Mysteries of the NBA Lockout - Part 2

The longer the lockout goes on, the more I try to understand it all, the more mysterious it gets. At the most basic level, there's the mystery of whether the league is actually losing money. They say yes, but the closest thing we have to a legitimate outside source (Forbes magazine) says no. But there are other, smaller puzzlements along the way as well. In the absence of almost any other news, I've decided to write a series focusing on the lockout mysteries that currently have me scratching my head.

So far we've covered:

Mystery the first - Why does the league want a hard salary cap when they already have one?

Which brings us to:

Mystery the second - Where did the money go?

So if we are to believe David Stern that league-wide losses are substantial ($340M last year), despite the fact that player salaries are contractually capped at 57% as we discussed last time, the league must have made some other significant miscalculation in the last CBA. After all, their 43% was supposed to take care of the other expenses and presumably leave a little something-something for the owners as well. Sure, some small markets might have trouble, but how could they be losing so much on the aggregate when their primary expense (salaries) is fixed?

The consensus at this point is that other expenses are spiraling out of control - but there's a fair amount of guess work going on here as well. Tom Ziller at SBNation called it 'mystery meat' three weeks back, and further analysis of the data  seems to indicate as much as well. But why? What are those other expenses?

I blame Mark Cuban. Oh, and the immutable "Law of Unintended Consequences." The bulk of the current CBA was negotiated in time to have a 50 game season in 1999, and renewed with minor modifications  in 2005. Cuban bought the Mavericks in January 2000.

It goes without saying that Cuban is chief among the owners who are willing to pay the luxury tax. And since the inception of the tax in that 1999 CBA, nine out of 13 NBA champs have been tax payers, and in the last four years all eight NBA finalists have been in that tax bracket. Since Cuban came into the league, only James Dolan of the New York Knicks has spent more in cumulative player salaries.

Of course, we've already established that player salaries aren't the problem, since that expense is fixed at 57% league-wide. Perhaps the real problem is that while Cuban is willing to spend well into luxury tax territory every year, he's also wiling to spend on every other thing he can think of to give himself a competitive advantage. This is the man that paid for his team's championship parade out of his own pocket (did that $340K get added onto the league's total losses this season?) Is it possible that NBA teams as a group are paying more - maybe even a lot more - for player amenities beyond salary? Count on it.

In 1998, the NBA started a charter air program for teams to provide consistent and comfortable flight accommodations for their players, which must have been a major improvement over, not to mention much more expensive than, the days of flying commercial jets. But in 2001, a little over a season after he bought the team, Cuban took the Mavericks out of the charter program and bought his own plane (he now has two). The reason? He didn't like the food the NBA program was providing. Oh and Cuban has a "team nutritionist determine the individual requirements of each player before [an inflight] meal is prepared." As players churn through Dallas and get used to the Cuban-standard, you can bet that other teams feel the pressure to provide a similar level of service. Could increased expenses for planes and five star hotels and nutritionists and trainers and whatever else Cuban is spending his billions on in Dallas be driving "other expenses" through the roof over the last decade? It's only conjecture of course, but it seems plausible, doesn't it?

Still, I'm more of a data guy. I'd sure like to see something more tangible regarding an increase in non-salary expenses. So here's what I did. I searched the database at prosportstransactions.com for NBA trades involving cash over the last decade or so. Here's what I found:

 

Year

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Transactions

4

13

11

10

14

29

30

28

25

43

59

43

43

 

(Note: figures are for the time period from July 1 of preceding year until June 30 of the year listed. Please note also that the vast majority of cash transactions are recorded twice in the database - once for each team involved in the deal - so as a rule of thumb the numbers above represent double the number of individual trades.)

So that's pretty interesting. As the salary cap, soft though it is, became more restrictive, certain deep-pocketed owners started throwing money around in attempts to circumvent the intentions of the cap. The 1999 CBA allows up to $3M to be included in trades - and that money would pretty clearly fall into 'other expenses' as opposed to player salaries. The Mark Cubans and Paul Allens of the NBA have used this ploy in recent years to buy draft picks and otherwise grease skids in what amounts to their own little revenue sharing plan. So that looks like a smoking gun, right? A more than tenfold increase in these types of transactions since the 1999 CBA went into place.

Of course, then I realized that it doesn't explain anything. We're looking for league-wide losses, so these cash transactions don't have any impact, since the money is just going from one team to another team. So while this is a great example of the law of unintended consequences, and demonstrates nicely how the wealthiest owners and big market teams can use the current system to take advantage of their less fortunate brethren, it's no smoking gun in the money mystery. Which leaves me still wondering: where did the money go?

Back to Cuban for a moment. The other day, the checker at Trader Joe's (who happens to know I blog the Clippers) lamented the Clippers sad fate under Donald Sterling. "I wish they had an owner like Mark Cuban." And that's when it occurred to me. If the league were run by 30 Sterlings we might not be staring down the barrel of a lost season right now. Cuban is very, very good for Dallas fans - but it may be that he has been very, very bad for the league, if as I suspect he's placed inflationary pressures on all the owners and led us to this lockout.

Still, here I am more than a thousand words into this post, and I still have very little idea where the money went. Did it all go to private jets and personal chefs? I guess it will remain a mystery for now.

Next mystery: Why does David Stern still have a job?

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