• Finalizado
    FINAL
    2015-09-12
    Argentina 71
    Venezuela 76
  • Finalizado
    BRONCE
    2015-09-12
    Mexico 86
    Canada 87
  • Finalizado
    SEMIFINAL
    2015-09-11
    Argentina 78
    Mexico 70
  • Finalizado
    SEMIFINAL
    2015-09-11
    Canada 78
    Venezuela 79
  • Finalizado
    Ronda 2
    2015-09-09
    Mexico 95
    Argentina 83
  • Finalizado
    Ronda 2
    2015-09-09
    Uruguay 69
    Puerto Rico 80
  • Finalizado
    Ronda 2
    2015-09-09
    Dominicana 103
    Canada 120
  • Finalizado
    Ronda 2
    2015-09-09
    Panama 62
    Venezuela 75
  • Finalizado
    Ronda 2
    2015-09-08
    Mexico 73
    Canada 94
  • Finalizado
    Ronda 2
    2015-09-08
    Panama 71
    Puerto Rico 78
  • Finalizado
    Ronda 2
    2015-09-08
    Venezuela 75
    Uruguay 77
  • Finalizado
    Ronda 2
    2015-09-08
    Argentina 92
    Dominicana 84

NBA: How the business works


Every sports league in the area in which they work, can be categorized according to two aspects: the degree of self-management and its constitution. By self-management we mean a term that includes but is not limited to the degree of independence from the federation which depends.

The constitution of a league determines its nature. This can be of three forms, as well:

  • A "clubs association" league. Every player signs a contract with a club, who pays his salary. The link in this case is only between player and club. It’s not a necessary condition the existence of a common contract model in such cases. Every club in the league may eventually be a franchise or not, and may or may not have equity interest in the league, but it’s an autonomous entity that does not respond legally by the league itself.
  • A single-entity league. Only one organization owns the teams, pays the salaries and generates the contracts. Also, the promotion actions, the marketing strategies, the television and merchandising contracts, the commercial agreements, everything, everything, goes through a single entity. Every team is nothing but a mere trademark; it means, it doesn’t exist any juridic person to support them individually.
  • A multi-entity league. This modality, which is a hybrid of the other two, has as its best exponents the NBA itself. Here’s the explanation.

 

The NBA is an entirely independent and fully self-managed entity, who works privately, outside the American Federation (U.S. Basketball). It is an organization conceived as a "Limited Corporation" whose members (the teams, currently 30 at the end of the current season) are franchises, which in turn are corporations themselves: that is, we're talking about real anonymous societies that represents together a giant holding company.

Scenarios for comparison

The NBA as a role model was copied to some extent by many leagues around the world, with varying degrees of success. But always in some way or another they were forced to deal with the different characteristics of each country, either at legal, economic or even political level. For example, the PBA (Philippine's first professional basketball league,  the first professional league formed outside the United States, in 1975) is a group of corporations that are actually local branches of international companies are companies that advertise themselves (at the time Shell, Coca-Cola, Alaska, Purefoods, Santa Lucia, the teams of San Miguel Corporation, etc.). They own the teams, they generate their own incomes, they draw up contracts and they pay salaries, that is, they’re companies not created "ad hoc" for playing.

The Lega Italiana di Pallacanestro (commonly called Lega Basket Serie A) was in the 1969-70 season, the first European league to have its first division clubs grouped in an association of self-managed clubs, and in the Italian case eventually became a private corporation. While its constitution provides for a mixed regime between partners that are companies and partners that are just clubs, through the years the latter ones also became companies formed but rather a matter of law to benefit from the market and compete on equal terms. Although the Italian Lega is -and responds legally- as a corporation, although not being dependent if the Italian Federation, it’s subject to strong regulation.

However, the star case different to the NBA is without a doubt the Spanish ACB. Like most European leagues, it was created based on the teams that competed in the first division of the Federation the year immediately before. The model, although it was copied from the NBA, was the base model that created the "association of clubs" league who then would copy, among others, the Argentine LNB (1985).

The ACB League began its operations in the 1983-84 season. Originally started as an association of clubs, however, it would be from the 1991-92 season, with the sanction of the Spanish Sports Act, when it produces a revolution in every sense. This law forced all clubs who haven’t any surplus in every one of the previous five financial years to becoming sports corporations. The qualitative leap in the management of Spanish clubs occurs when they -despite the abrupt change- continue to exercise (and progressively increase) its social function. That is, 100% company vision, without ceasing to be a club. The league itself legally constitutes a corporation and follows the model of management of the NBA.

American League: 0% club, 100% company

In the specific case of the NBA neither team is a club. Each team is responsible for all broadcasting and communication contracts (radio, television, etc.) at local (municipal, county and state) levels, but the league holds the exclusive rights for every contract signed at national level. The merchandising and partnership agreements are centralized, while the revenues are divided between the clubs in a proportional manner.

