NBA Lockout Won't End Well Unless it Ends Quickly


While millionaires and billionaires negotiate how to split up billions, the “common” folks are out of work.

Sounds like what is happening on Wall Street? More like the NBA.

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What’s at stake to the NBA and its players association is how to split up $4 billion. Both sides want 53% of revenue. There was an agreement on a 50/50 split and an exasperated David Stern, NBA commissioner, announced that the players had changed their mind.

The owners lost $350 million two seasons ago and $300 million last year. Every percentage of revenue is worth around $40 million, so if all things are equal ,the owners would need nine percentage points more for the future contract to break even.

There are many more details to be ironed out related to a hard salary cap and a punitive tax for exceeding that cap, but the main difference is the splitting of revenue.

The real problem is public perception. The theory is that fans will always come back. But will they? Baseball was lucky; they had the “steroid” era and the great homerun race of Sammy Sosa and Mark McGuire to bring fans back to the ball park. However, they’ve lost their grip as America’s past-time to football.

There’s no guarantee that the NBA will be so lucky. Players have even mentioned that they will start their own league, an idea that sounds great in the press and locker room but would never work.

What happens to all the parking attendants, sports bars near arenas, and food vendors that service the teams? They don’t have millions or billions to fall back on. Does “Occupy Wall Street” know about this?

I don’t think this ends well, unless it ends quickly.

You can see the fallout already in the stock price of Madison Square Garden.

Sports has changed. No longer is a player judged on wins and losses, nor even how many fans he/she puts into the seats every night. Now players are also judged on how players affect network ratings and the profitability of arenas overall not just on game day.

Madison Square Garden who owns the New York Knicks and the MSG Network, stands to lose an estimated $70 million if the season is cancelled. MSG’s stock down from a high of just over $30 for the year and has lost around $500 million in market cap from that high.

Arenas and sports networks all over the country that lose their flagship show, the NBA, will see that equity value erode for them as well.

I feel for David Stern. Mr. Stern has owners on one side that have lost over $300 million each of the last two seasons and on the other side players who think they have already given too much.

If this work stoppage continues, the owners will actually lose less money than they would if they played under the old contract. The players will lose a couple of billion in salary that they could never get anywhere else. The worst part is the ancillary jobs at the arenas and sports networks for folks who have no choice in the matter.

With college football and the NFL in full swing, the real question is if the NBA doesn’t play, will anyone care who is right or wrong? And will anyone even care enough to ask the question?

What do you think?

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