Do the Players — and Cities — Really Need the NBA Owners?

The following originally appeared at The Huffington Post.  The idea of a players league has been discussed at the Wages of Wins network recently. This post – which introduces the Basketball Players Association League (or BPAL – credit Devin Dignam for the name) – offers some details on why this league is necessary and how it might work.

The 30 owners of the National Basketball Association have told the players to take a substantial pay cut. And if the players don’t agree, these players are not going to be playing in the NBA for a long time. Which means fans of the NBA are not going to see basketball played at the highest level for a long time.

Such extortion is not uncommon for NBA owners. Just ask the people of Sacramento. Earlier in the year it looked like the Kings were on their way to Anaheim. This move was motivated by the apparent unwillingness of the people of Sacramento to build a new arena for the Kings. When Kevin Johnson — former NBA player and current mayor of Sacramento — indicated he would find a way to publicly finance the Kings’ place of business, the owners of the Kings indicated they would postpone the move to Anaheim.

Unfortunately for cities that host an NBA team, this behavior is often the norm. Robert Baade and Victor Matheson have noted that since 2000, eight NBA teams have begun playing in new (or renovated) stadiums. As the following table indicates, the cost of these stadiums has exceeded $2 billion. Of this cost, $1.75 billion – or 84.1 percent — came from public funds.

 

 

 

 

 

 

Such public investment in private companies is hardly common in capitalism. Capitalism normally functions as follows:

  • Owners provide capital (i.e. buildings, machinery, etc…).
  • Workers provide labor.
  • Capital and labor are combined to produce output. The revenue generated by this output is used to compensate owners for their contribution of capital and workers for their labor.

In North American sports, though, taxpayer funds are often providing a significant portion of the capital. But the returns to capital are given to the 30 men who own the NBA teams (again, who often are not providing a significant portion of the capital). And now, these 30 owners want to reduce the returns to labor.

In response, players like Deron Williams have indicated that they plan on taking their talents to Europe. There is another simple solution, though, that would actually allow people of North America to continue watching professional basketball at its highest level.

Once again, two groups are being extorted by the 30 NBA owners: cities and players. A simple solution is for these two groups to come together and form a new basketball league, which I am gong to refer to as the Basketball Players Association League (or BPAL). In the BPAL, the cities would act as owners. Already — as noted — the cities are providing much of the capital. In the BPAL that practice would continue. But instead of just giving the capital to the 30 men who happen to own the teams, the cities would keep the capital and earn the economic returns this capital generates. Meanwhile, the players would continue to provide the labor (and earn the returns generated by their labor).

If we look at population data from the Census Bureau, we already see a number of cities that could host a professional basketball team. For example, Salt Lake City — with a metropolitan population of 1.1 million — currently hosts the Jazz. The following metropolitan areas are a) at least as large as Salt Lake City, b) do not have an NBA team, and c) have hosted a team in professional baseball, professional football, and/or professional hockey: Seattle (3.4 million people), San Diego (3.1 million), St. Louis (2.8 million), Tampa Bay (2.7 million), Baltimore (2.7 million), Pittsburgh (2.4 million), Cincinnati (2.2 million), Kansas City (2.1 million), San Jose (1.8 million), Columbus (1.8 million), Nashville (1.6 million), Jacksonville (1.3 million), and Buffalo (1.1 million). In addition, Canadian cities like Montreal (3.6 million), Vancouver (2.1 million), and Calgary (1.1 million) could also be asked to join. And this list leaves out such places as Las Vegas or even Mexico City.

Of course, these are just the 18 places that don’t have a current NBA team. Once this league is established, one suspects many current NBA cities might decide to end their often one-sided relationship with the NBA.

In sum, there are many places the BPAL could operate. But would this new league be profitable? The NBA currently claims that owning a basketball team is bad business. Although such claims are widely reported in the media, examinations from Arturo Galletti (of the Wages of Wins Journal — see Here and Here) and Nate Silver (of the New York Times) casts serious doubt on the NBA’s claims. Furthermore, Joe Lacob — the newest owner of the Golden State Warriors — had this to say about the ability to make money on an NBA franchise:

This is an incredible business opportunity. Turning this into a winner No. 1 and running this business better in certain ways… Look, sports franchises appreciate 10% a year on average over three decades, the last three decades. There’s no reason to think this won’t appreciate in value. So that is the least of my worries. We will make money on this team in appreciation of value.

In reading this quote, remember Lacob is talking about the Warriors, a team that has missed the playoffs in 16 of the last 17 seasons (in a league where over half the teams get in every year). Given Lacob’s quote — and the analysis of Galletti and Silver — one suspects that the NBA is simply crying poverty in an effort to extract more money from their players.

With the BPAL, though, this behavior can end. The cities and players can come together and form a partnership that ends the practice of 30 men simultaneously extracting money from both workers and taxpayers. And fans can once again go back to watching athletes playing basketball (as opposed to watching basketball players in suits).

Let me close by noting that if the players get serious about this new league, this current lockout will end very quickly. The NBA owners appear to think that players are going to be forced give in. After all, there is only one NBA. But the scarce resource in this conflict is not the 30 owners. It really is the players.

Lacob reportedly paid $450 million for the Warriors. That franchise price only makes sense if LeBron James, Dwight Howard, Kobe Bryant, etc… come play his Warriors. If these players are all in a new league, Lacob will stand to lose much of his investment in the Warriors. And the same story will be repeated for the other 29 owners. Faced with potential loss of the one thing fans are willing to pay to see (i.e. elite basketball talent), one suspects the stand the owners are currently taking will crumble.

And when that happens… well, I still think the players and cities should form their own league. Either way, though, fans will once again get to see basketball played at the highest level in the world.

- DJ

P.S. Should the picture appear at the beginning or the end of the post? Or should we drop it?  Not sure what works but there has been some confusion about who is writing the posts in this forum.  Maybe if we all added pictures to our posts, that confusion would be reduced.

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