parts of this article have been posted inside other threads but thought I would post the whole thing here as it is an interesting read and I always enjoy his style and outside the box thinking
When the Writers Guild of America went on strike in 2007, something fascinating happened: The networks, production companies and movie studios slowly realized their infrastructure made no real sense. They had been handing out too many developmental deals, green-lighting too many pilots and overpaying for too many movies for far too long. It was a broken model. Only when that massive overhead was removed for a few months and Hollywood didn't collapse did everyone realize, "Wait a second, were we doing this the right way?"
The answer, clearly, was no. The old way was like watching two people battle over entrée choices for dinner, then playing it safe by ordering everything on the menu. When the strike ended right as the economy was turning, new Hollywood tightened its belt, stopped overdeveloping and aimed for a higher batting average. Frugality and caution now carry the day. Sure, A-listers earn as much money as they always did, and expensive movies and television shows cost as much as they always did. But that's where it ends. Creative people in Los Angeles now talk longingly of "the old days," back when you could waltz into someone's office, pitch a half-baked idea and walk out with a check. No longer.
In the NBA, the owners are headed for a similar, "Wait a second, were we doing this the right away?" realization, if it hasn't happened already. The current system doesn't fly. The salary cap and luxury threshold ebb and flow with yearly revenue -- so if revenue drops, teams have less to spend -- only there's no ebb and flow with the salaries. When the revenue dips like it did these past two seasons, the owners are screwed.
They arrived at this specific point after salaries ballooned over the past 15 years -- not for superstars, but for complementary players who don't sell tickets, can't carry a franchise, and, in a worst-case scenario, operate as a sunk cost. These players get overpaid for one reason: Most teams throw money around like drunken sailors at a strip joint. When David Stern says, "We're losing $400 million this season," he really means, "We stupidly kept overpaying guys who weren't worth it, and then the economy turned, and now we're screwed."
This isn't about improving the revenue split between players and owners. It's about Andre Iguodala, Emeka Okafor, Elton Brand, Andrei Kirilenko, Tyson Chandler, Larry Hughes, Michael Redd, Corey Maggette and Luol Deng making eight figures a year but being unable to sell tickets, create local buzz or lead a team to anything better than 35 wins.
It's about Jermaine O'Neal making more money this season than Kevin Durant, Russell Westbrook, James Harden, Serge Ibaka, Eric Maynor, Thabo Sefolosha and Jeff Green combined.
It's about Rasheed Wallace -- a guy who quit on his team last season, then showed up for this one with 34Cs and love handles -- roping the Celtics into a $20 million, three-year deal that will cost Boston twice that money in luxury tax penalties.
A sign of the times: Tracy McGrady and his $22.4 million salary rotted away in Houston.
It's about Tracy McGrady making $22.4 million, being unhappy coming off the bench, then convincing his team to let him disappear until it traded him.
It's about Gilbert Arenas hogging one-third of Washington's salary cap next season even though he brought guns into the Wizards locker room and had to plead no contest to a felony.
It's about Joe Dumars dumping Chauncey Billups and Arron Afflalo (combined cost: $13.2 million this season) so he could give Rip Hamilton, Charlie Villanueva and Ben Gordon $143 million combined.
It's about Jamaal Tinsley getting paid $10.6 million this season and the next by Indiana not to play there.
It's about Brian Cardinal, Darko Milicic, Bobby Simmons, Eddy Curry, Kenny Thomas, T.J. Ford, Mark Blount, Etan Thomas, Andres Nocioni, Tony Battie, Adam Morrison, Marcus Banks, Marko Jaric, Matt Carroll, Jerome James, Mike James, Jason Kapono, DeSagana Diop and Dan Gadzuric making more than $120 million combined this season to dole out high-fives.
And the owners are blaming the players? Really? Just in the past three years, we've seen general managers Sam Presti (Zombie Sonics), Daryl Morey (Rockets) and John Hammond (Bucks) build competitive teams by prudently watching their cap, searching for bargains, building around young talent and picks, and/or carving out enough cap space to take advantage of desperate suitors who will pay with draft picks or young players just to dump an unsavory contract. There's a method to their madness. They are the minority, not the majority. Most of their competitors sabotaged themselves and inadvertently reduced the value of franchises as a whole.
For instance, when I was in Dallas for All-Star Weekend, I asked an extremely wealthy person the following question: "Why haven't you bought an NBA team yet?"
His answer: "Because they're still overvalued. Anyone who buys in right now is doing it for ego only. That's why the league grabbed the Russian's [Mikhail Prokhorov's] money [for the New Jersey Nets] so quickly. He has a big ego and deep pockets, and he didn't know any better. He just wanted in. The pool of American buyers who fit that mold has dwindled. Look at [Oracle CEO] Larry Ellison. Five years ago, he would have jumped on the Warriors like Cuban jumped on the Mavericks. Now he's being much more cautious. He doesn't think they're worth more than $325 [million] and they aren't. Not with the current revenue system, not without a new arena, and not with a lockout coming. It's a dumb investment."
