Though there are many issues to be considered in the negotiations, the two main issues at the heart of the disagreement between players and owners are what percentage of the Basketball Related Income (BRI) should go to the players vs the owners, and whether the salary cap should be a hard cap or a soft cap.
The BRI issue is an inherently complex one with many factors going into why the figure is calculated the way it is (meaning, which sources of income are counted and which are not) and how the pie is sliced between ownership and the players. Right now, the players (defined as both salaries and benefits) get 57% of the BRI, although that number can rise to 57.5% or 58% if the BRI exceeds certain thresholds. Obviously, the players want a higher percentage while the owners feel they’re getting too much as it is.
The salary cap issue is an easier to define, though no less contentious than the BRI issue. Right now, the NBA has a “soft cap”, meaning that there exceptions to the cap that allow teams to spend more than the allotted cap ceiling. The owners have stated they would like to implement a “hard cap” with the new CBA, meaning that there would no longer be any exceptions to exceed the cap and all teams would be bound by the exact same salary parameters.
It’s easy to see why owners like this system and why players abhor it. Simply put, with a hard cap, ownership can more easily control spending and thus maintain profits while also theoretically fostering an system that promotes equality on a competitive scale. Players, though, see it as a limit not just to salaries, but also to the potential number of contracts signed. Currently, any team can sign any player to a minimum contract no matter what. In a hard cap system, teams can only sign additional players if they have the cap space. Furthermore, to give teams the ability to have the minimum roster size, teams also need to have the ability to void contracts and get under the cap, thus making non-guaranteed contracts more common place, another trend that players simply cannot allow.
That’s a brief overview of the issues facing the two sides as we draw closer and closer to a potential lockout, but I’m sure the issue that readers care most about is how these issues affect the Cavaliers, so lets take a minute and look at it a little closer in that context.
Had this issue come up a year ago, I’m positive Dan Gilbert would have privately supported a soft cap system. Why? He had the game’s greatest player on his roster, and he used his willingness to spend above both the cap line and the luxury tax line as a tool to help Danny Ferry build Championship contending teams around LeBron. A hard cap system would have made it exceedingly difficult to pay LeBron what he’s worth in the future while also keeping contending caliber players around him.
Now, though, with LeBron gone, things are a little different. To be honest, I would have still guessed that perhaps Gilbert would prefer a soft cap so that he could use his ability to spend money to help the team rebuild quicker. However, according to CBS’s Ken Berger, that’s not the case at all. Berger wrote a great article the other day discussing the nuances of switching to a hard cap and why it could be a travesty to the NBA as a whole, and in it he wrote the following:
Hard to imagine, but it depends on which owners are driving the negotiations. Will it be the hard-line, vocal new wave of owners such as Robert Sarver (Suns), Dan Gilbert (Cavaliers), Wyc Grousbeck (Celtics), and Leonsis, guys who weren’t around for the 1998 lockout? Or the old guard, led by Timberwolves owner Glen Taylor and Spurs owner Peter Holt, the top-ranked owners on the labor committee? Taylor and Holt have been the loudest voices in the two most recent bargaining sessions, according to sources who described them as the “voices of reason” -– which explains the more amicable tone of the talks.
Leonsis, evidently, didn’t get the memo. And if the hard-liners have their way and push the envelope for a hard cap, the NHL represents a “cautionary tale,” according to Gabriel Feldman, director of the Sports Law Center at Tulane University.
“I don’t think it’s clear to be able to say that because the NHL has a hard cap, the NBA should get a hard cap because the NHL has competitive balance,” Feldman said. “I don’t think the hard cap is a cure-all. It has its own drawbacks.”
I’ll be honest, I was initially a little surprised to see that not only is Dan Gilbert in favor of a hard cap, but he’s also one of the strongest voices actively pushing for a hard cap. I can think of a couple reasons, though, why he might be pushing for a hard cap beyond just the obvious benefits of limiting player salaries across the board.
First, the main idea of the hard cap is to promote parity. Great minds can debate whether it actually succeeds in that goal, but it’s certainly the main idea behind it. If all teams are bound to the same player salary limits, it cuts off certain built in advantages cities like New York, Los Angeles, Chicago and yes, Miami, have. Nobody was burned more this summer by Miami than Dan Gilbert. Under a hard cap, there’s virtually no chance Miami could have landed Wade, Bosh, and LeBron unless all three took serious pay cuts (as opposed to the laughable semantic pay cuts they are currently bragging about).
