The NBA Lockout: Here's What You Need to Know

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The players want the NBA to be more like Major League Baseball. The owners want the NBA to be more like the NFL.

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Lucy Nicholson/Reuters

As if we didn't have enough labor crises already, the NBA has become the second major sports organization to enter a player lockout. Could 2012 be a year without basketball? (Or football?) We're here to guide you, step by step, through the squabble that could take down the $4 billion industry of professional hoops.

What's the NBA dispute about, in a nutshell?

The players want the NBA to be more like Major League Baseball. They want huge player salaries that are guaranteed to pay out, even if the player under-performs.

The owners want the NBA to be more like the NFL. They want smaller player salaries, more "revenue sharing," and the ability to let players go if they don't perform.

How did we get here? The NBA expects to lose $300 million this season after losing more than $300 million last season. Those losses aren't concentrated in a handful of clubs. Two thirds of the NBA's 30 teams will lose money this year, Commissioner David Stern said.

Owners currently pay players about 57 percent of their gross team revenue. If they paid closer to 50 percent of the pie, they might be in the black. That's what this fight is about: Designing a system that allows teams to offer players competitive salaries without bankrupting smaller teams.

What's the difference between a "hard" and "soft" salary cap?

A salary cap is a spending limit on your players. The NFL has what's called a "hard" cap. There are very few exceptions where teams can spend above the limit on players. This makes teams more competitive. It also means that owners don't get into a horse race to see who can pay the most money.

The NBA has what's called a "soft" cap. The official limit is about $58 million, but teams can go over that in all sorts of ways. The most famous is the "Larry Bird Exception" that allows teams to resign players above the cap without it counting.

Most basketball teams spend above the cap. Boston, New York and the Los Angeles Lakers can spend more than $100 million, while Minnesota spends less than $50 million. Like major league baseball, teams that spend way above the cap pay a luxury tax that is redistributed throughout the league.

What do the owners want, and why?

The owners want more money. First, they are asking for a one-third reduction in player salaries. Right now, owners are required to spend nearly 60% of team revenue on players. They want to bring that down closer to 40%.

Second, they want a hard cap.

Third, they want "non-guaranteed contracts." This will let them cut, or renegotiate with, a player who under-performs. One of the highest paid players in the league right now is Rashard Lewis. He's guaranteed to make $21 million in the final two years of his contract. In the last two seasons he's played only 50 games and averaged half the point total of Dwyane Wade. The owners want to be able to get out of those contracts.

Fourth, the owners -- particularly owners in smaller markets -- want more aggressive "revenue sharing" so that teams that spend like New York and LA do more to subsidize teams that spend like Minnesota and Charlotte.

What do the players want, and why?

The players want more money, too. They want to keep guaranteed contracts because that's guaranteed money. They're opposed to the hard cap because that caps their salaries. In particular, a hard cap would keep the wealthier teams from bidding competitively on players.

The players union also wants revenue sharing to be part of the collective bargaining agreement so they can force teams at the lower end to spend more on player salaries.

Will there be a 2011-2012 NBA season?

"The NBA lockout is going to be a lot more contentious and prolonged than the NFL," said Jeffrey Standen, a professor of sports law at Willamette University and author of The Sports Law Professor blog.

"The owners in the NFL have the basic structure of the collective bargaining agreement," he continued. "The revenue percentage. The rookie salary compensation scheme. It shouldn't be too bad of a negotiation. In the NBA, the owners want some fundamental changes to the collective bargaining agreement."

Why has the looming NBA lockout received less attention than the NFL lockout?

Maybe because football is the king of sports. It's a more distinct season. It holds the fall to itself. Also, the NBA is a long, spread-out affair. If basketball misses a third of its regular season, it still has 55 games. If football misses a third of its season, you're down to 10 games.

What might a final deal look like?

If owners can cut player salaries, as a percentage of gross team revenue, by a sixth, and then get concessions on players' rights (perhaps by eliminating sign-and-trade deals), we might get a deal.

What can I say about the power of players in sports that will make me sound really smart? Will Leitch writes in The Atlantic about how workers in sports (that is, athletes) are learning to* control their business to a degree unlike any other industry in the country:

LeBron's example marks an evolution in athlete culture, one in which players realize their power. You're seeing this everywhere now, from the NFL and NBA labor battles to the better understanding of concussions and athlete safety. For their part, fans are better educated than they've ever been (thanks to the Web) and are starting to side with the players in kerfuffles like labor disputes. Fans used to feel that owners somehow "earned" their money, while pro athletes were just fortunate winners of a genetic lottery. This is the exact opposite of the truth. (Holding on to your job is about 95 million times harder for a player than for an owner.) Sure, guys like LeBron and Carmelo Anthony are seen as mercenaries, but from a business standpoint, we understand their leverage ... and even appreciate and envy it*
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*Quote changed.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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