Stern's Letter To NBA Players
Memo to: All NBA Players
From: David J. Stern
Date: Dec. 16, 1998
Re.: Collective Bargaining
As the 1998-99 season slips away from us, it is critical that I communicate directly to you the owners' current collective bargaining proposals. I recognize and respect your right to reject these proposals. However, it is important that there be no doubt about the precise terms you consider to be such a "bad deal" that you would prefer to lose the entire season.
I believe that the proposals now on the table reflect a good faith effort by the owners to reach an agreement that is fair to all players, extremely beneficial to the vast majority, and assures that the growth we have achieved together will continue. They establish a system in which the average salary is projected to rise to more than $4.5 million, ten-year veterans will receive at least $1 million per year, a new middle class exception will permit teams already over the salary cap to enter into multi-million dollar contracts each year, and superstars will be able to secure long-term contracts in excess of $100 million.
I have enclosed a complete summary of the owners' most recent economic proposals, along with three charts that illustrate their benefits. In reviewing these proposals, I urge you to focus on the extent of the compromises the owners have made from their initial bargaining demands. The proposals now on the table represent the following significant concessions that were made in direct response to your union's forceful assertion of your concerns:
I hope you will review this memorandum and its attachments carefully. The growth of our league over the past 20 years has resulted in continual and spectacular growth of individual salaries and team values. The owners' proposal would allow this growth to continue. If the season is lost, none of the opportunities that the players and owners will undoubtedly pursue -- separately -- would come close to equalling what we have achieved together.
Thank you for taking the time to consider this memorandum.
DJS/aij
Enclosures
cc: Mr. William Hunter
NBA Proposals -- Principal Economic Terms
The following is a summary of the NBA's current proposals on the principal economic terms of a new agreement:1. Player Salary Growth
- guarantee that collective salaries and benefits would increase by a total of 20% over the first 4 years on the agreement.
- guarantee that NBA players remain the highest paid players in team sports. (See Chart 1 comparing average and median salaries in football, baseball, hockey and basketball.)
- raise the average player salary to a projected $4.6 million by year 6 of the new agreement. (See Chart 2 showing projected average salaries and player compensation as a percentage of BRI under the NBA's proposals.)
The NBA's proposals would:
2. Maximum Player Salary (See Chart 3)
- 0-6 years of service: 25% of Cap
- 7-9 years of service: 30% of Cap
- 10 or more years of service: 35% of Cap (but not less than $12 million)
Greater of 105% of a player's prior salary, or:
3. Minimum Player Salary
- 0-2 years of service: $250,000 (increasing $5,000 each year of the agreement)
- 3-5 years of service: $350,000 (increasing 10% each year of the agreement)
- 6-9 years of service: additional $50,000 per year of service
- 10 or more years of service: $1 million
Thus, for example, for the 1998-99 season, the minimums would be as follows:
- 0-2 years of service: $250,000
- 3-5 years of service: $350,000
- 6 years of service: $400,000
- 7 years of service: $450,000
- 8 years of service: $500,000
- 9 years of service: $550,000
- 10 or more years of service: $1 million
(These amounts are based upon a full 82-game season)
4. "Middle Class "Exception
- $1.5 million in year 1
- $1.75 million in year 2
- $2.0 million in year 3
- average player salary in years 4-6
This exception:
- would be available to every team over the Cap.
- could be used to sign a 1-, 2-, or 3-year contract.
- could be used to re-sign a team's own free agent or another team's free agent.
5. Annual Salary Increases
- 12.5% -- maximum annual salary increase for players who sign "Bird "contracts
- 7.5% -- maximum annual salary increase for all other players
6. Contract Length
- 7 years -- maximum contract length for players who sign "Bird "contracts
- 6 years -- maximum contract length for all other players
7. Rookie Scale
- new first round picks would be signed to a 3-year salary-protected "scale" contract, wit a team option for a fourth year
- team would have a right of first refusal if it exercised its option
- additional option years would be added for each year a player is under age 20 when drafted.
