Wednesday, December 3, 2014

The Conference Problem

Over at Grantland, Zach Lowe has an interesting article about the growing disparity between the two conferences and what people around the league are saying about it. The West is much better than the East - it is known. There have been a lot of proposals about what to do about it and there are a few more in Lowe's piece, but the things that really jumped out to me in his article were tucked away in the middle of the piece.

Any change would appear to be a hard sell for Eastern Conference owners who enjoy playoff revenue. There is anxiety around the league over more new owners voting in their teams’ interest rather than thinking league-first — a trend that seized the lottery reform debate and promises to intensify as the NBA discusses changes to its revenue-sharing system.

That first sentence certainly seems like a bit of an understatement. According to Lowe's numbers, NBA teams make an average of $2 million per home playoff game. That type of money adds up really quickly, even for guys with as much money as your average NBA owner. A system that makes it harder for his team to have home playoff games would take money out of his pocket. These are people who are about their money.

For a franchise like Charlotte, why are they going to vote for anything that makes it harder for them to make the playoffs? They have a hard enough time making the playoffs out East! If you force them to compete against some of the big dogs out West, they might need a decade to get into the playoffs - look at what happened to Minnesota. Would it be hard to sell MJ on the benefits of conference re-alignment? I'm going to say yes.

If the Top 16 teams by record made the playoffs last season, that would be $4 million bucks less for MJ. He didn't get to where he is now by agreeing to take less money for the greater good. That's not the way the game works. What's the value of making the playoffs for the Hornets as a franchise? When you look at building brand equity and growing a fan base, it's way more than $4 million. That's the money MJ would need to see to agree to this.

As the article mentions, the push for re-alignment is coming from Western owners like Robert Sarver in Phoenix who want to make more money. His team won 48 games and didn't make the playoffs - he is bummed about that and he would like to create a system where it would be easier for his team to make it. Logically, then, owners like MJ in Charlotte are going to be opposed to a system where it would be harder for them to make it. There's a lot of money on the line.

The balancing process would accelerate if teams that needed high draft picks the most actually got them. That’s how you sell realignment to East owners who can’t see past playoff gate receipts: Your 35-win first-round roadkill doesn’t get a lottery pick today, but in a 1-to-16 world where conferences don’t matter, you might pick 12th instead of watching the 48-win Suns grin on the lottery dais.

In the last five drafts, the East had the Top 3 picks in 2010, 2013 and 2014. They had the No. 1 pick in 2011 and the No. 2 and No. 3 picks in 2012. It's unfortunate that the one top pick that didn't go to the East in that time-span was Anthony Davis, but teams in the East are winning plenty of lotteries under the current system. And when you look at the bottom of the East, there is usually one below .500 team at the 8 seed and that's it.

There may be some benefits to more Eastern teams having picks slightly higher in the draft, but they aren't going to overwhelm the huge advantages that playing in such a weak conference does for any decent team that makes the playoffs. The Toronto Raptors and the Washington Wizards have a real chance of competing for a conference title out East and they would be two of the teams fighting for one of the last playoff spots out West. Those are two young teams who are starting to come into their own - if they can make a few runs to the Conference Finals, much less an NBA Finals, it will take those two franchises to a whole different level. Why are they voting for a proposal that makes that harder for them?

It's the same thing with every other team in the East. They are going to be looking out for their own self-interest, which was the really enjoyable nugget that Lowe threw in the piece - some people around the league are a bit concerned that owners are voting for their own narrow financial interests and not the overall strength of the league. I get the feeling that is another understatement and it tells you all you need to know about any proposals based around the idea of growing the game or thinking long-term to improve the product.

There are still a few family-run NBA franchises in the NBA, but most of the ranks of the ownership corps have changed over in the last 15-20 years. The money just got too big for the original owners, who all ended up making an absolute killing from their time in the league. For the new generation of owners, the NBA is a straight up business. It's not the family farm. You don't spend $2 billion on anything if you don't intend to treat it like an investment.

Let's not forget what the business of the NBA league office actually is. It's not to put on the fairest and most competitive tournament for a championship. It's to maximize the money of the owners of the league's 30 franchises. If putting on the fairest possible tournament is the best way to do that, that's great, but it is kind of beside the point. The point is for each owner to make as much money as he possibly can from owning his team.

