NBA players can slam dunk, but what about free throws? Looks like they missed in the lock-out talks.

Last week, team owners in the NBA failed to strike a deal with NBA players. Consequently, the commissioner, David Stern, was compelled to cancel another 102 games in the regular basketball season, delaying any start to official play and—here’s the important part—precluding the players from earning a portion of their respective salaries for the up-coming NBA season of games, if there are to be any games at all. 

52-48 is a doubtful play, but 50-50 is sure to score. 

What occurred was this:  the players refused to accept a 50-50 revenue sharing arrangement offered by the owners, opting instead to continue their lock-out for a demand of a slightly more favorable 52-48 split, players versus owners.  The background to the decision was that owners claimed that some franchises were losing money for paying too much to players in salaries, so the owners collectively ended up deciding on a pre-condition limit of players’ take, holding the line at a 50-50 revenue split.  The players, on the other hand, decided to hold out for the moment for nothing less than a 52-48 revenue sharing plan instead. 

The players didn’t play smart.

Simply put, the players’s decision to hold out for more money looks at this point like a decision to settle for less money.  Let me explain:  Before the lockout, the average NBA player salary was about $5,000,000 a year, or about $61,000 per game.  Under the rejected owners’ offer, that means that to keep the same income level, a player would be compensated exactly $5,000,000 on every $10,000,000 in game revenue.  However, the players said that that was insufficient and that, instead, they would demand an additional $200,000 which would only come from only a 52% take. 

When the 50-50 offer was rejected by the players, the Commissioner had no choice but to cancel another 102 games [on top of the 100 games already eliminated earlier], further limiting the length of the NBA basketball season and, more importantly, limiting the ability to the players to generate income from any money sharing arrangement. 

The math is not complicated.

It is difficult to understand why player agents couldn’t see—or, if they understood, why they couldn’t convince the players—that an additional cancellation by the Commissioner of 102 games would lead players to literally lose the opportunity to make a serious amount of money, far more than they were asking for—in truth, hoping for, really. 

Look at it this way:  shortening the NBA season by another 102 games represents the loss of about 7 games for each player or, in economic terms, the ability of each player to make either $427,000 at the 50-50 rate, or $443,800 at the 52-48 rate.  But wait, even if the owners eventually were to concede—which is not really very likely—and give into the split that the players are presently demanding, the amount of money the players are fore-going by being disagreeable [remember that’s somewhere between $427K and $443K] in a 102 game shortened season is far more than the $200,000 they said they were really angling for in the first place! 

It simply doesn’t make any economic sense.

Obviously, the players didn’t work out the math, but that’s not really their forte or their “job”—that’s why they employ agents, to show them the prudent course of action and to maximize their income.  If the agent’s figured it out, then they didn’t get the lesson effectively translated to the players who actually were calling the shots on the other side of the negotiation table. 

Depending who you ask, employee unions serve any number of purposes.  For management, unions really represent a simpler, albeit more primitive, form of managing—I think of it as management's lazy-way to operate.  On the other hand, unions frequently offer workers the psychological sense of collective strength and empowerment, if in no other way than to offer them to have a “say” at the “table.” 

There's no slam dunk to be made to win the game.

But that sense of power doesn’t automatically translate into dollars and cents.  Again and again I read reports of strikes and stand-offs [of all kinds of labor disputes] where workers adamantly insist on not being back on the job so they can press for slighly more gains at the negotiation table–which, ironically, given the time away from work that those demands cost labor, almost never gets them more money in the end; instead it results in less than otherwise would be theirs, save for their stubbornness.

And that was exactly what happened last week with the basketball players who thought they were powerful negotiators, like they mostly are as basketball players.  However, in truth, they really were neither very shrewd nor skilled in bargaining at all.  Instead, they made precisely the wrong decision when they didn't have to!  Think of it as a missed free-throw that counted for a lot.  
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