TRIBUNE: How do you feel about the overall health of the league right now?
SILVER: From a revenue standpoint, things are great. We generate more than $4 billion a year, and growing, on a global basis. This season, (TV) ratings were up double-digits on all our networks. We’re seeing the same growth for local television rights. The Lakers just entered into a fantastic new television deal for the next 20 years. Global (marketing) expansion is terrific. Merchandising sales are going well.
We’re spending too much on (player) salaries, though, and under our current CBA, we pay roughly 57 percent of gross (income) to our players. At our meeting during All-Star weekend, we told them prospects are wonderful, but the model is broken, and no business is sustainable over time that pays out more than it takes in. By definition, if we pay out 57 percent of the gross, it has to cost us less than 43 cents to generate every dollar, and that’s not the case.
TRIBUNE: Why?
SILVER: Our expenses are up across the board. When I first came to the league 19 years ago, virtually every team had a waiting list for season tickets. The world has changed. There’s a ton more competition now for the entertainment dollar. In every one of our cities, there are a thousand-plus channels on most cable networks and unlimited amounts of programming on the Internet, and we’re competing against those things. The cost of marketing and selling are that much greater.
Having said that, under any new deal, our players will continue to be the highest-paid team athletes in the world, hands down. Shame on us if we can’t find a way to make this work. We are not only the only sports league, but probably the only business, that shares all its audit financials with its employees. That’s what we do with our players association. We’re open book. We’ve said, these are all the financials of our 30 teams. Here are our tax returns, just so there’s absolutely no issues over our financials.
But there is, maybe understandably, a fair amount of skepticism by our players. They ask, how can it be that these wealthy, highly successful businessmen are willing to enter into a business like this and lose the kind of money they are? My response is, they’re living up to the current CBA. I would expect nothing less of them. At the conclusion of this deal, though, they’re saying we need to negotiate a new deal.
TRIBUNE: Is basketball-related income the biggest negotiating issue?
SILVER: The BRI is one. Also, when it comes to distribution of revenue, more now than in any of the CBAs I’ve been involved in, there has been more discussion about competition. (In previous CBA negotiations), the key issue was the split of the revenue and not how it was distributed. We could give you the 57 percent and you can decide how to distribute it among the players.
Clearly, our view has changed. How that money is distributed among the players is a key component of competition around the league. In addition to our desire to create a model where all teams at least have the opportunity to be profitable, we also are focused on a model where all 30 teams have the opportunity to compete for a championship. There’s a recognition out there now that’s not the current model to the extent that we have a soft salary-cap system.
For example, a team like the Lakers has a payroll of $110 million when you include the luxury-tax figure. With the salary cap at $57 million, that’s not a balanced system.
What we’ve proposed to the players is a hard cap. We’ve looked at the NFL, and we’re not ashamed to say that appears to be a better system. There’s a lot more analysis we need to do with the players. I’m not suggesting we’re the NFL. But we believe through shorter contracts, less guaranteed money and a harder salary cap, we can create more parity among the teams in this league. We believe for the long-term success for the business, that’s important.
TRIBUNE: Are you proposing a system such as one employed by the NFL, with bonus pay but only one season guaranteed?
SILVER: What we’ve heard back from the players, it’s a non-starter to propose no guaranteed contracts. We haven’t proposed that. We’re saying there should be a balance between security for the player and flexibility for the team. Whatever the percentage of BRI we ultimately negotiate – something lower than it is now – we’re willing to guarantee that extent to the union, given that the contract isn’t fully guaranteed. By definition, that’s money going to a more deserving player.
Our view is, the players should want that same balance. They should want to see the money going to the highest-performing and most deserving players. There’s no reason why basketball players should be treated differently than employees in virtually any other industry, where there are incentives tied into contracts. It would seem to make sense that there should be greater incentives to win. Long-term guaranteed contracts aren’t the best way to create competition.
TRIBUNE: Currently, a team can offer its own player a six-year contract or extension, or a free-agent signee five years. What is the league proposing for the new CBA?
SILVER: Four years for your own team; three years for a free agent.
TRIBUNE: How many of the league’s teams are operating in the red?
SILVER: Approximately three-quarters of the teams are not making money.
Re: NBA Lockout!!!! WWBD?
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