- The owners correctly understand that they have a present monopoly in government-subsidized professional basketball facilities and IP (trademarks and all of the team loyalty that come with them), with high barriers to entry for potential competitors for player labor. The owners also have legally-sanctioned cartel status (which prevents the development of a free market in player labor) and legacy contracts that impede player mobility. The owners want to leverage their monopoly and legal-cartel status to set a below-market rate for labor.
- The players correctly understand that they have a present monopoly in a specialized good (elite-level basketball ability), with legally-sanctioned cartel status and natural scarcity creating a high barrier to entry for potential competitors in that good. The players want to leverage their monopoly in that good to extract monopoly rents for it.
I'm rooting for the crash and burn, because, ugh, the NBA. No group of owners has so greedily squeezed fans and governments, and no group of players has been so frequently placated by huge salaries into indifference to substandard product. The NBA (and particularly NBA owners) are counting on their losses being small enough for the duration of any lockout that they will make it back quickly with the benefit of a new labor model and the corresponding increase in franchise values. What I hope is (a) that fans remember that NBA owners would rather murder fans than give up a penny of revenue; and (b) more importantly, that local governments realize that the lockout-loving NBA is the same NBA that, when the lockout is over, will promise endless economic bonanzas to induce arena subsidies and tax breaks for NBA teams. Hey, cities: what's Oklahoma City's return on its $210 million investment to steal the Sonics going to be this year?
I've been hoping for months that the lockout would cancel the season. If I'm lucky, it'll cancel the next 7-8 seasons as well. I hate the NBA.
ReplyDeleteAnd several dozen more college graduates will struggle to find work.
ReplyDeleteKidding! They're not really graduates.
The player "labor" has a very limited shelf life plus there are dozens if not hundreds of new players vying to steal the jobs of the older players each year. The players will fold first though we may "miss" (not me) a season of basketball.
ReplyDeleteThe franchise owners can afford to stand pat. They have way more leverage.
NBA useful player lives are pretty long. Elite players, which are the ones driving both costs and negotiations, enter the league at 19 and are productive to about early or mid-30s (often with contracts extending beyond their productive lives). Average players enter the league a couple of years later and play to about 30. The union may fold because current membership can't afford to lose between 7 and 10% of their total lifetime earning capacity, that's a real possibility. We'll see.
ReplyDeleteI was thinking about something else on the way home, though. Free marketeers have a knee-jerk reaction to unions, and might here impulsively align themselves with the owners against the players' union. But the incentives here are perverted because management is a legally-sanctioned cartel that employs legally enforceable rules to maintain discipline. Typically economists don't worry about non-legally-sanctioned cartels because the incentives to break discipline are too great -- one member will undercut another on price agreements or overbid to get favored goods. Free market economists don't like unions, though, because they have the power of law to enforce discipline. Well, in the NBA's case, there is an equality of cartels. What's interesting is that management -- who you would expect to be anti-union -- really benefits from this dual-cartel system as distinguished from a total free market. Because we know what would happen in a perfectly free market, where the NBA couldn't enforce salary caps: player salaries would skyrocket, as each owner bid for the elite talent. We know this because it has happened even with salary caps -- the owners just can't stop themselves from outbidding each other up to the limit of their legal ability to do so. What would LeBron have gotten in a truly competitive market?
The owners are relying on the short player lifespan, like Chuck says, to ensure that they get what they want. But imagine if the players could say "there's no deal, period. No minimum, fine. Also no guaranteed share, no cap, and no draft. We'll play for whoever wants to pay us." This is a situation where the free market would be on the side of the players, not the owners.
My main issue is that, almost without fail, NBA owners are the biggest bullies w/r/t the public of any major sport. Maybe it's just perception, but it seems like they're much more likely to hold cities over a barrel to get stadiums built or do awful things to players than other sports. Maybe it's because basketball was, for a long time, the cheapest sport of the big three to get in on the ground floor of, but the NBA owners have been distateful for a long time.
ReplyDeleteI feel like I am absolutely biased by living in a three-sport city with no NBA team, but I also cackled with delight at this news.
ReplyDeleteHow big are salaries these days in Europe and is that enough of a market to swallow some of the NBA talent? I don't mean a PR stunt value but as a sustainable career choice.
ReplyDeleteI don't love the NBA, but it is hard to think about all of the people whose jobs depend on these games -- parking attendants, concession workers, etc. -- who are going to be hurt by this. No one is talking about the little guys who are getting screwed here.
ReplyDeleteYes, and this is why I have some difficulty having overt sympathy for the players. An average NBA team probably employs 100-150 folks. NBA roster size is generally 15, who are demanding at least 50% of team income be guaranteed to them--10% of a team's employees taking 50% of salaries? Aren't there some people riled up about similar divisions elsewhere in the private sector? Neither side here seems clean.
ReplyDeleteAnd I'm not sure how much value the team names/loyalty have. If the players got together a 10 team league that was top-loaded with superstars? They'd sell out arenas and get TV ratings even if the game wasn't "Heat v. Knicks." NBA, more than any other major team sport, has, especially in recent years, been driven by individual storylines/rivalries, rather than teams.
Because I am old, I remember when the NBA Finals were shown on tape delay. To watch them I would take a nap after supper, skip the evening news so as not to see the result, and then turn on the TV at 10:30 (Central) to see the game. The Magic-Bird era ushered in huge TV revenues and it became a prime time sport. Of course they were still playing basketball in those days instead of whatever you call the "sport" with five individuals looking out for themselves and for highlight time on ESPN that they're doing now.
ReplyDeleteThe game became unwatchable for me a number of years ago, and they can stay on strike forever for all I care. I was interested to hear several reporters yesterday suggest that if the current deal went to the players for a vote it would pass overwhelmingly, but that Hunter and Fisher won't let that happen. It reminds me of nothing so much as the story of the Golden Goose. A pox on both their houses.
Don't think of it as labor. Think of it as product. The players are the product. If the NBA made hovercars instead of elite basketball, and if hovercars depended upon licensing a patent from a third party, and if there were no acceptable substitutes for the patented product without severe degradation in the quality of the product, then nobody would complain if NBA Hovercars Inc. spent half of its revenue to license the patented product.
ReplyDeleteYou don't have to have sympathy for either side. What I was trying to get at in the original post, though, was that there are two monopoly cartels, the owner cartel and the player cartel. Both are thinking like true monopolists, and by that I mean that both think that they are entitled to 100% of the monopoly rents and that they are being magnanimous by giving nearly half the monopoly value to the other side.
As for the 10-team, loaded-with-superstars model, see the USFL.
There are problems with the player-run league approach, starting with the availability of suitable arenas not affiliated with NBA teams. Where would they play in NYC -- the gym at Columbia? Or would they have to go to non-NBA markets like Kansas City and Las Vegas?
ReplyDeleteI don't know that the NBA's contracts prevent the arenas from contracting with another league/group on non-conflicting nights. As for NYC area? Play at Nassau Colliseum, or Izod Center.
ReplyDeleteWe have no idea what all the fuss is about.
ReplyDeleteSincerely,
Vancouver, BC
Not unlike the academic job market.
ReplyDeleteNot significant. Allen Iverson made 2 mil to play a season in Turkey. And there aren't really that many teams in other countries who can afford even that for a couple players. And teams overseas can generally only hire two foreign players.
ReplyDeleteThe viewers see what you did there (and I know we're not really viewers)
ReplyDelete