First Major Labor Hurdle Falls, Players Get Big Boost

lockoutThere were no negotiations yesterday, but a huge hurdle fell as the NBA lockout trudges towards week number three.

NBA owners released $160 million in escrow money that is withheld every season from NBA salaries.  

Escrow money withheld from all NBA players’ paychecks each season will be returned to them this off-season for the first time, providing a $160 million infusion of cash in the midst of the league’s labor lockout.

The escrow funds — representing eight percent of each NBA player’s salary — are held back each season to ensure that the players’ share of basketball-related income does not exceed the contractually agreed-upon percentage, currently 57 percent. This year, for the first time since the system was introduced in the collective bargaining agreement that came out of the 1998-99 lockout, the cut to players will fall short, sources with the NBA and the National Basketball Players Association confirmed.

This is a huge step in the negotiations because owners were intent on keeping the money.  That intent had stalled negotiations before they even really started.  The players said they had earned that money and the owners said they were keeping it.  So the owners letting it go will at least pull that hurdle out of the way. 

But the players now have some ammunition as well.  This isn’t what the NBA owners needed as they cry poor and demand a major overhaul of player salaries.  To crunch last season’s numbers and determine that even with all the money players made, they still didn’t get 57% of gross revenue hurts the ownership position (if players had gotten 57%, owners would have kept that money).  Players can now contend that its ownership excess that is the main problem, not salaries.  

That’s not to say that the system doesn’t need tweaking.  But the release of this money will only strengthen the NBPA’s position that that’s all the system needs.  They can maintain that dropping their cut to 54.3% (the number in their counter proposal), along with some more sound financial moves by ownership, would be all the system needs to erase those losses.  

And lets not discount the financial boost players will get from this.  The release of this money means players will at least get some money during the lockout.

That cash could ease or delay the point at which some players begin to feel financial hardship from the lockout. Based on the “average” NBA salary of $5.7 million, the escrow rebate would be worth $456,000. A minimum-salaried player ($473,604) would be due $37,888 while a $16 million superstar could expect $1.28 million coming back

It will be interesting to see if the NBPA does anything with that money to help some of the younger players withstand the lockout and maintain their resolve if negotiations cut into the season.  $37,888 isn’t much for a minimum guy, but it’s something.  And a $16 mil per year guy can maybe toss some of that $1.28 million back into the pot so some end-of-the-bench rookie struggling to make mortgage payment can get by for a few more months.  The union could just look at it as found money, and encourage players to share it in an effort to stand up against ownership.

A big hurdle has been removed in these negotiations, but that won’t necessarily mean both sides will now walk back to the table and start talking.  Public, financial proof that player salaries aren’t crushing the system and a cash infusion that could help buoy players during a work stoppage don’t necessarily bode well for ownership.  Those are two big wins for players.  They may choose to ride this momentum for a while and see what other hits the owners might take without even setting foot in negotiations.