NBA - Deal's Done...Who Won?

The NBA lockout is over.  On the heels of one of the more exciting seasons in recent history, I was upset that the two sides couldn't solve the labor issues over the summer and I am excited for the season to start.  From a negotiating perspective, it's a great case study. The negotiations, in media and social media circles, was referred to as "billionaires vs. millionaires".  We had two sides (players and owners), both suffering, yet they couldn't seem to make a deal.  There was also a third party with skin in the game, the agents. Unfortunately, the agents were whispering their agenda to the players, clouding the issues.  After all, agents are trusted advisors and should have the best interests of their clients in mind.  Right?

So where did we end up and how did we get there?  The owners exerted their leverage and, it appears, they got most of what they wanted.  Once the players started missing paychecks, the leverage increased significantly.  While the union may have warned players to save for the lockout, it doesn't change the fact that players have a finite amount of time in the league.  Even Kobe Bryant who has made a fortune in salary and endorsements knows that his time in the league won't last forever.  Missing a full season would have cost the players hundreds of millions in salaries and that is money that they could never recover.

As I mentioned in a previous blog entry, one of our smartest clients once told me, "it's not always about the outcome; sometimes it's about the process".  In any process, consensus building is crucial.  There were too many voices on the players side for an effective consensus to take shape.  The aging superstars had one agenda, the young superstars another, and the role players yet another.  The agents were also trying to push their agenda through their clients convincing them that it was in their best interest.  In the meantime, the owners sat back and waited.

We see this at times during real estate transactions.  Many times, large corporations need to build consensus to move forward with a transaction.  We need buy-in from the C-level (depending on the size of the transaction), the finance department, the business unit and the actual space user.  The space user (who wants nice space, near his house, etc.) can have a different agenda than the heads of the business unit (P&L responsibility, bonus implications), who may have a different agenda than the C-level (moving jobs to less expensive labor markets).  In the meantime, the landlord waits.

The ultimate leverage in any deal is the ability to walk away with no impact.  Therefore, it's crucial to know who is on the other side of the table in any negotiation. While the owners certainly would have been impacted by missing the season, it would have affected the players exponentially more.  Michael Jordan, now an owner, played an important role, taking a hard-line stance in the negotiations against the players. Some called him a traitor to the union, but no one should have been surprised that he is as ruthless off the court as he was on it.

Similarly in real estate, the clock is always ticking.  Landlords know when a tenant is behind schedule.  Some landlords will move forward without exerting their leverage for fear of losing the tenant.  Others will exert the leverage in a more subtle fashion, not giving in to certain requests during the lease negotiation.

In two months, if not sooner, none of the fans will remember the lockout.  It will be business as usual in NBA arenas throughout the country.  The players didn't need to miss paychecks, the owners didn't need to miss revenue and the fans certainly didn't need to miss 15 games of the regular season.  They had years to figure it out.  However, the process was broken from the start and when that happens, the outcome is always in jeopardy.

JN