Basketball Lockout The basketball lockout of 2011 The lockout resulted in the cancellation of 16 out of 82 regular-season games; the players came out of the negotiations with the percent share of their revenue substantially reduced, but they avoided a hard salary cap Paul D. Staudohar abor–management relations did not or so. Also, unlike most other businesses, play a dominant role in professional sports do not face outside competition, be- sports until the early 1970s. Grow- cause various leagues have granted owners a Ling fan interest in the games, heightened monopoly to present their teams’ games in by network television, transformed leagues the geographic areas in which those teams and teams into valuable business enterprises. are located. This monopoly power could be Players’ unions, previously weak and inef- altered by the formation of a new league fectual, emerged under new leadership to with competing teams in major league cit- seek a greater share of the expanding wealth ies, as has occasionally happened over the through collective bargaining. Ever since, years, but not recently. labor–management relations in sports have In recent years, lengthy lockouts have be- been characterized by conflict over money come commonplace in professional sports. and power. The most dramatic was the National Hock- The bargaining model in professional team ey League (NHL) lockout in 2004–2005, re- sports has many commonalities with other sulting in the cancellation of an entire sea- American industries. A key difference is that son.1 In 2011, the National Football League individual players’ salaries are determined in (NFL) sustained a 136-day lockout but no negotiations between the player—usually loss of games.2 This article concerns the Na- represented by an agent—and his team. Col- tional Basketball Association (NBA), which lective bargaining between the league and shut its doors on July 1, 2011, for a 149-day the union affects the individual negotiations, lockout that reduced the regular season from because it involves issues such as free agency, 82 to 66 games. team salary caps, and pensions, which to- Why are these lockouts occurring? When gether play a role in determining the overall players’ unions and leagues negotiate collec- share of league revenues that players receive. tive bargaining agreements, large amounts Noncompensation issues, such as drug test- of money are at stake. A limited number of ing, disciplinary action for off-field behavior, owners and players are contesting the dis- and the length of the season, are also deter- tribution of a few billion dollars in annual mined collectively. revenue. In the NBA, some of the owners are Paul D. Staudohar is professor emeritus of Another difference is that collective bar- billionaires and the average player salary of business administration gaining outside of professional sports typi- about $5.8 million a year is the highest in at California State cally has been less adversarial, in part be- sports (or any occupation, for that matter).3 University, East Bay, California, and a cause of the declining influence of organized Each side strives to maximize its power member of the National labor in the workforce over the last 40 years at the bargaining table, and work stoppages Academy of Arbitrators. 28 Monthly Labor Review • December 2012 are one way to maximize power. Strikes are the weapon exemption” applied, meaning that the league had legal of choice for sports unions, while owners use lockouts. If immunity from antitrust law so long as the parties had a there is to be a strike, it usually occurs late in the season, collective bargaining relationship. when players have received most of their pay and when At this juncture, dissident players were persuaded by owners are vulnerable to the loss of bounteous postseason their agents to have the union decertified, a move that television revenues. A players’ strike in major league base- would allow an antitrust suit to be brought against the ball in 1994–1995 resulted in cancellation of the playoffs league. A petition for decertification was filed with the and World Series. National Labor Relations Board, and an election was If little progress is being made in negotiations, owners scheduled. Meanwhile, the league declared a lockout on may take the preemptive step of a lockout before the sea- June 30, 1995, and proceeded to restructure some of its son begins and before players have collected paychecks. objectionable contractual proposals in the players’ favor. A lockout can motivate the players to make concessions These tactics proved successful, and the 1995–1996 season and often leads to a better deal for the owners. According began on time. to one study, lockouts and strikes in sports are happening Despite strike threats by the NBPA and brief lockouts with increasing frequency because they have no perma- in 1995 and 1996, there were no lengthy work stoppages nent impact upon attendance, which typically rebounds in basketball until 