Friday, November 04, 2011

More on the NBA lockout

After Tyler linked to our inaugural Grantland piece, many of the commenters at Tyler's site were complaining that the situation regarding losses is symmetric for each side, and thus the owners have just as much to lose as the players.

But people, it is NOT symmetric.

First, the owners are losing net revenues, the players their gross revenues. Do we really think operating profits are >= labor costs?

Second and more important, owners are sacrificing short run net revenues for long run benefits. If they can shift the cost curve, then the present value of the long run savings should get capitalized into their franchise values. The current owners can capture the long run benefits from "winning".

By contrast, the current players have no capture-able long run economic gains to motivate short run pain. They only gain what ever revenue increases they get over their playing days. They don't have a long run claim on the revenue stream they are sacrificing to try and protect.

It doesn't get much more asymmetric than that.


Anonymous said...

the players are basically stupid and uneducated. they should be happy that someone is willing to pay them ANYTHING to play a game. would they rather be working in a car wash??? because that is all most of them are qualified to do.

Neil said...

I would also assume that owners still have their merchandising deals as well as other revenue streams that players no longer benefit from.

Brad Hutchings said...

Not to mention that perhaps 10% or more of active players are effectively losing their last playing year as this drags out.

Gerardo said...

Great explanation.

What happened to college players who left school "early" for the draft?