The NHL uses a hard cap, and it’s unfathomable to ever see a situation where Alex Ovechkin, Sid Crosby, and Steven Stamkos all teamed up. Financially it just wouldn’t work. As a result, superstars in the NHL tend to sign high dollar long term contracts with their teams and there’s not much movement among the elite players (although it certainly does still happen as seen this summer with Ilya Kovalchuk). I could easily see this being a reason for Gilbert now preferring a hard cap.
The NBA definitely gives the illusion of parity, but the truth is that only 7 different teams have won the Championship in the last 27 years (Lakers, Celtics, Spurs, Heat, Pistons, Bulls, and Rockets). In the 12 years under the current soft cap system only 5 teams have won. In the 5 years under the NHL’s new hard cap system there have been 5 different Stanley Cup Champions. In the 10 season prior, there were only 5 different Champions. It would be a leap to assume that the hard cap is the sole reason for the NHL’s recent parity, and it would be just as presumptuous to project a hard cap affecting the NBA in the exact same way it affected the NHL. The point is just that the goal of a hard cap is to create parity, and this is probably the prime reason Dan Gilbert supports the hard cap.
Secondly, a hard cap could increase the value of the Cavaliers’ trade exception they acquired from the Heat in the LeBron trade. The uncertainty of the CBA that currently exists is a major impedance on Chris Grant’s ability to use the exception. Teams are going to be hesitant to make any move this season as long as they are unsure of what the financial future of the league is going to look like. It’s also unclear how an existing trade exception would be used if the league switches to a hard cap exception-less system. Having said that, though, the ability to trade for a player and only giving cap relief and draft picks in exchange is an enormous advantage in a hard cap system and it would allow the Cavaliers to take advantage of teams desperate to get under the hard cap ceiling. I would hope Dan Gilbert wouldn’t sell out the long term ability of the Cavaliers to stay competitive for the short term ability to quickly improve, but this could be yet another reason for Gilbert’s strong support of the hard cap.
Finally, another reason why Dan Gilbert supports a hard cap might simply be pettiness. While the hard cap would surely have to grandfathered in to the league in some manner, there’s still no doubt it would adversely impact the Miami Heat in the near future. It would make it next to impossible for the Heat to field a full team around the big 3 and could potentially force them to have to dismantle the team.
At the end of the day, I think it’s a long shot that the NBA would succeed in going to a hard cap. Not only would it be a deal killer for CBA negotiations as Berger pointed out in his column, but as much as we Cavs fans hate it, the Miami Heat are good business for the NBA as a whole. Fan interest is through the roof and this is being called the most anticipated NBA season ever. No way would David Stern want to see these kinds of dynasties dismantled. The sad reality is that these kind of superstar mashups are the wave of the future for the NBA and they aren’t going away any time soon. It’s bad news for markets like Cleveland, but the soft cap system does still allow for success for small market teams with owners willing to spend to exceed the cap.
There’s no question the CBA negotiations and the resulting changes to the league’s salary structure will have some kind of impact on the Cleveland Cavaliers and their ability to rebuild. It’s a story we’ll be watching with a close eye all season long and the only question is what are we, as Cavs fans, supposed to be rooting for? What system is in our best interest? I’d like to believe a hard cap benefits the Cleveland market the most, but I still think the soft cap benefits an aggressive owner like Dan Gilbert more. As long as a team is smart and doesn’t spend money just for the sake of spending, it can work. Opponents will point out that the soft cap means small market teams have to overpay to get talent to come, and that may be true, but in a hard cap when the money is equal across the board, often times a city’s amenities can come into play, and that’s a situation that does not help the Cavaliers.
In reality, the Cavaliers have to accept the harsh truth that if they can’t even keep a hometown player like LeBron James, then there’s probably no system that will benefit them in terms of drawing superstars. Perhaps the best thing for the Cavaliers to do, then, is to learn from the Detroit Red Wings in the NHL. The Red Wings have been able to thrive in both a cap-less system and the new hard cap system despite the economic woes of the city of the Detroit. Sure, in the cap-less years they weren’t afraid to load up on high priced superstars, but they have found equal success under the hard cap by scouting well, drafting smartly, and being judicious in their free agent signings, picking and choosing the right players who fit their system and not overpaying to do so.
Whether the NBA ends up with a hard cap or, more likely, sticks with the soft cap, there are lessons to be learned about rebuilding by examining the success of franchises in all sports. That will be the challenge for the Cleveland Cavaliers as they move forward.
Image Source: Cavs.com