'This story appears in the Oct. 31 issue of ESPN The Magazine.
IS THERE ANYTHING MORE BORING than a lockout? One gray-haired, grimly smiling guy steps from a fleet of SUVs to a battery of microphones and says he wishes the two sides weren't so far apart. Another gray-haired, grimly smiling guy steps from the next line of SUVs to the same microphones and says his side's resolve is stronger than ever. Instead of highlight reels, we get a dull, corporate scorpion mating dance.
But a footnote in history says our sports don't have to be held hostage by negotiations. In 1890, a group of baseball stars formed the Players League, which shared profits among athletes and investors. Greed and mismanagement doomed the league after only one year, but its concept of solidarity still applies. Now that the NBA lockout has already brought, as of press time, the cancellation of at least two weeks of games, the sport's stars have even more incentive to take control of basketball's most valuable resource -- their talent -- and start a league of their own.
"I've discussed forming our own league with LeBron," Carmelo Anthony told The Mag in mid-October after playing in the South Florida All-Star Classic, a packed-house charity game that also included King James, Kevin Durant, Chris Paul and Dwyane Wade. "You can see the fan reaction here. They need it, we need it. I can tell you that I'm working on something. We'll see what happens."
Amar'e Stoudemire agrees: "It's something that we've thought about. Obviously we want to play in the NBA and get this situation resolved. But if it doesn't, we still want to play at a high level and keep our fans satisfied."
In other industries where talent works with suits to produce entertainment -- Hollywood, music, publishing -- artists receive royalties. Yet in sports, the concept of players as owners remains a novelty, even though it's the athletes we pay to see. Since the Players' League folded a century ago, athletes have been punching clocks in all our major sports. Incredibly lucrative clocks, for sure. But NBA owners have let hard-liners like Cleveland's Dan Gilbert and Phoenix's Robert Sarver set an agenda of reducing the money flowing to players by hundreds of millions of dollars. If the NBA players' association reacts by simply conceding a few percentage points of revenue, the owners will come back in a few years, claiming more losses and seeking more givebacks.
Audited financial statements of NBA owners show that they lost a combined $1.55 billion from 2005-06 to 2009-10. But most NBA franchises are like the Mona Lisa; they're worth owning not because of what they make or lose in a given year but because they are rare and prestigious and accumulate value. The average NBA team has gained more than $100 million, or nearly 40 percent, in value since 2003, during the worst economy in decades. Team owners also get a crazy, and lucrative, tax break. They can write off 100 percent of the amount they paid for their teams over 15 years, on whatever schedule they like. This is a fabulous way to make profits disappear for tax purposes -- or during labor negotiations. There's little debate that buying or keeping most franchises is a no-brainer for anyone with enough money.
With such a cash cow at stake, the owners do everything they can to choke off competition while the NBA is active. But this is America. I can lock you up to play for me or I can lock you out from playing for me, but not both.
So should players secede right away? No way. As long as there are games left on the 2011-12 calendar, NBA commissioner David Stern could crush any talk of a new league simply by lifting the lockout. With the proviso that a players' league makes sense only if this entire season is canceled, what would it look like? After talking with players, financial experts, media consultants and potential investors, and looking at plans floated by gadflies like Michael Tillery of the Starting Five blog, here's our stab at a basic business plan.
MISSION STATEMENT: The National Players League (NPL) is of the players, by the players and for the players and fans. It will provide the highest-quality competition and entertainment.
BUSINESS CONCEPT: The NPL will leverage the talent of the world's top basketball players to achieve three goals: First, to stage games in place of the NBA season. Second, to establish a new business model for basketball, in which the players themselves own the league and fewer intermediaries exist between the league and fans. Third, to exploit the NBA's areas of vulnerability to grow and expand the new NPL.
FUNDING: The NPL's overall goal is to raise $500 million. Initial seed money will come from a source that has gone largely unnoticed in the current labor dispute: escrow overages.
Under the NBA's expired collective bargaining agreement, players were entitled to 57 percent of the league's basketball-related income every year. But team owners couldn't know whether all of the contracts in the league would add up to more or less than that until after each season, so teams withheld a small portion of every player's paycheck in an escrow account. At the end of each season, if teams had collectively already paid out more than 57 percent of revenues to players, they kept part or all of the account; if they had paid less, they gave the escrow back.
Last season, for the first time under this CBA, the owners paid out less than 57 percent. As a result, the NBA refunded $188 million to the players. Asking players to forward their escrow checks to the NPL would be a perfect way to start a new league: Every player in the union would contribute an equal fraction of his salary in the form of the roughly 8 percent that the league had withheld. Members would all become part-owners of the new league, whether or not they play in it anytime soon. And the money would have originated from an NBA bank account, not players' pockets.
Further, the NPL will offer primary ownership roles to players willing to invest $10 million or more in the new league. Ten players have earned significant MVP votes in the past three years (with a steep drop-off beyond them): Anthony, Bryant, Durant, James, Paul, Wade, Dwight Howard, Steve Nash, Dirk Nowitzki and Derrick Rose. As the NPL's top players and revenue producers, they will be given first chance to be managing partners of NPL franchises. If one of them balks, then player rep Derek Fisher would step in and be given the first pick.
