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Leverage, Ethics and the NBA Lockout

Soviets and JFK enjoying some laughs during the Cuban Missile Crisis

In nuclear war strategy, the concept of mutually assured destruction, that if you nuke me, I’ll nuke you and we’ll all be dead, establishes an equilibrium wherein both parties recognize that to launch a first strike against the other would be suicide – as a result, nobody should launch nuclear missiles.  The recognition of this reality, as well as the interest both the USA and the USSR had in their own survival, was perhaps the most significant factor in avoiding nuclear catastrophe during the Cold War (morality issues around nuclear mass murder probably coming in a distant second place).  Because both the USA and the USSR had developed second-strike capability (i.e. the ability of the intial target to launch a nuclear volley of their own in response to the first strike), they effectively had equal leverage at the negotiating table vis-a-vis nuclear capabilities.  Neither side could effectively intimidate or bluff the other because they both knew that any nuclear strike would be mutually destructive.

Earlier today, I read a post about the NBA Lockout where Andrew Sharp, the author of the post, described the negotiations, if they could even be called that, as going “nuclear.”  On Monday, the National Basketball Players Association (NBPA), the union representing the players, rejected the latest offer from the owners (details explained in the Wikipedia page and around the web) and disclaimed their union rights, allowing the players to file class action antitrust suits against the NBA.  For the league, owners, players and, most importantly, basketball fans, this is the sum of all fears because it means we will likely not get a season this year.

Interestingly, Sharp suggested that the players decision to possibly forgo paychecks for the 2011-2012 season amounted to an exercise in mutually assured destruction.  I don’t know if this is necessarily the case, because players simply don’t have the same leverage as the owners with respect to short-term economics.  The teams are owned by generally independently wealthy multi-millionaires and billionaires who can stomach a season (or two) of zero revenues.  NBA players, except for superstars like LeBron James or Kobe Bryant or Rashard Lewis, for the most part can’t survive as long without getting paid.  Therefore, the theory goes, the players have to cave first, even if it means taking a deal valued at less than what they believe is fair.

Or they could disclaim their union rights and sue, which is what they’ve done.  The presence of enormous potential liability on the part of the owners (player attorneys allege that the lockout is illegal, the league is anticompetitive, etc) might scare the owners into giving some concessions to the players in a settlement.  The owners may be rich, but nobody wants to burn millions of dollars in court unless they’re pretty certain that the courts will rule in their favor.  Assuming the owners don’t mind spending years in court fighting about this, though, then the players have truly blown themselves up.  In the long run, maybe the players get a deal they view as fair.  But in the long run, assuming a world without NBA basketball, most of the current players are bankrupt and bagging groceries.  Hardly mutually assured destruction – the owners still have greater leverage.

Fans pay big bucks to see megastars like Eddy Curry

So the reason the players are willing to flip the bird to the league and owners and bet everything on litigation has as much, if not more, to do with ethics as it does economic self-interest.  The on-court employees of NBA franchises (that is, the players) of course feel that they are an integral and vital part of the NBA’s success (although with 22 teams allegedly losing money, success might be a relative term).  Unlike, say, a widget-producing business where assembly line workers are effectively interchangeable with other laborers on the free market, NBA players are distinct and super-talented individuals, whom fans pay to see.  Therefore, the argument goes, players ought to be entitled to a bigger piece of the economics.  Given that the Knicks still regularly sold out MSG during the Isiah era and the fact that a playoff team with one of the best point guards in basketball couldn’t make enough money to avoid being sold to the league, I’m not sure that there’s such an enormous/obvious correlation between on-court talent and financial success.  Besides, if the Knicks simply hired the current St. John’s basketball team as replacements, you’re telling me that people would boycott due to a perceived lack of talent?  I’m not sure, to be honest.  Feels like better plays means more fan engagement means more money, but fans are usually pretty sticky – bad teams are seldom punished by hardcore fans. 