The owners are essentially Marlo from The Wire. Marlo isn't really a character in the traditional sense because he doesn't seem to have discernible personal emotions or back-story. Marlo is Capitalism, capital letters. It doesn't really matter who the owners are - the game would still be the game and whoever was in charge would want as much money as they could get their hands on. The system selects for people who are going to maximize ROI.
There's always going to be a Marlo. No Marlo, no game.
In this scene, one of Marlo's underlings is robbed and he tries to convince Marlo to take the loss, rather than him.
Omar ain't no terrorist. He just another nigga with a gun. And you ain't no Delta Airlines, neither. You just a nigga got your shit took. So bring me what you owe, and talk that global economy mess somewhere else. Feel me?
That's kind of how I picture a meeting between Adam Silver and the owners, if he ever tries to convince them to take less money.

Here's how Marlo negotiates. Tell me if it sounds familiar.
Drug Dealer: Look man, all I'm saying if I'm gonna take you're package, split me and be fair. I got to pay all my people the same, and here you're upping the price on me. 
Marlo: Pay your people less.  
Drug Dealer: They my people, though. 
Marlo: Then short yourself. Split is 60/40. If you want better? You need to tool up and wait for Chris, Snoop, and the rest of my people, come pay a call on your people. 
Snoop: We will be brief with all you motherfuckers, I think you know.
That's the lockout in 100 words. We're changing the deal. Pray we don't change it any further.

The silver bullet is slicing games off the schedule. You don’t even need to get down to a 58-gamer in which every team plays everyone else twice, minimizing travel headaches. Every game you lop off from 82 makes it a hair easier to nibble away at schedule imbalances. 

That’s obviously not happening anytime soon. Gate receipts are soaring in some markets, and neither players nor owners are eager to give those up. The Knicks approached a record $145 million in net gate receipts last season, nearly $3.5 million per game, and the Lakers pushed $90 million, per several league sources. A bunch of smaller-market teams don’t even sniff $1 million in gate per home game, but that scarcity makes every game feel precious. 

The NBA’s mammoth new national TV deal might withstand a schedule slice, since the league could earmark the same number of games for its broadcast partners. But local TV deals are based on teams filling 82 prime-time slots, and several teams are set to negotiate fat new local deals over the next couple of years.

Of all the pie in the sky reform ideas out there, the one I have always been the most partial to is reforming the NBA schedule. There are way too many regular season games and everyone knows it. It makes all the sense in the world to play fewer games, but as Lowe says, that is obviously not going to happen. Teams are making way too much money per game to even think about cutting the number of games. It's not smart business.

The name of the game these days is providing content, so why would you diminish the amount of content you can produce and therefore sell? The biggest reason why baseball players make more money than the guys in other sports is they play 162 games a season - 81 home dates means a lot of tickets, a lot of stadium revenues and a lot of commercial slots on local TV. Those 41 regular season home games? They aren't going anywhere.

When you are making $3.5 million a home game, why exactly would you play fewer home games? It just doesn't make any sense. And when you are negotiating for a local TV contract, why on Earth would you agree to any change in your business model that would lower the ultimate price you could command? The NBA is like any business responding to what the market wants. If the market will pay for 82 games, than 82 games it is.

It's not just the owners. The players may want to play fewer games, but they aren't going to want to take less money. It would be the same for any of us. If you could get a 5-10% cut to your paycheck if the NBA didn't play 82 games, you would probably be cool with them playing all 82. With all the money that owners and players are making with the current system, they are going to want to find a way to make it work.

Even a small step like shortening the pre-season is not going to be easy. Whose going to make up for the money they would have made on those pre-season games? A lot of times they play games in cities that don't normally see NBA teams, which is a pretty guaranteed money-maker, so the owners aren't going to want to get rid of that. The money is going to have to come back at them some other way. They aren't just going to take the loss.

When people talk about reforming the NBA, they have cause and effect wrong. They see problems and look for solutions. For the owners, the problems come and go but the solution is always the same - they need more money. Whatever the problem is that justifies the solution doesn't really matter. If the problem doesn't require a solution that gets them more money, then it's a problem they aren't going to be in a huge rush to solve.

If you walk into an owner's office with a proposal that involves him losing money, it's going to be a pretty short meeting. This is something that comes up a lot in rap songs - once you have made enough money, you have a hard time talking money with people who don't have any. Just because I am rich, don't think you can hit me up for money whenever. If you want to talk to me about something, talk to me about how much money I can make.

All this stuff about competitiveness and fairness is great, but can we put a $ sign on all of that? When you are wealthy, money is the only language you speak. The question is the same with every proposal - how will it affect my team's money, directly or indirectly. If you want to make any type of substantial change to the structure of the NBA, it has to involve getting the vast majority of owners a lot more money. That's the only reason they would ever do anything.

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