This is how the NBA's situation differs from Hollywood three years ago. Hollywood stumbled by accident into the realization that things were broken. But the NBA already knows. The league wants a system more beneficial to owners that features a hard salary cap, no long-term deals (only three or four years guaranteed at most) and no luxury tax. The players will dig their feet in and fight. We will have a lockout or a strike. It will last for months. And months. And months. Start preparing yourself mentally now. It's going to happen.
And really, I would be fine with this. I would.
Just one problem ...
Let's say the owners get their way and the new system is better than the old one. Great. Awesome. Answer these questions for me:
1. Why should I care?
2. Why should you care?
3. Why should either of us care that owners might not lose as much money in 2013 as they did in 2010?
Does it mean ticket prices will drop? I doubt it.
Does it mean franchises with older arenas aren't in danger of having their team hijacked like the Sonics were stolen from Seattle? I doubt it.
Does it mean failing teams won't continue to tank down the stretch for lottery picks, or dump some of their best players to contenders for 40 cents on the dollar to save a few bucks? I doubt it.
So I ask you again ... why should we care?
For instance, let's say you root for the Wizards like my buddy House. Over the last two years, House watched his team overpay Arenas ($111 million; nobody else could have offered more than $85 million at the time) and Antawn Jamison (a $41 million extension for someone about to reach his mid-30s) in a bizarre attempt to keep together the nucleus of a noncontender. Those contracts forced the Wiz to package the No. 5 pick in the 2009 draft, along with a couple of lousy contracts, for immediate help (Randy Foye and Mike Miller). When that move backfired and Arenas went child actor on us, the team called an audible and dealt three of its four best players (Jamison, Caron Butler and Brendan Haywood) for expiring contracts and the No. 30 pick in the 2010 draft.
Three unintentionally funny outcomes here. First, Wizards GM Ernie Grunfeld was the one who overpaid everybody, then had to sacrifice Butler and a 2009 lottery pick just to undo his own horrendous mistakes. Basically, he created the same cap space that could have been attained two summers ago, only Washington fans lost a lottery pick in the process. Did he get fired for this? Of course not.
LeBron James wants to join Gilbert Arenas in Washington! OK, probably not.
Second, the Wizards will have a ton of cap space this summer, only this summer's top free agents won't be saying, "Man, I'd love to play on a young team that's built around Gilbert Arenas." So it's a flawed business plan coming out of the gate. The Wizards shouldn't even mention the words "cap space" to their fans again. It's like promising your kids an ice cream at the end of a long drive when you know there's nothing in the fridge.
Third, they actually tried to sell their fans that one benefit of the Jamison trade was dipping the Wizards under the luxury tax threshold. As House hissed afterward, "What the [bleep] do I care if the Wiz aren't paying the tax? How does that affect me? Does that mean they're lowering ticket prices for the rest of the year then?"
Nope. Over the past five years, half the league's franchises crapped on their season-ticket holders at least once with mismanagement, salary dumping and/or tanking for lottery picks. Along with the Wizards, the following fan bases have reached a breaking point with their respective teams: Sixers, Pistons, Pacers, Nets, Knicks, Suns, Clippers, Warriors and Timberwolves. Depending on how the summer of 2010 works out, we could be adding Cavs, Heat, Raptors, Hawks and/or Grizzlies fans to that list. And four other teams have tried to put out a quality product but still hemorrhaged money this season: New Orleans, Milwaukee, Charlotte and San Antonio.
(Yes, I just mentioned 19 of the 30 NBA teams. You counted correctly.)
Some situations are fixable with a better revenue system, so let's concentrate on the "franchises that can't stop crapping on their fans" group (10 teams in all, counting the Knicks). Guess what happens when you get continually crapped on? It kinda makes you not want to support your team anymore. You know, because you have a big pile of crap on your head. Teams don't seem to understand this; apparently, neither does the league.
For instance, I have Clippers season tickets. At last week's deadline, the Clippers dumped Marcus Camby, the league's second-leading rebounder and their best defensive player, for two expiring contracts and $1.5 million in cash. I had tickets last Wednesday to watch Atlanta kick the butts of the suddenly depleted/lousy/rebuilding Clips. Did the price of those tickets change? Of course not. Hey Mr. Billionaire Housing Discriminator Who Owns The Clippers, I'm glad you pocketed that extra $1.5 million. Really, I am. But what did that do for me? Why didn't you use that savings to discount my last two months of tickets? And what about the other "customers" who bought season tickets because you promised a good product and didn't deliver for the 17th time in the last 18 years?
