The Bargaining Table of Professional Sports
Bargaining is once again at the forefront of sports. Earlier in 2020 it was basketball, then baseball, then football, and now it’s basketball again. The NBA and the NBPA are currently negotiating over a curtailed offseason that would lead to games starting December 22nd.
As detailed on a recent Spotrac podcast, the players stand to potentially forgo hundreds of millions of dollars should the season begin in 2021. That’s the tradeoff for a longer offseason, which would really just be a normal length offseason. The major factor in this case is revenue from televised games during the holiday season.
There’s also another financial detail that was just finalized last night, and once again it relates to escrow. Months ago I wrote about the issue NFL teams face with regard to guaranteed money and escrow. This escrow provision seemingly has led to a rise in “guarantee mechanisms” like in the case of Patrick Mahomes’ contract.
Returning to basketball, escrow comes into play for different reasons. In the NBA, the true salary cap isn’t set until the end of the season when all the basketball related income is tallied up. Since the players’ share of money is based on this BRI, there has to be room to settle the difference in projections versus actual outcomes at the end of the season.
As a result, players typically have 10% of their salary held in escrow until there is reconciliation at the end of the season. If you’re a team executive you know that getting back money already paid out is nearly impossible. Just look at the battle between New England and Antonio Brown. Basketball owners had wanted to raise the escrow level to 18%, if not higher. Instead, both parties agreed on a different method.
According to the new CBA adjustments, “in the event player compensation were to exceed the players’ designated share in any season, necessary salary reductions beyond the standard 10 percent escrow would be spread across that season and potentially the following two seasons, subject to a maximum salary reduction in any season of 20 percent.”
There is a difference between cash spending and cap spending for sports teams. The salary reduction related to cash spending. This same agreement also stipulates a cap floor for this season and a raise between 3 and 10 percent for each remaining season under the CBA. My initial interpretation of the escrow clause is that players can have their cash reduced by up to 20 percent each of the next two seasons without any alteration to the cap.
The players are facing multiple obstacles during these negotiations. One of the biggest hurdles they have to overcome with every negotiation is the size disparity of the two parties. The NFL has it even tougher, there are thousands of players with their own interests. Across all sports, the amount of owners is paltry when compared to players.
When you have a great many people on one side of the bargaining table and a select few on the other, the interests of the few are helped. This plays out in sports, lobbying, bailouts, taxation, and many other areas of life. There is negotiating power to be had when you have a concentrated group. Even with this obstacle, though, things could be worse. You could be excluded from the table entirely. There is no better example than NFL rookies and the rookie wage scale.
Another concept for the players to keep in mind is their BATNA (best alternative to negotiated agreement). NBA players do not have a ton of leverage in this scenario, and they quickly agreed to a tentative start date of December 22nd. To me, that signals they don’t want to lose out on potential revenue, so there may be some wiggle room with unresolved financial clauses.
Something I’m interested in and have to look into is the newest WNBA collective bargaining agreement. In their case, players had resorted to playing overseas as well as in the WNBA. The newest CBA supposedly reduced the incentive to play overseas for WNBA players. In this case, they had a clear alternative.