Size of Player Salaries Make Kyrie’s Player Owned/Run Basketball League Idea a Pipe Dream

JohnWallStreet

The New York Daily News reported on Tuesday (6.16) that during a group chat with teammates Nets guard Kyrie Irving proposed the idea of the players leaving the National Basketball Association to form a competing basketball league. While Irving opposes the NBA’s plan to resume the season at The Walt Disney World Resort in Orlando, Ryen Russillo tweeted that the concept for a player owned/run league was not pitched as an alternative to the bubble solution. The ESPN personality wrote “Kyrie telling other players they should start their own league is not new. He’s talked to teammates about it [throughout] this season.” The former Cavs star is not the first high-profile athlete to suggest the players should get together and form their own league, but Marc Ganis (President, Sportscorp.) says there’s a reason none have ever tried to compete with the NFL, NBA, NHL or MLB; "they typically grossly underestimate what it takes, how good they have it now and that it’s enormously difficult to take on the longstanding major sports leagues and succeed."

Our Take: It’s important to understand that by definition “the league's revenue-sharing arrangement makes the NBA owners and players partners; and in fact, the players are majority partners as they keep 50.1% of the defined revenues.” Long-time player agent David Falk suggested that if the NBPA did a better job of educating their constituents about their standing as stakeholders and of how they can make more money (i.e. not through negotiations or by starting their own league, but by increasing total league revenues) there would be less dissent within the ranks. Of course, the players do not hold equity stakes in the clubs and thus do not share in their appreciation.

Falk, who put on a high-profile exhibition/charity game without the NBA's involvement back in 1998 as a response to the lockout, called the concept of launching and running a major sports league “a daunting undertaking.” He suggested if Irving is upset with how the NBA is being operated, the player “should sit down with the union and try to change the things he doesn’t like.” After all, Kyrie is a NBPA Executive Committee Vice President.

While it's reasonable to assume Irving believes the players could make more money if they were to retain a larger percentage of revenues and/or owned a stake in the clubs (though the stars could accomplish as much by pushing to eliminate the max on salaries in the next CBA), there’s no guarantee that would be the case. It’s not as if every business is inherently profitable and there’s no reason to believe Kyrie understands all that goes into running a global sports enterprise. In fact, Ganis said based on the idea itself it's apparent that the Nets star “doesn’t have any clue how much time, effort and money it takes to put together and properly operate a major sports league; or about the importance of having a decades long foundation.” And even if he did, Falk points out that “there hasn’t been a worse time in the last 15 years [because of the economic depression] to start a new league than right now.”

It’s unclear just how serious Irving is about trying to put together a player owned/run league, but neither Falk nor Ganis felt as if the risks associated with leaving the NBA - or the exposure that comes with it - were worth the potential rewards. Falk said he “just doesn’t see what the point in forming a new league is. The players already have a league where they’re the majority partners, where they don’t have to invest a dollar, where they assume no risk and they get to keep more than half of all BRI.”

That’s a pretty good deal, particularly when you consider the amount of capital Irving & Co. would need to start a new sports league. In addition to player salaries (which range from $109.7 million to $138.7 million per NBA team this season) there are security, marketing and travel expenses that all need to be covered (plus a series of costly deposits to be made on long-term building leases). Falk said he “personally wouldn’t recommend a player invest money in a league that plans to compete against the NBA.” It must be noted - as Hal Biagas (President, Sideline Sports Management) did - that "if the players were successful and the league did increase in value they would reap the ultimate payoff [as owners]."

Ganis believes if Irving is serious there would "without a doubt" be some private equity investors willing to put up money, but even with a deep war-chest he says launching a new league would be “a monumental task” (see: XFL). That’s because “what [the players] won’t be able to get [from investors] is the money needed to pay each other. They can get the start-up capital, but the player salaries are huge and PE wants to get paid back - with profits. It's not as if investors are going to let the players/owners take all of the money out of the business.”

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