NBAers of the World, Unite!

NBAers of the World, Unite!

NBAers of the World, Unite!

Moneybox
Commentary about business and finance.
Nov. 3 1998 5:49 PM

NBAers of the World, Unite!

The central dilemma in the current NBA lockout is that the workers control the means of production because the workers are the means of production. Even if you leave the old-school Marxist rhetoric aside, what we're looking at when we look at the NBA is a situation in which labor really is the source of all value. NBA owners contribute almost nothing to the product that they put out, and while the current lockout represents their attempt to re-establish control over the players, it's both difficult to imagine that attempt succeeding and, even more, unclear whether that attempt should succeed.

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Given the fact that when it comes to the NBA players we're talking about men who on average take home more than $1 million a year while getting the summers off, it's undoubtedly hard to see these guys as the vanguard of the working class. But you can recognize the logic behind the players' demands without mistaking them for proletarian heroes.

The current impasse began, after all, because the existing players' agreement had a provision saying that the owners could reopen contract discussions if player compensation reached more than 52 percent of annual revenue. Last season, compensation totaled 57 percent, and the owners want to reduce that to 48 percent, while the players' best offer so far is 60 percent. The various debates about what kinds of schemes should be employed to curtail the salary explosion--hard salary caps, luxury taxes, etc.--are in some sense sidelights to the basic issue, which is the appropriate division of the annual loot.

The owners, of course, plead poverty, pointing to the fact that many teams are operating in the red and arguing that the "Larry Bird exception"--which allows teams to breach their salary caps in order to re-sign stars--has proved itself to be a recipe for disaster. In the first place, of course, it's only a recipe for disaster because the owners have been unable to control their own spending. (It's the owners, not the players, who in this case want to prevent a free market in labor from operating.) More importantly, though, the owners are just having a hard time grasping reality. While they may have legal title to their teams' names, and in some cases to the stadiums they play in, they don't really do very much to bring in any revenue. The players do the lion's share of the work. It's not clear why they shouldn't bring in the lion's share of the revenue.

Now, you could argue that this is true of any business. Shareholders in a company don't do any work, so why should they get paid any dividend (or why should profits be reinvested rather than paying them out in salaries)? But in most businesses workers are fairly interchangeable. Nobody goes to McDonald's because Megan is behind the counter (well, unless you're a high-school boy who has a crush on Megan). People go to McDonald's because of the name and the food, both of which are the product of the company, not of the workers. And, in any case, those employees who are judged to have a disproportionately important impact on the business--the executives--are compensated exceedingly well in most corporations.

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Even in Silicon Valley, where it's a cliché that workers are a company's only real resource, most corporations own the things that really matter, whether it be the patents to the Pentium chip or the copyright on Windows or the technology of a new router. It may be important to hire the best programmers, but no one buys Microsoft's products--explicitly or implicitly--because its programmers are the best. At the same time, the options culture of the Valley is itself a recognition that workers do deserve an important share of a company's revenues.

The NBA--indeed, all of professional sports, but the NBA above all--is different from these other situations because the workers are the reason people come to the games. That's not entirely true. Some people would come regardless of who was playing, just because they wanted to watch their local team. But imagine a situation in which at this moment alternative teams were started in every NBA city in America, and all the current NBA players began playing for those teams. Is there any doubt that the supposedly invaluable brand names of the Celtics, Knicks, and Bulls would quickly lose value, and that the NBA itself would become no more economically viable than the current CBA?

People come to see NBA games not because it's the NBA, but because they know that's where they'll see the very best basketball players in the world. If the NBA disappeared tomorrow, people would still want to see those players. If those players moved on, people would not still want to see the NBA. To be sure, the owners put up the capital and deserve a return on investment to compensate them for their risk. But cutting costs by cutting salaries may make sense in a business world where workers are fungible commodities. It makes no sense in a business where the workers are the only resource that matters. I don't know if the players deserve 67 percent of the league's annual revenue. But to decry their position as greedy or unreasonable is simply to misunderstand the nature of the game.