8. "Timing"
- We have withdrawn our original proposal on "timing," which would have prevented teams from spending up to the Cap on non-Bird players, then exceeding the Cap to sign its Bird players. We have told your union that we are prepared to compromise on this issue by increasing the amount at which free agents are included in their prior team's Team Salary.
9. Escrow System
- Escrow percentages (beginning with the 2001-02 season)
2001-02: 52%
2002-03: 52.5%
2003-04: 53%
2004-05 (option): 53.5%
- We have withdrawn our original proposal that the NBA be permitted to place in escrow an unlimited amount of player salaries in order to arrive at the agreed-upon escrow percentage. However, we need to agree upon the maximum percentage that may be placed in escrow as well as an appropriate tax to be imposed upon teams if player costs exceed that percentage.
10. Group License Agreement
- We have withdrawn our original proposal that the players' 50% share of group license revenues be paid in the form of increased player salaries instead of directly to the Players Association. Our current proposal is that NBA Properties continue to pay the players' 50% share to the union, but that we eliminate the existing guarantee that the union receive $25 million each year regardless of the level of revenues generated from the Group License.
11. Term of Agreement
- 6-year term with NBA option for 7th year
- first 3 years without escrow
- second 3 years with escrow
- NBA option for 1 additional year with escrow
12. Other Salary Cap Rules
- The NBA has also proposed changes in certain other Salary Cap rules, which we believe could be resolved if we are able to agree upon the items listed above.
Chart 1
NBA players are guaranteed to remain the highest paid athletes in team sports.
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Chart 2
Projected Percentage of BRI to be Paid to Players and Projected Average Player Salaries.This chart shows the projected percentages of BRI to be paid to the players and the projected average player salary over the life of the agreement proposed by the NBA. As you will see, even though the BRI percentage is decreasing, the average player salary continues to rise.
Note that the average salary for 1998-99 was calculated as if an 82-game season had been played.
| Year | Percentage of BRI to be paid to players | Average Player Salary |
| 1998-99 | 57.0% | $3,000,000 |
| 1999-00 | 57.1% | $3,366,000 |
| 2000-01 | 55.8% | $3,707,000 |
| 2001-02 | 52.0% | $3,840,000 |
| 2002-03 | 52.5% | $4,189,000 |
| 2003-04 | 53.0% | $4,569,000 |
Chart 3
Projected Maximum Bird Player SalariesThis chart shows the maximum amount a player who signs a "Larry Bird" contract can earn under the NBA's proposal.
Note that the amounts for 1998-99 were calculated as if an 82-game season had been played.
| Season | Years in League | Average Salary | Total Salary |
| 1998-99 | 0-6 | $10,656,250 | $74,593,750 |
| 7-9 | $12,787,500 | $89,512,500 | |
| 10+ | $16,500,000 | $115,500,000 | |
| 1999-00 | 0-6 | $12.031,250 | $84,218,750 |
| 7-9 | $14,437,500 | $101,062,500 | |
| 10+ | $16,843,750 | $117,906,250 | |
| 2000-01 | 0-6 | $13,578,125 | $95,046,875 |
| 7-9 | $16,293,750 | $114,056,250 | |
| 10+ | $19,009,375 | $133,065,625 | |
| 2001-02 | 0-6 | $15,125,000 | $105,875,000 |
| 7-9 | $18,150,000 | $127,050,000 | |
| 10+ | $21,175,000 | $148,225,000 | |
| 2002-03 | 0-6 | $16,156,250 | $113,093,750 |
| 7-9 | $19,387,500 | $135,712,500 | |
| 10+ | $22,618,750 | $158,331,250 | |
| 2003-04 | 0-6 | $17,531,250 | $122,718,750 |
| 7-9 | $21,037,500 | $147,262,500 | |
| 10+ | $24,543,750 | $171,806,250 |
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