OPERATING STRUCTURE: The NPL will launch with 10 teams of 10 players, in two types of cities. The league will first look to locations that are NBA-ready but don't have NBA teams. Stern has previously said Kansas City, Pittsburgh, St. Louis and Tampa-St. Pete have "good buildings"; we can add Anaheim, San Jose and Seattle to that list. Second are cities that have strongly supported the barnstorming games held during the lockout: Las Vegas, Miami and possibly Baltimore or Philadelphia.
Teams will stock their rosters through a nine-round, 90-player draft, creating one of the greatest basketball spectacles ever: Dirk, Kobe and LeBron battling it out over the rights to Manu, Rajon and Blake. Each team will have an initial budget of 10 percent of the league's investing pool (or at least $50 million per franchise). Teams will share the league's overhead: the costs of insurance, promotion and travel. Beyond that, the managing partners, together with the general managers they hire, will negotiate player salaries.
There will be no graduation requirements, no age limits, no maximum salaries, no salary caps. The NPL is about competition, not misallocating resources because of top-down rules.
Teams will play each other five times. The NPL's 45-game schedule will begin on what would have been NBA All-Star weekend and end with two rounds of playoffs the week before the start of the NFL season.
PRICING AND MARKETING: With teams, cities and venues established, the NPL expects to secure a national TV partner. The likeliest: Comcast-NBC, which could use more sports programming in the late winter and spring, and which is rebranding its Versus outlet toward traditional sports.
The NPL is confident that some media giant will offer a contract because live sports remain one of the few ways for advertisers to reach the viewers they covet. Advertisers are expected to pay about $1.3 billion to ESPN/ABC, TNT and NBA TV for NBA games in 2011-12. If this season is canceled, where better for them to redirect at least part of that spending than to replacement top-level basketball programming?
At the local level, the NPL will focus on attracting fans to games, not maximizing revenues. High ticket and concessions prices have driven away many people, particularly younger and black fans, from the NBA experience. Part of the NPL's mission is to overcome that trend. Maintaining robust crowds is also important in order to generate favorable media coverage and a good TV presence. The new league will keep ticket prices between $5 and $20.
ANALYSIS OF COMPETITIVE RISK: Even assuming the NPL finds capital and generates revenues, it faces two severe risks. A new organization will find it hard to meet demand from fans who want basketball but are used to getting it from the NBA. "We looked at an alternative football league that eventually became the XFL," says Harvey Schiller, CEO of GlobalOptions Group and former president of Turner Sports. "And one thing came from fans, almost to a person, when we reviewed their opinions. They said, 'You guys can do whatever you want, but don't mess with my NFL.' "
The NPL is betting that hoops fans have less of an unshakable connection to the names and traditions and logos of their favorite franchises than they do to the names and styles and personalities of their favorite players. After all, 1.1 million people just watched the live Internet feed of Chris Paul's All-Star Charity Pickup Game. NBA players are more visible than baseball or football players. It's arguable that in basketball, Michael Jordan and LeBron James fans connect to them more than any particular organization.
The other prime risk is competition from the NBA itself. But if the owners carry out their threat to kill the season, then fans, sponsors and corporate partners will all turn their attention to whatever basketball springs up. Yes, Adidas has a $400 million deal to outfit the NBA in apparel, but what would Nike pay to dress LeBron and Melo in new unis? Yes, Spalding makes NBA basketballs, but Rawlings and Wilson could bid for that contract. And yes, it will be difficult to fill front-office, marketing and medical staff, but the NPL can start by hiring people the NBA lays off. The NBA is a dominant entity and a powerful brand, but its competitive position will begin to crumble.
HOW MANY THINGS COULD GO WRONG with this plan? How about everything. Let's face it, the history of alternative leagues isn't too bright. Players could cave once they start missing paychecks. They could quarrel over money or mismanage it, or fail to find outside investors. But if they band together at this moment, the NPL would have something that no other alphabet-soup combo in the history of rival startups, from the AFL to the USFL to the WHA, ever boasted: the best players.
"Even in the ABA, which had Dr. J and George Gervin, most of the players were nobodies," says David Berri, associate professor of economics at Southern Utah University and general manager of the website for Wages of Wins Journal, an early proponent of a new players league. "But the best players could be in this new league."
The NPL draft would be fun. Athletes would be paid a combination of salaries and profits. Competition would be high-level. Games would be cheap. It's a chance to combine the best aspects of the NBA, reform proposals and fantasy games into one entity.
Of course, if the NPL ever came close to viability, Stern and his minions would probably unhinge their jaws and do whatever it took to swallow the new league. Which brings us to exit strategy, something traditional business plans don't usually make explicit. Previous alternative leagues often sought expansion via mergers, but that's not really an issue here. The players will need to decide on what terms they would fold this new league. Here's a suggestion that would bring the soul of the NPL concept into the NBA and would potentially change labor agreements across sports: Any new CBA should allow player compensation to include partial ownership of franchises, which players would convert to cash if they switch clubs or the team is sold.
If NBA players are willing to assume the risks of owning their teams, they should be able to share in the profits. Because if NBA owners, with their monopolies, subsidies and tax breaks, are really losing more than $300 million a year, then the right response isn't to shovel more revenues at them. It's to put some new drivers behind the wheel.
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