were the Cleveland Cavaliers and the Indiana Pacers. All together the league might have been left with just 16 teams without the new bargaining agreement.

“I believe Gordon and George Gund at the time would not have purchased the Cleveland Cavaliers shortly thereafter except we had this deal. At that point Indiana was really struggling. Shortly after that Herb and Mel Simon purchased the team in Indiana. Both are still in the league (in 2001) many years later. Two of the strongest ownership groups we had. I think there were others that followed thereafter that probably would not have happened if we hadn’t been able to say OK I think we got a system that’s going to make sense.

“At the time we were very serious and I think Larry (Fleischer) and the players, you know your first reaction is they are bluffing, but again having been in the process and learn all the numbers, we were seriously thinking of at least right away folding two or three times, buying them back or merging them or something. I don’t have any doubt but for that kind of deal that would have happened as well,” said Granik.

The 1983 Collective Bargaining Agreement that put a salary cap in place is considered to be the turning point in the league's history by the owners and by the players. The 23-team league survived and both sides formed a working alliance, which would allow the league to grow. It also helped that two entities were about ready to join the league, Michael Jordan and Nike. The salary cap was the brainchild of a new lawyer that came on the scene named Gary Bettman. Bettman would become one of the three key people that would run the NBA in the mid-1980s and beyond. David Stern would be the boss, Granik the No. 2 guy, followed by Bettman.

The Collective Bargaining was Commissioner Larry O’Brien’s last major work for the NBA.

O’Brien was in a sense a transitional commissioner. The NBA was a business under his predecessor Walter Kennedy, but under O’Brien it became a bigger business. O’Brien replaced Kennedy in 1975 and guided the NBA in the league’s “merger” with the ABA. O’Brien was the lead negotiator in two Collective Bargaining Agreements in 1976 and 1983. During O’Brien, gate receipts doubled and TV revenues increased by threefold. Still O’Brien was unable to financially stabilize the league and without the 1983 labor agreement, which established a partnership with the Players Association and its Executive Director Larry Fleischer, the NBA might have contracted franchises.

The 1983 agreement propelled the league into a better financial position.

Or did it? Kansas City ownership sold the franchise to a Sacramento group. Twenty-eight years later, Sacramento is in dire fiscal shape. Indiana remains a troubled franchise. The league over the years added teams; Charlotte was an initial success but eventually moved. Vancouver lasted just six years before the owner Michael Heisley uprooted the franchise and placed it in Memphis. A second Charlotte franchise has not been financially successful. The second New Orleans franchise is on the financial ropes.  Seattle no longer has a team.

Cost certainty is fleeting. The owners and players celebrated in 1983 a new deal. In retrospect, it didn’t work for everyone.

David Stern replaced O'Brien as commissioner on February 1, 1984. Stern was an attorney who had been the NBA's Executive Vice President. Stern would direct a tremendous expansion in the marketing of the NBA and develop a cohesive and profitable broadcasting strategy. He would move try to ensure the stability of NBA franchises by increasing licensing revenues, and developing corporate sponsorships.

In the buildup to the potential NBA lockout of 1998, NBC and TNT guaranteed owners that they would pay out $465 million dollars for broadcast rights whether the league played a game or not. The NBA had been very good to NBC and TNT in 1997-98 as they shared $400 million in profits from TV. Those two items did not go unnoticed by the National Basketball Players Association.

The players promised that it would boycott interviews with NBC and TNT personnel because the association’s leadership felt the networks were bankrolling the lockout and provided a guarantee of money against losses if no basketball was being played. Phoenix Suns CEO Jerry Colangelo disputed that saying television had no influence on the lockout and that owners were merely seeking a better collective bargaining agreement.

Each owner would get more than $15 million from the NBC and TNT and more from local cable contracts. Cable consumers would help pay for the lockout unknowingly. Cable consumers did not receive any rebates from games missed because of work stoppages in Major League Baseball in 1994 and 1995 and in the National Hockey League in 1994-95.

On March 23, 1998 NBA owners voted to reopen the talks because the players’ share of the revenues exceeded 57 percent. The league shut down operations on July 1, 1998 and both sides dug in. The owners had a nest egg and could afford to wait until the players caved. The television unit of General Electric, the National Broadcasting Company and Ted Turner’s Turner Sports agreed to pay the owners a rights fee even though there was a possibility that games would be cancelled. If the games were cancelled, NBC would get money back either in a form or a rebate of a reduced rights fee schedule in the final three years of the TV agreement while Turner would have the contract extended by a year.

A few players boycotted NBC TV interviews whether they were on a national or a local affiliate level but TV interviews with NBC or CNN (TNT’s sister network) were of little concern.

The players sat for 202 days. In the end, the owners kept the salary cap, keep the draft and got a ceiling on top salaries at $14 million and a limit on how many years a team could pay a player at the $14 million level at seven. There was always a rookie minimum salary and stiffer drug testing policies. The middle class NBA player got more money; the stars were capped. David Stern had turned the middle class player against the stars in the fight and won the battle and the war.

The NBA got cost certainty in 1999 but not everyone made out. Charlotte and Vancouver quickly became former NBA cities. In 2005, the NBA and the players cut yet another cost certainty deal. Seattle didn’t make it and Sacramento ownership seriously considered moving to Anaheim this past spring.

The business of the NBA will go on despite a lockout. Anaheim will continue to push to get the Maloof brothers’ Sacramento Kings. Louisville may want in once the dust settles. San Jose and Newark will be buyers as well. Meanwhile the fans take another one on the chin. But they will be back … well some of them in the arena if they can afford the price of the tickets. If not, the corporate crowd will go to a game and treat it as an event and the real fans can stay home and watch it on TV.

LeBron told it like it is and he was vilified for that. David Stern, Players Executive Director Billy Hunter and others won’t be as blunt. The NBA is a business and the two sides will eventually settle this dispute without any worry about the fans.

Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition" is available at bickley.com, Barnes and Noble or amazonkindle.

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Comments (1)
1 Saturday, 02 July 2011 16:16
Ruth Grunberg
Cable subscribers need to unite. Call our own Attorney Generals to demand rebates if games are missed or file class action lawsuits. The forced payments to NBA is forcing me, as cable subscriber, to cross a virtual picket line that I would never cross in the real world.

This may be illegal under NLRB rules. Evan, please write a story on this aspect of the issue.

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