What We’re Reading: December 23

With the holiday season approaching, we figured it was an appropriate time to turn towards the most festive of sports topics: labor negotiations. This week we take a look at some interesting developments in the NBA and MLB, including the new Collective Bargaining Agreements (CBAs) outlined for both organizations.
The NBA
  • November 1st to December 25th of 2011 was unique in the sense that there were no NBA games played; the fourth lockout in the history of the league shortened the 2011-2012 season from 82 to 66 games and caused an estimated $400 million in losses. Another lockout seems unlikely after an agreement was reached by both sides last Wednesday. The new CBA tackled many of the thorny issues that derailed the last negotiations, including Basketball Related Income (BRI) splits and the luxury tax.
  • Who can forget the headlines from last summer, when Mike Conley signed the largest contract in NBA history (5-years for $153 million)? While Conley is a core part of the Grizzlies team, the contract was more likely a product of him entering free agency just as the cap ballooned. Lost in the cap jump was the fact that minimum salaries and the rookie scale didn’t budge. This has been rectified in the new CBA, with minimum salaries rising by 45% across the board. Indeed, Sports Illustrated predicts that the average player salary will climb to $10 million by 2020-2021.
  Major League Baseball
  • Major League Baseball also recently preserved labor peace, as the owners and the union were able to agree to a CBA which updates issues like the luxury tax, draft pick free agent compensation, and international free agent spending limits. Notably, the luxury tax could be as high as 60-70% for teams significantly over the spending threshold. We’re looking at you, New York and LA.
  • The hard cap on international spending could have far reaching consequences in the international talent market, argues Ben Badler. The hard cap levels the playing field for MLB’s smaller teams, yet it will almost certainly depress salaries for Latin America’s top talent.   What’s more, the new CBA stipulates that international players must be at least 25 to be exempt from the cap, meaning that 22-year-old Japanese superstar Shohei Otani will likely not arrive in the Major Leagues for at least another three years.
Both agreements will surely bring about changes to their respective leagues.  For the NBA, allowing teams to offer a six (rather than five) year extension to certain veterans will afford those teams a better chance to retain their top talent.  For the MLB, harsher penalties for chronic big spending could act like a pseudo salary cap.  In both cases, the agreements answer the question (for now) of how massive revenues will be allocated between players and owners.