Now, here's where you say, "Simmons, you're an idiot for buying tickets for that septic tank of a franchise in the first place." Great point. I still own Clips tickets for two reasons: I like seeing the other teams, and there's a puncher's chance that someone like LeBron or Wade might be dumb enough to sign here. Stupid, I know. I'm delusional. But I have owned Clips seats for the past six years; in five of them, the season was over in mid-February.
Does the NBA care that I feel like an idiot for continuing to renew these seats? I don't know.
Does the NBA care about all the loyal customers in every failing city who feel like idiots for continuing to renew their seats? I don't know.
Shouldn't I know?
Here's what we do know ...
Teams survive on TV money, season-ticket revenue and luxury suites. They don't care about the upper decks. They care about getting fat checks in March and April for the following season, then banking that money for a few months and collecting interest on it. They care about getting us to pay for a spring's worth of playoff tickets up front even though our team might survive only eight days in the postseason. And if they stink, they care about only one thing: creating an illusion of regret.
The illusion of regret is crucial. It's the single most important dynamic in the NBA right now. It drives every lottery drawing, every trade deadline and every free-agency period. It drives Knicks fans to make the decision in 2008, "I'm gonna ride this out for another two years JUST IN CASE we get someone good two years from now." It's driving more interest in this particular offseason than any in recent memory; as incredible as this sounds, people are anticipating July more than June.
The illusion of regret is also relatively evil, no different from America's lottery system that preys on the lower class: convincing people to pay for the unlikely chance that something good might happen, then making them feel like idiots when it doesn't. This is how the NBA differs from any other professional sport. In a league with 12-man rosters, in which only five guys can play at once, you're really only as good as your franchise guy. If you don't have one, you're screwed.
That's where the illusion of regret comes in. A noncontender needs to convince its fans every spring, You better lock down another year of your seats, because if you don't, you're gonna miss out when we kick ass and make the playoffs and it's going to be impossible to get good seats and you'll be jealous! Hell, look at me. I want to break up with the Clippers ... but what if they get LeBron and I miss out? I would regret it. Every minute. Every day. Sure, they have about as much of a chance of getting LeBron as I have of becoming the WNBA commissioner. Doesn't matter. I can't miss even the 3 percent chance that it might happen. Which leads me to this moment in April ...
"Here's another check, Mr. Billionaire Housing Discriminator Who Owns The Clippers. I'll keep my fingers crossed for another year. I hate you."
I do it every spring. I have no protection. Neither do any of the other season-ticket holders for any of the other screwed-up franchises. In Cleveland, the Cavs asked for 2010-11 renewals last month under the guise of an "Early Bird Special." Cavs season-ticket holders will have to decide before the 2010 playoffs start, "Am I keeping my tickets next year? Am I rolling the dice that LeBron comes back?" If they keep them, and LeBron doesn't come back, it's going to feel like getting tipped over in a port-o-john. And yes, the Cavs would be doing the tipping.
So why don't fans have protection? As a failing business -- and, really, a league that loses $400 million in a single year has to qualify as "failing" -- doesn't the NBA have an obligation to win customers back? Just this week, Minnesota announced that it was making 2010-11 season tickets available for up to 50 percent off in March. This made news because ... well, teams don't normally do this. But why don't they? Why not take Minnesota's move even further?
Let's say the NBA made the following rule right now:
Any team that misses the playoffs cannot raise ticket prices the following season. Miss two straight playoffs, season-ticket holders get a 5 percent discount for renewals the following season. Miss three straight, it goes to 10 percent. Miss four straight, it jumps to 25 percent. Miss five straight, it jumps to 50 percent.
Seems pretty reasonable, right? Geez, if you miss the playoffs for five straight years, you shouldn't be in the league. The Clippers missed in 2007, 2008 and 2009. Last summer, they brought back coach Mike Dunleavy, who had made history by losing 300-plus games for two different teams (the Clips and the Bucks) and also having a winning percentage under .400 with both. To nobody's surprise, the season fell apart and that squinty con artist stepped down last month. Now the Clippers are playing the illusion of regret to a hilt. We have tons of cap space, we're gonna have a new coach, and we're going after LeBron ... don't quit on us! Doesn't change the fact that Mr. Billionaire Housing Discriminator Who Owns The Clippers sacrificed the 2009-10 season when he didn't have to.
OK, so let's say my discount penalty plan is in motion. Let's say the 2009-10 Clips knew that, if they missed the playoffs a fourth straight year, they would be looking at 25 percent discounts across the board. Is there any way they keep Dunleavy? No. Is there any way they dump Camby at the deadline? No. Financially, it wouldn't make sense.
