Union To Conduct Audit Of Five Teams

THURSDAY, 10:23am: The union sent an email to agents urging them to read Draper’s piece, USA Today’s Jeff Zillgitt tweets. Some agents are perplexed that the union would use the story to deliver its message, Zillgitt adds (Twitter link).

10:26pm: A third of NBA teams are losing money with new TV revenue more than a year away from kicking in, the league said in its response to Draper’s report, as RealGM relays. The NBA called the report “grossly misleading” and asserts that the collective bargaining agreement expressly addresses related parties in a way that includes arenas and broadcast rights to ensure that the players receive their fair share of basketball related income.

TUESDAY, 5:45pm: The National Basketball Players Association intends to exercise its right to conduct an independent audit of the books of five teams this year, the union revealed in a statement to Deadspin’s Kevin Draper. The union has rarely called for the audits in the past, the statement acknowledged. The revelation is set against the backdrop of coming labor negotiations in 2017, when the union and the league have a mutual option to terminate the existing collective bargaining agreement. The owners have given every sign that they’re willing to sacrifice an entire season to keep the players from regaining a larger share of basketball related income, but the league considers everything else negotiable, Draper writes.

The union issued its statement in response to Draper’s request that it address a recent Madison Square Garden Company filing with the Securities and Exchange Commission in which MSG revealed its intentions to spin off its sports holdings from its media entities. MSG owns the Knicks, whom Draper predicts will be among the five teams the union chooses to audit after the league conducts its own audit of basketball related income this summer.

At issue is the definition of related parties with ties to NBA owners. For instance, the Nets and the Barclays Center are not considered related parties, even though Mikhail Prokhorov and Bruce Ratner own significant stakes in both, Draper points out. That would allow Prokhorov and Ratner to arrange a deal that hides revenue on the arena side, keeping it out of the NBA’s calculation and lowering the pool of money available to players, as Draper explains. The league sets the salary cap based on basketball related income. The percentage of that income to which players are entitled was capped at 51% during the 2011 labor negotiations, a significant cut from the 57% figure that held under the previous collective bargaining agreement.

The collective bargaining agreement in place now refers to a definition of related parties that dates to 1995, before many methods of revenue generation that are now in wide use among teams were in place, Draper writes. Former union executive director Billy Hunter had been in office for much of the time since the 1995 negotiations, so the move to conduct the audits represents another contrast between new executive director Michele Roberts and her predecessor, as Draper observes.

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