NBA Talks Collapse, Head to Court
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. November 15, 2011
In a move that jeopardizes the basketball season, NBA players rejected the league’s latest offer and said they would begin the process to disband their union. Read the full story from today’s Wall Street Journal here.
By KEVIN CLARK
In a move that jeopardizes the basketball season, NBA players rejected the league’s latest offer and said they would begin the process to disband their union.
In a move that jeopardizes the NBA season, the NBA players union rejected the league’s latest offer and said it would begin the process to disband the union. Kevin Clark has details on The News Hub.
It marked the lowest point so far in the league’s contentious labor dispute, as the lockout hit its 137th day. “The 2011-12 season is now in jeopardy,” said National Basketball Association Commissioner David Stern.
Players rejected what the league had said was its best offer—a proposal to split revenue about 50-50 and start a 72-game season on Dec. 15. With the league unwilling to negotiate further, the players decided their best hope was to battle it out in court. Disbanding the union is a legal tactic that would allow the players to bring an antitrust lawsuit against the league. However, the league filed its own lawsuit earlier this year in hopes of preventing such an antitrust claim by the union.
The move came after a four-hour meeting among player representatives at a New York City hotel. Jeffrey Kessler, a union lawyer, said the decision came after the players agreed that “bargaining totally failed.”
Union Executive Director Billy Hunter said an antitrust lawsuit should be filed in the next day or two, though union lawyers said that’s not a certainty.
The union hired high-powered attorney David Boies on Monday to help with the case. Mr. Boies said union decided to disband once it came to believe “the collective bargaining process was over [and] that there wasn’t any purpose in continuing.”
With games through November already canceled, the season hangs in the balance, as negotiations now move to what could be a drawn-out legal process.
Firing back on ESPN, Mr. Stern said the union’s move was done to see whether “they can scare the NBA owners into something. That’s not happening.” He called dissolving the union a “charade.”
He also said the league filed an unfair labor practice charge before the National Labor Relations Board, “asserting that, by virtue of its continued threats, the union was not bargaining in good faith.”
The league didn’t announce any more game cancellations Monday, but Mr. Stern has said a season would take 30 days to start, making games through mid-December essentially impossible to play.
Still, it’s no guarantee the full season will be lost. During a labor dispute earlier this year, the National Football League players union similarly moved to disband and take their fight to court, but managed to work out a settlement through negotiations that saved the season.
The main sticking point in the NBA negotiations has been how to split the league’s $4 billion in revenue. The owners’ latest proposal revolved around what is essentially a 50/50 split. The last contract, which expired in July, gave players 57% of the revenue. The league says it is losing $300 million a year, and that 22 of its 30 teams are losing money.
Logistical issues like salary cap structure, trade clauses and “luxury tax,” a fee high-payroll teams must pay, are still unresolved and are also considered important by both sides.
The union said players lose $350 million in salaries each month they are locked out; players don’t make it up when games resume. NBA Deputy Commissioner Adam Silver has said that canceling the first two weeks of the season cost the league “hundreds of millions of dollars” and the cancellation of the preseason cost the league $200 million.
The lockout also affects Walt Disney Co.’s ESPN and ABC, and Time Warner Inc.’s Turner Sports, who pay the league $930 million per season to air games. Advertisers spent $807 million on NBA games that aired on cable and network TV last season, according to Kantar Media, an ad-tracking unit of WPP PLC.
An average of 2 million people watched regular-season NBA games on ESPN last year, and an average of 2.5 million watched regular-season games on Turner’s TNT, according to Nielsen Holdings NV. But ad spending is heavily weighted to the latter portion of the NBA season.
Russ Granik, the NBA’s Deputy Commissioner from 1990 to 2006, says a long lockout would impact the league’s highest-revenue teams as well, including the Los Angeles Lakers, New York Knicks, Miami Heat and Chicago Bulls. All teams declined to comment due to NBA rules that prohibit teams from discussing the lockout.
Madison Square Garden Co., which owns the Knicks, in a November public filing said if cancelled games aren’t rescheduled, the company’s financial results would see a “material negative effect.”
The Knicks are unveiling the first phase of their $850 million renovation this year and planned to raise ticket prices 49% in the lower seating section.
The Knicks anchor Madison Square Garden and combined with the New York Rangers and other sporting events at the arena to generate $372 million in revenue in 2010 for its MSG Sports division.
Earlier, the NBA filed a preemptive lawsuit against the Players Association in August in Manhattan federal court, seeking a judgment that the lockout didn’t violate federal antitrust laws.
–Chad Bray contributed to this article.
Write to Kevin Clark at Kevin.Clark@wsj.com