1998, a remarkable achievement given the year following the work stoppage.4 the frequent shutdowns in baseball, football, and hockey. By this time, the owners were represented by Commis- Background sioner (since 1983) David Stern and the players by Billy Hunter, a former U.S. attorney. The owners decided to re- The National Basketball Players Association NBPA( ) was open the 1995 collective bargaining agreement, because, formed in 1954 by Bob Cousy, a star player for the Boston by the 1997–1998 season, players were receiving about 57 Celtics.5 Following recognition by the owners in 1957, the percent of league revenue and the league claimed that half NBPA languished from lack of both interest and organiza- of its teams were losing money.6 tion. In 1962, however, the union hired Larry Fleisher as A major issue in the 1998 negotiations was that the league general counsel. Confronting owners in an adversarial re- wanted to have a hard salary cap while the union wanted lationship, Fleisher negotiated the first collective bargain- to maintain the status quo. The settlement reached in 1999, ing agreement in all of professional sports in 1967. following a 202-day lockout that canceled about half the TheNBA was the first professional sports league to nego- season, maintained the soft salary cap. However, the own- tiate a salary cap, beginning with the 1984–1985 season. ers won a cap on individual player salaries and a limit of A limit was placed on team payrolls, with the idea that 12 percent on maximum annual raises for Larry Bird–type richer teams in large markets would be less able to en- free agents who re-sign with their old team and 10 percent tice free-agent players from small-market teams by paying for players who sign with other teams. This arrangement hefty salaries. However, the salary cap was soft because was meant to encourage free agents to remain with their there were numerous ways to circumvent it, such as al- clubs rather than signing with another team. Players were lowing a team to sign its own free-agent player without guaranteed 55 percent of league revenue in years 4 through his salary counting against the cap. This loophole became 6 of the agreement and 57 percent in year 7. known as the Larry Bird rule, named for the Celtic player A replacement agreement was reached in 2005 with- who took advantage of the exception. out a work stoppage. Relatively few changes were made Following negotiation of the 1988 agreement, Fleisher to the previous contract regarding free agency rules and retired. He was succeeded by Charles Grantham, who the salary cap, which continued to rise in accordance with wanted to eliminate the salary cap, the college draft, and league income. The new agreement barred U.S. players the right of first refusal—a right that allows a team to from joining the NBA until a year after their high school match a salary offered its free agent by another club—in class graduated. The agreement also raised the minimum 1994 negotiations. Grantham was unable to reach agree- age from 18 to 19.7 ment with the league, and the 1994–1995 season was played without a replacement contract. TheNBPA filed an Causes and issues antitrust suit seeking the elimination of labor market re- strictions, but a U.S. district court ruled against the play- In January 2010, the league made its proposals for a new ers. The court determined that the “nonstatutory labor collective bargaining agreement. Among these were a Monthly Labor Review • December 2012 29 Basketball Lockout 38-percent reduction (estimated at between $750 million the players’ share of BRI from 57 percent to 54.3 percent.11 and $800 million) in player pay, a rollback of existing sala- However, given the owners’ insistence on a 50–50 split of ries, a hard salary cap, and shorter contracts.8 The union revenue, there was still a sizable gap between the money wanted none of it. proposals, and the players were adamantly opposed to a Despite taking in $4 billion in annual revenue, the league hard salary cap. With the collective bargaining agreement claimed that 22 of its 30 teams were losing money and that due to expire on July 1, there was scant hope of reaching overall losses in the 2010–2011 season were about $370 agreement before then. million.9 These figures made cutting the players’ share of The owners’ subsequent lockout on July 1 caused the po- revenue a top priority. (NFL owners similarly sought to cut sitions of the parties to harden, and no negotiations were the players’ share of revenue in their 2011 negotiations, scheduled for a month. When talks resumed in August, even though none of the league’s teams were losing money.) no discernible progress was made during the next several A focal point of the NBA negotiations was how to divide weeks, and it began to look like training camps would not basketball-related income (BRI), which includes most of open on time and that the start of the regular season was in the revenue received by NBA teams, from sources such jeopardy.