NBA Lockout Settlement Near as Both Sides Tally Losses

Business Wire, Dec 15, 1998

CARMEL, Calif.--(BW SportsWire)--Dec. 11, 1998--As losses mount in the ongoing NBA lockout, the point has arrived where fiscal prudence dictates that both sides reach an agreement, according to an analysis by Paul Kagan Associates, Inc., a Carmel, Calif., sports and media research company.

"Players are looking to make an estimated additional $278 million in higher salaries and percentage of club revenues," said PKA analyst David Marin. "They've already lost an estimated $234 million in salaries through December 10. On December 18, with 10 games scheduled, the cancellation of only three will mean player salary losses will equal the $278 million in additional compensation the players are seeking to gain."

The $278 million in additional money sought by players consists of 57% of the new national TV rights money and 57% of license and merchandise, luxury box and signage revenues, totaling $685,320 per player, times 406 players. To estimate player losses through December 10, Kagan used an average player salary estimate of $31,707 per game, times 28 players per game (14 per team), times 264 cancelled games.

"Meanwhile, owners are losing an estimated $1.15 million per game in general admission, club seat, luxury box and concession revenues, for a total thus far of $303 million -- but they have saved $234 million in player salaries for a net loss of $69 million," Marin said. -0-

                          NBA LOCKOUT IMPACT

                   Losses If          Losses      Increase In Income
                   No Season        Thru 12/10     Sought By Players
               -------------------------------------------------------
Players         $1,055,589,444    $  234,378,144    $  278,000,000
Owners             311,760,556        69,221,856            -

-0-

The need to settle is less pressing for some owners who don't make a profit during a normal season. It is more onerous for the larger clubs, especially those with high arena revenues. Another uncertainty for owners, however, is the reported extension of their contract with NBC and the likely makegoods to Turner Broadcasting for games paid for but not played.

The lockout began on July 1, 1998, after the owners acted on a provision of the 1995 Collective Bargaining Agreement (CBA) which allowed them to re-open the deal if the percentage of Basketball Related Income paid to players exceeded 51.8%. It was 57% in 1997-98.

The CBA includes a salary cap which increases each season. The Bird exception, however, which allows a team to exceed the cap if it re-signs its own players, has driven the average payroll to more than $33 million, $6 million per team over the 1997-98 $26.9 million cap.

After failing over the summer to renegotiate an acceptable modification, the NBA cancelled the start of the season, the first time games have been cancelled in the 51-year history of the league. The regular season was scheduled to run from November 3, 1998, to April 21, 1999.

The Kagan Group's leading-edge research, consulting and conference services have been a part of the sports business scene for more than 27 years. Kagan Media Appraisals has valued more than $30 billion of media and sports properties on contract assignment and Kagan analysts have developed business plans and strategies for leagues, teams and networks.