A 10-Year-Old System That Revolutionized Sports : Pro basketball: Then-NBA vice president David Stern helped push through a plan for the 1984-85 season that was the start of the salary cap.
It really happened, so help us Richard Ravitch.
Owners and the players association agreed that the league was at a crossroads. Teams were facing financial difficulties, some severe enough to consider folding or moving, and the owners let the union look at their books to prove it. The players, understanding that lost teams meant lost roster spots, agreed to a limit on salaries. The owners, in turn, agreed to share a determined portion of the revenue.
This was the NBA in 1983. This was the foundation of the salary cap.
“It was a recession mode,” said Charles Grantham, executive director of the National Basketball Players Assn. and then the second in command to Larry Fleisher.
In 1994, accepted history has it that the league and an executive vice president named David Stern deserve credit for a system that revolutionized sports. One problem--half the idea was borrowed.
Stern took the idea of promising a percentage of the owners’ take from the NFL union, which had made that one of its demands in the strike of 1982, and made that the compromise. The players gave in on allowing a ceiling on their salaries in exchange for a slice of the pie, however underbaked it was in the tough economic times. Stern’s behind-the-scenes prodding pushed the deal through.
The plan was announced March 31, 1983, and took effect in the 1984-85 season. Players got 53% of the defined gross revenue--primarily gate receipts and local and national television contracts--and the ceiling was set at $3.6 million per team, with exceptions given to five clubs already over the limit. As profits increased in succeeding years, so did the salary cap, doubling within four seasons and then nearly quadrupling to $14 million in 1992-93.
Players and owners got rich together as worldwide interest in the game surged with the talent, personality and marketing of superstars Magic Johnson, Larry Bird and Michael Jordan. The partnership paid off with unimagined riches.
NBA Properties, which oversees merchandising and had brought in only $65,000 to the 23 teams in 1983-84, delivered $4.2 million in domestic and international sales for the 27 clubs in 1992-93. Revenue from sky boxes in new arenas brought millions more. Likewise, money from advertising in the arenas. And none went to the players as part of the 53%.
Nevertheless, the cap had served its purpose. The NBA had not merely stabilized, which would have been a reasonable enough goal when it was implemented, it had flourished. Even without access to the unexpected revenue, player salaries were averaging more than $1 million per year.
Which brings us to the summer of ’94.
The players and owners are negotiating a new agreement, a process that undoubtedly will run into 1994-95 without, it seems, the threat of a strike or lockout. The cap reached $15.175 million last season and will climb again when next season’s figure is announced, probably within five days. But the players are pushing for elimination, pointing out that they agreed to a ceiling when times were tough and that times are no longer tough.
“No question,” Grantham said. “It’s a dinosaur now.
“It may have been necessary at the time of recession, and now that we’re in an expansion mode, there’s clearly not a need for it. (The owners) want it. They want it to protect their profit margin.”
Owners counter that if it’s not broken, don’t fix it.
Said Deputy Commissioner Russ Granik: “We think that having this system in effect for the last decade, along with the great talents of a lot of the players we had in that decade, has been instrumental in turning the NBA around. . . . We think a system like this is absolutely necessary for that success to continue.”