Common contract model

In the NBA (just like many other leagues in the world) there is a unique contract model and a "terms and conditions" disclaimer to be widely accepted if anyone wishes to enter in the organization. However, what differentiates the NBA from the rest of the leagues (in other words, what makes the NBA a multi-entity league) is that the contract is signed with the league, but it gives to the team the responsibility of paying the salary stipulated in contract.

Franchise system

Each team wishing to enter the NBA shall deposit a fee to the league whose price has changed over the time, but which is around 300 million dollars. This is a fee for participating, and the waiting time to enter is five years from the time the royalty payment have been in effect. It will generate interests exclusively in favour of the league and it’s not refundable as the team stays in it.  Meanwhile, the candidate must, among other things, to overcome very exhaustive financial controls, generate activities, submit a business plan and marketing plan both locally and nationally, and also, during those five years of "layoff", generate a surplus in each of these five periods. The total budget for business plan is set at a minimum of $ 240 million and that includes but is not limited to the total payroll of employees of the organization.

 

Player market

NBA has its own player market, which operates in a very different way than FIBA. Every player has its own market value, represented by the salary he perceives in a current season. When a transfer between two NBA teams takes place, the regular process is to swap players who represent a similar amount of money. Cash only is allowed to fill the gaps, and, at the end of the current Collective Bargaining Agreement, this amount could not exceed of approximately 3 million dollars.

The real problem relies when a FIBA player wants to play in an NBA team.  Under the terms of the international market, we use to, either pay the total transfer amount or waiting until he ends his contract and thus be released as a free agent.  FIBA players, in many cases, have termination clauses and often very high, as they intend to protect the interests of their club of origin. Well, the NBA, until more than twenty years ago almost prohibitive for those players "from outside" (i.e., foreigners only were allowed if they came from the NCAA tournament), was obliged to reconcile both systems, establish a ceiling for termination clauses for FIBA players of "only" half a million dollars per player.

The "draft"

The NCAA is a competition where a college player can only play four years, which is the time in U.S. takes to get a degree. Depending the sport practiced, each player is allotted inside the "draft" who corresponds to the professional league of his/her sport (football if they go to the NFL draft, if baseball, the MLB draft, if soccer, the MLS, if ice hockey to the NHL and if basketball to the NBA).

Players emerging from the college tournament at the end of those four years are chosen according to their level and the higher the position the player has a better chance of being hired by the professional league next year. However, the NBA draft through the years, for obvious reasons, became a worldwide "showcase", allowing every year more and more players who play in FIBA clubs, to register massively to the draw with college players.

Normally the choice order used to be the inverse of how they have finished the regular season last year; however, through the years, the highest positions are protected by a "lottery" that gives the teams more proportional chances.

About the contracts, the draft picks can be safely exchanged as partial payment on internal transfers of players. The teams also retain their rights to their chosen players if they wish to play overseas.

Salary cap

Each team in the NBA (i.e. the sum of all of the players’ annual salaries) can not exceed a certain limit, we can call this the first "threshold", and up to the 2009-10 season it was set to around 58 million. However, there are several mechanisms known as "exceptions" that can overcome the first limit because it is guaranteed to a player of certain conditions to collect the minimum required for each case. For example we have the "rookie exception" (the salary of a first-year player), the "mid-level exception" (the annual average wage), the "bi-annual exception", the "Larry Bird exception", exceptions for transferred players and serious injury replacements, etc.

The luxury tax

When teams in wages beyond the "second" limit (up to the 2009-10 season it was set to around 71 million dollars), must pay a "fine" to the league: exactly how much you spend to the cap. Moreover, this "fine" is distributed among the teams that do not exceed the cap, which may mean an amount of approximately $ 3 million.

Sign and trade agreements

When a team is willing to contract a free agent, and the original team wants something in exchange, being money or players, the best for both clubs is a sign-and-trade agreement. This occurs when a team signs one of his free agents and immediately transferred to another team. This kind of agreements are very profitable such for the implied teams as for the player, whereas he will obtain a better contract than initially could; the selling club gets something in exchange, and the buying team gets the desired player.
Unlike other sports frameworks such as baseball, where teams who lose free agents are compensated with future elections in the draft or money, the NBA teams who lose free agents receive no compensation.
Free agents
There are two types of free agents in what is normally provided in a Collective Bargaining Agreement of the NBA: restricted and unrestricted. An unrestricted free agent is that who can sign for any team without any condition, while a restricted free agent is subject to the right of first refusal of his current team, which means that although he can sign for any team, his current team reserves the right to match offer and keep him on its roster. Teams can offer the player a contract of at least two years, while the original team has 15 days to match the offer or let him go.
In the case of a player's first-round draft involved in the operation, free agency can be limited only when it exercises this option in his fourth year, provided they respect the salary scale for rookies. For any other case, the player must have at least three years of experience, and the team who wants him must make an offer for 125% of his salary last season, or the minimum salary for players plus $ 150,000, when this amount exceeds the previous one.
In March 2010 there were over 70 players in a situation of free agents.


Matias Barmat (@worldhoopstats)

Lecturas: 8257 - 2011-08-21