NBA owners won a hard cap. They will not stop clawing for more

The richest people on Earth aren't often satisfied with their winnings. The next fight could be to shift the 50-50 revenue split with players to be more skewed, or to establish more creative accounting to shrink the pie.

Good morning. My Mediterranean polity would simply leave the horse on the beach. It's pretty there, and it's oh-so-heavy. Anyway, it's Free Newsletter Wednesday. Let's basketball.

This summer has made clear that NBA owners won a decades-long battle to essentially install a hard salary cap on the league. We have no idea what happened at the NBA players' union in 2023 that allowed Adam Silver and his team to push this through with no evident fight, but it's done. The new leader of the union is rattling swords about softening the apron system. At no point during my lifetime has the NBA players' union won a battle with the league. They have simply at times lost less badly. The apron system instituted in 2023 isn't the biggest loss, but it currently appears to be the most mystifying. Prior generations of players went to the barricades, or at least suited up for a long stay in the trenches, for lesser pitches from the league. This time, the union caved before anyone else even realized there was an argument.

The biggest loss for the union in the modern NBA in my book is still the huge revenue split alteration that came out of the brutal 2011 lockout. To that point, players were guaranteed 57% of all basketball-related income the league and its teams earned. After several months of near-constant negotiation, plenty of dust-ups involving the National Labor Relations Board, focused media coverage, somewhat entertaining barnstorming basketball games around the country, less-than-credible threats for the players to start up their own league and a more credible threat to cancel the whole season, the NBA got the union to agree to a 50% revenue split. (It's actually a range of 49% to 51% based on revenue growth. It's easier to call it 50%.)

At the time, the deal cost players a collective $300 million or so per season. Thanks to the streaming era making live sports one of the most lucrative media properties available, that owners' victory in 2011 was worth about $817 million this past season, or $27 million per team owner. That's money that now goes into the teams' coffers, whether to boost profit or cover other expenses. It's money in the bank.

The apron system doesn't quite have that raw impact on the bottom line. It levels the playing field between the teams that spend like crazy to field contenders and those unwilling to lose money on an NBA franchise in the near term to satisfy their fans. The NBA as an institution loves it because of its purported competitive balance benefits as it forces teams to spread talent more evenly among themselves. This is the element that has drawn praise and ire from fans, depending largely (but not entirely) on whether the teams those fans root for have seen their players get aproned out or aproned in. Team owners love it because it chills the payroll arms race. Even the richest owners who prior to 2023 spent well above the salary cap can now point to legitimate reasons to avoid doing so given the roster rigidity and draft penalties in place for those team who dare repeatedly abuse the relative softness of the salary cap.

That is a key note here: while it's helpful to call this a hard cap in shorthand and to get the point across, the salary cap is still incredibly porous and thus soft. There's just a hydraulic press scheduled to smash the hell out of teams that are too high over the cap for too long. Team can slither their way to very high payroll, but the risk of being liquidized is significant.

David Kelly, the union's new leader and someone "from the inside" as a former executive with the Warriors, says he wants to soften the apron system. That's the right attitude even if it seems incredibly unlikely the players will be able to claw back anything based on, oh, 50 years of sports labor history. The bigger question to me is what the owners will have in their sights in the next round of negotiations.

This is where we go back to 2011 again. The biggest target on the union is that revenue split, and as individual salaries continue to reach unfathomable heights and society edges toward post-capitalism, players are going to find it harder to garner sympathy from fans. Media has gotten so much better about framing labor issues and fans are largely skeptical of the owners across all sports leagues. That hasn't really mattered, though: the owners keep winning. They care less about what people think of them – Tom Dundon is more a distilled version of a modern NBA owner than an aberration – and their individual upside is great enough to go to the barricades. Players rely on their salaries and have far more varied situations than the 30 team owners. Solidarity is a lot harder among a population of people, some of which make $500,000 and some of which make $70 million. The 30 team owners are all billionaires or thereabouts. And the Trump era has shown a remarkable level of class solidarity among billionaires and would-be billionaires.

So why wouldn't the owners push Adam Silver to try to change the revenue split from essentially 50-50 to 45-55 in favor of the league? Or even 40-60? You'd still get high-end NBA players making north of $50 million per year, and so it'd be hard for writers like me to express much pity. It turns into a philosophical debate about who creates value and who carries risk. I would argue, and will argue, that the players clearly create the value and that there is no risk to owners given the long history of increased team valuations. But the owners have never caved because their arguments suck and can be refuted. The players have lost battles where they were right. Repeatedly.

The other way owners could strip more money and power from players is by redefining what goes into basketball-related income. This is probably a constant battle the union is fighting – if I ran the union, my first act would be to hire a team of forensic accountants and pull every audit lever in the collective bargaining agreement to find where teams and the league are hiding revenue, because you know they are hiding revenue – but owners could keep a lot more money if they just exclude more revenue sources from the pie in the first place. Here's the deal: if a $10 million revenue stream is in basketball-related income, it gets split 50-50 with players, meaning owners get $5 million of it. If owners negotiate a 40-60 split, owners would get $6 million of it. If they can exclude that revenue stream from basketball-related income entirely, owners get all $10 million. It is the the single most lucrative thing owners can do, and it's archaic not to draw out widely comprehensible backlash.

The same applies on the expense side: owners could make the argument that the high and rising costs to, say, produce a streaming local broadcast of a game given the collapse of the regional sports networks is integral to growing the league's audience, and so expenses related to broadcast game production should be deducted from basketball-related income. Proceeds for local streaming or broadcasts would be net, not gross. This is an abominable argument, and would push the NBA closer to Hollywood accounting, where accountants are paid to show that highly profitable enterprises actually lose money in the quest to screw labor, but it's one the owners will quite possibly try to produce.

This is all to say that the players' union has lost a huge battle in recent years, but that there's no reason to expect that the owners will appreciate their victory and stop pushing. Kelly and the union are surely prepared to push back on the subjects they've already conceded. They need to be ready for the next strident ask the owners make. This is just how this goes.

Good Morning It's Basketball will return on Thursday. Be excellent to each other.