Nevertheless, the argument that players ought to have a greater share of their teams’ revenues appeals to many, especially Marxian economists.  After all, what the owners are paying for when they pay player salaries is the players’ labour-power.  The product they put out on the basketball court is their very labor – how can you not argue that their labor itself is what makes the whole NBA concept lucrative?  From the fans’ (i.e. the consumer’s) perspective, the laborer himself is generally more important than the individual who owns the means of production. While the widget buyer probably doesn’t care too much who made his widgets, the NBA fan, at least theoretically, would probably rather see Derrick Rose on their team than Mario Chalmers.  One would still rather see Mario Chalmers than, say, me.  So the NBA players can argue that their work is what makes the NBA tick.  But without the league and the owners to manage league franchises, there’s no stage for the players to play anyway.  Again, check, owners.

This isn’t all to say that I side with the owners.  I don’t.  I may be a capitalist and I may usually side with owners in labor disputes and I may recognize that the players have preciously little leverage here, but I’m also a fan.  Given how great last season was (especially for Knicks fans), it’s a catastrophe that we might lose that momentum this season.  Sure, on the catastrophe scale it ranks between burning your pop tarts and missing the subway, but it’s still pretty painful.  It’s painful because, like the players might argue, it doesn’t really matter who owns the team.  Sure, bad owners make bad personnel decisions and can plunge their teams into a decade or more of darkness while good owners will do whatever it takes to deliver championships to their fanbase, but for the most part owners are simply investors who bought a franchise with an embedded fanbase, history and other insurmountable barriers to entry.  Then they take all that leverage, none of which is the product of their own labor/efforts, and turn the screws on players and fans simply because they can.

And of course, the fact that the economic model of the NBA is “broken” has a whole lot to do with the owners and managers themselves, who when they’re not busy whining about how hard it is to make money are paying marginal players huge contracts.  I linked above to Rashard Lewis when listing superstars: NBA fans will know that this was a joke.  Lewis, who is not good, signed a ludicrous contract which will make him the second highest paid player in the league next year.  How did he get that contract?  Because he was pretty good several years ago and Orlando management, for some reason, thought that he could play at a level that would justify $120 million when he was signed-and-traded from the Sonics.  This is (and was), to put it gently, retarded.  So what do owners want to do?  Instead of simply BEING BETTER AT THEIR JOBS, they want to restrict the ability to execute the sort of sign-and-trade deals that made Rashard Lewis such a wealthy man.  That’s a bit like when crazy people request to be committed to an institution so they don’t hurt themselves, except crazy people don’t typically own and manage multi-million dollar sports franchises.

Look, I obviously think it’s cool that owners want to make a return on their investment and profit from their teams.  Theoretically, the pursuit of such profits ought to incentivize owners to put out the best possible product and so the fans, even though they may end up paying more for tickets, win because they get to see better ball.  But it’s my opinion that good owners are the owners who never lose sight of the fact that in addition to their own pursuit of profit, there are millions of people out there who, rationally or not, live and die by their teams.  There are millions of people out there who are upset that they might not get to watch professional basketball this year.  Is that ridiculous?  Probably, yeah, from an objective standpoint.  But that ridiculousness is what fuels the NBA.  Owners need to acknowledge this.

So instead of applying their leverage and trying to squeeze every ounce of juice out of the players in these negotiations, the ethical thing for the owners to do would be to recognize that basketball teams aren’t like factories, where the main purpose is to produce profits for shareholders.  The owners should be negotiating in good faith with the players in order to make sure that a season takes place because, yes, the owners owe that to the fans for whom the league exists.  The owners are the Soviets, the players are the Americans and NBA fans are the population of the earth who really, really don’t want to spend the next however many years in a bunker avoiding the fallout of a prolonged lockout.  Owners and players may be playing a high-stakes game of finger-on-the-red-button, but both parties, especially the owners (since they have the most power to end the stalemate) need to consider the fans here.

If the owners can’t handle that, or if their inability to make a profit in this world is getting to them and making them act like jerks, then they should sell their teams.  If you’re James Dolan and making a profit no matter what, you should still sell.

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