Last month I argued the NBA lockout is about socialism, not greed. That is, NBA owners want to substitute central planning for the market price system. Some additional proof of my argument comes from Miami beat writer Ira Winderman:
[T]he NBA released a YouTube slideshow highlighting its latest proposal to the union amid.
And there, on the final slide of the presentation, the NBA offers a “sample team roster.”
It is a roster that, in the league’s words, includes: One superstar, one All-Star and three starters. Only one player in the NBA example holds a max salary, unlike the Heat’s mix of LeBron James, Dwyane Wade and Chris Bosh.
So why have independent franchises at all? If you want to centrally plan rosters to ensure an “equitable” division of talent — which won’t happen no matter how much you restrict labour mobility — why not simply merge the clubs into a single-owner entity under the direction of a professional basketball manager? It would make more sense than what the NBA is trying to pull off with this lockout.
Each owner could transfer his club to a new NBA, Inc., in exchange for a percentage weighted by appraised franchise value. The new single entity could then hire a business CEO — not a lawyer-commissioner like David Stern — to operate the league. Players could directly negotiate terms of employment with NBA, Inc., and the CEO (or his “basketball operations” department) could assign players based on where they would best help the league’s profitability.
I’m not saying such a system is ideal. I’m just trying to follow the owners’ arguments to a logical conclusion. An independent-franchise model makes no sense if you’re simultaneously trying to eliminate entrepreneurship from the equation. Constantly dragging down the better-performing franchises to the level of the poorly performing franchises is not the way to build a profitable business. Contrary to media and league propaganda, “parity” does not make your business profitable. The NFL is not more profitable than the NBA because of parity (which only exists to the degree it does in the NFL because of the small schedule, not the restrictions on player movement). The NFL is more profitable because its business model is better aligned with television. The NBA remains dependent on live attendance, particularly in the smaller markets.
The truth is, it’s probably a better business strategy to have a handful of marketable super-teams (like the Miami Heat) and carry the smaller teams as loss leaders. Parity needs to take a back seat to marketing. The NBA shouldn’t be looking to the NFL as a model, but the WWE. You can still draw fans in the marginal markets if you offer them more chances to see visiting super-teams (akin to villains in a wrestling match). Otherwise, they are de facto developmental squads for the super-teams. There’s nothing wrong with that, and hey, every once in a while, a smaller team will make a “Cinderella” run in the playoffs.
But let’s be honest. The NBA isn’t the NCAA. Duke-Butler might be OK for a college championship. But if the NBA regularly produced small market champions without big stars, pro basketball would fall behind the MLS in public awareness.
The NBA needs stars to thrive. And the current (and likely future) system does more to inhibit star development than promote it. Randomly assigning promising players to poorly managed franchises is not a recipe for long-term profitability. If you run a company, you don’t put your most valuable new hires in a position where they are most likely to fail. The NBA does so for political, not business reasons — there are 30 franchise owners who each have one vote on all matters and a commissioner who has no equity stake in the business.
The franchise system makes individual owners fiercely protective of their authority. That’s why an important tool businesses often use to retain key employees — stock options — are a forbidden subject in the NBA. Everyone acknowledges the immense value of a “franchise” player like LeBron James, yet he’ll never be in a position to obtain equity as a form of compensation. What makes more sense: A salary-only model that’s heavily restricted by price controls and artificial “caps,” or an open system that allows players to have a vested interest in making their teams profitable? Even under a single-entity model, players could earn equity based on performance. That would help eliminate some of the artificial tension created by the current system.
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