The NBA's salary structure is essentially built to ensure that players and owners share revenue equally. Both sides are guaranteed a certain portion of basketball-related income through the collective bargaining agreement, somewhere between 49-51 percent. If players make too much, the difference is covered through escrow withholdings, and if players don't make enough, they are paid out the difference.
The flaw in this model is that revenue is not necessarily the most valuable financial component to owning an NBA team. Where most owners are truly seeing a windfall is in franchise valuations. A mere decade ago, the NBA was having so much trouble attracting buyers that the league itself owned the then-New Orleans Hornets for a brief period. But given the supreme value of DVR-proof live entertainment and the league's growing global footprint, franchises have become more valuable than ever. In 2013, the Milwaukee Bucks were sold for $550 million. That was the highest price any NBA team had ever fetched. But Steve Ballmer's $2 billion purchase of the Los Angeles Clippers a year later broke the scale. When Forbes released its 2020 team valuations, all 30 NBA franchises were worth a projected $1.3 billion or more.
This is an area of financial growth for the NBA that its players have no access to, and that is something that they would like to change. Michele Roberts, executive director of the NBPA, spoke at Tuesday's SporticoLive event and suggested that she would like to see that changed in the next round of CBA negotiations.
"We've got a collective bargaining agreement that says we can't [own stakes], and hopefully down the road we'll make some changes," she said. "The players will be the last to suggest that we want to see the game's value, or teams' values, in any way diminish, but it sure would be nice to be able to go to the party."
As Roberts said, players are not currently allowed to own stakes in franchises. In all likelihood, they never will be. Even if players ask for it when the current CBA expires in 2024, owners are unlikely to surrender such a valuable chip without serious concessions on other issues.
Even if it did become allowable, the idea raises a number of logistical questions. For example, would the players as a whole be guaranteed a certain percentage of team ownership, or would equity be something that individual players, likely superstars, could negotiate for?
If it's the latter, how exactly would that practice work in conjunction with the league's max salary? Currently, players are limited to predefined percentages of the salary cap, which is expressed in dollar figures. Team valuations are somewhat nebulous. Would players be allowed to negotiate for a predefined percentage of a team, or would a third-party need to appraise each team annually to ensure that no team could offer more than the cash equivalent of the max in equity?
And let's say, for instance, a player negotiated for an ownership stake in a team, but then left through either a trade or free agency. Would they be bought of their share? Would they lose it outright? It wouldn't be competitively viable for a player to own a stake in a team that he doesn't play for. That would create a conflict of interest. So how would players and teams handle movement?
In theory, it could prove to be a somewhat elegant solution to the league's current issue with superstar movement. Perhaps players would be more inclined to remain with small-market or non-competitive teams if they were financially incentivized to help turn those teams around. That sort of investment might create a sort of economic loyalty that would make it easier for certain teams to retain their best players.
For now, this is just an idea, and an unlikely one at that. But it's one that recognizes the reality that players are missing out on the most lucrative element of their own business. Whether or not this proves viable remains to be seen.