This is what kills me about David Stern, a shrewd man who loves the National Basketball Association and has devoted his life to making it better. He pretends that the economics of his sport don't work anymore, only he acts as though there isn't any blood on his hands. I beg to differ. By allowing franchises to antagonize season-ticket holders, and by refusing to put a system in place that protects fans from tanking teams, he's as guilty as anyone. How can a league have such crystal-clear vision with so many different things -- expanding its global presence, building a self-perpetuating Olympic team, dominating the digital market, experimenting with 3-D -- and look the other way every time its fans get kicked in the teeth?
If I were running the NBA, eliminating the illusion of regret would be my biggest initiative. I would give every nonplayoff team the same odds for winning the lottery, just so these teams wouldn't destroy six to eight weeks of a season for paying customers. Then, I would cut the season by four games, guarantee only the top 12 playoff spots, then decide the seventh and eighth seeds in each conference with a double-elimination tournament for every nonplayoff team that I would call the Entertaining As Hell Tournament (see my 2007 column for the gory details). Boom, we just killed the tanking and salary-dumping issues.
Couldn't that work? Has it even been discussed? Wouldn't it generate a ton of interest and extra revenue? Wouldn't you watch? Wouldn't it put a ton of pressure on teams to stop shutting their best guys down or giving away contract-year guys for no real reason? You can't give away Camby! We need him for the Entertaining As Hell Tournament in April! And who knows, maybe a wacky 7-seed would gain momentum and pull off a Round 1 shocker in the playoffs. You never know. It's never a bad thing when those three words are involved.
Since Stern works for the owners, I understand why he blames the economy instead of blaming the reckless franchises who got the league into this $400 million hole. That's his job -- to cover up the sins of his employers. Just know that gate revenues aren't down only because people have less money than three years ago. They're down because fans became tired of the illusion of regret, and also, because our consumption patterns changed. Many of us own nice televisions now. We can watch any game in HD on a 50-inch screen. We can watch one game while watching another on our laptop. If we want, we can watch the fourth quarters of 10-12 NBA games in one night. There's no real impetus to buy NBA season tickets anymore unless: (A) you're rich, and/or (B) you have great seats between the baskets.
When I mentioned this theory to Stern in our recent podcast, he spun it into a positive by pointing out that the league should be praised for finding new ways to reach its fans. True. But let's spin it the other way. Teams depend on season-ticket revenue because it's guaranteed income. With the current setup, I could skip getting season tickets, then use stubhub.com, ebay.com and even team-endorsed ticket sites to cherry-pick choice seats for six or seven big games per season. So if the NBA wants to keep me (or you, or anyone) as a customer, it needs to prevent me from sampling instead of buying. Ask any sales guy for any NBA team -- this is their biggest challenge. They don't want me for seven games. They want me for all of them.
Stern didn't seem to think it was a problem. Which is a problem. He's running a league blessed with a giant TV contract and its biggest talent boon in two decades, only it's about to lose $400 million, and he's acting like everything is out of his hands right now. Huh? Maybe he needs to be more honest with himself. Yeah, the revenue system needs to be fixed. But so do the playoff system, the salary cap, the ticket plans and the customer/team relationship. They're all part of the same problem.
And if the commish doesn't think the NBA is fundamentally screwed up, just look at what happened last week, when the Knicks, Bulls and Clippers all gave away players and/or picks to shave 2010-11 cap space for LeBron, Bosh, Johnson, Stoudemire, Gay, Boozer and Wade. Was it the right thing to do? Sadly, tragically, disgustingly ... yes. The illusion of regret was taken to new heights. Only one fan base can end up with the best player alive. A few others will settle for lesser stars, some will come up empty, and in the case of Knicks fans and Cavaliers fans, there's a chance for genuine damage. Like, "I'm never rooting for those guys again" damage. Just know that the players didn't create this do-or-die scenario; the owners did.
And sure, like with the Hollywood strike, an NBA lockout will end up working in favor of the owners. It will lower operating costs, protect teams from overspending and create a system in which A-listers get rewarded (the LeBrons and Wades) and the working class (the Goodens and Farmars) gets screwed. Costs will drop, franchise values will increase, and the owners will believe all the acrimony was worth it. The ship will have been righted. Or so they will say.
I hope they're right.
I still don't know how it benefits you and me.
Bill Simmons is a columnist for ESPN.com and the author of the recent New York Times best-seller, "The Book of Basketball." For every Simmons column and podcast, check out Sports Guy's World. Follow him on Twitter at http://twitter.com/sportsguy33.
Talk about anything general in the NBA here.
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Joined: Thu Aug 07, 2008 1:15 am
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I agree with a lot of what Bill Simmons has to say, especially when it comes to the NBA. He's right on the money with this issue.
yeah, that thought is a complete fairy tale that would never happen but wouldn't it be great if it did. Love that outside the box thinking and would love to see one day a commissioner in a sport put the customers (fans) FIRST!
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