As of this writing, the situation between NBA owners and players looks grim. The players have made what seem like large and arguably unprecedented concessions to the owners. The owners are going in for the kill, asking for even more and willing to lose an entire season to capture several hundred more million dollars in revenues. Their operating logic is that the players have no choice and resistance is futile. The owners know they have a monopoly and think they have the players by their private parts. They are going to squeeze as hard as they can to get what they want. 

The players are responding by considering the idea of decertifying the union and hence effectively invalidating the NBA’s antitrust exemption. That is probably a smart move, but it is also time-consuming, and ultimately its success depends upon getting a judge who abides by the spirit of competitive markets and antitrust laws. In this era of Citizens United that is no longer a slam dunk. The real hope is less that it leads to a protracted legal battle than that it forces the owners to back off their demands and be content with the massive victory they have already won.

As an aside, my sympathies run with the players. This is an entertainment industry with enormous economic “rents,” and the battle is over who should get the rents. If the players do not get the “rents,” the owners will, not some unemployed worker in Pawtucket. In my mind the 400 or so greatest basketball players in the nation, and arguably the world, have a far greater claim to them than the owners.

I sense mine is a minority position among the fan base. Many fans, based upon the Internet sites I visit, assume the owners’ side and regard the players as greedy millionaires who have no concern for the fans or the game. I imagine this is because most fans are accustomed to seeing extremely wealthy people earn massive incomes on the labor of others and find that fully appropriate. And they have no idea about how the monopolistic NBA is an industry that has little in common with traditional “free market” industries. It is not exactly like high wages are going to drive the good jobs overseas, or drive up ticket prices. Ticket prices are set by what the (monopolistic) market will bear, and player salaries have almost nothing to do with it. Ticket prices will not be lowered as a result of the players getting lower salaries. That money will go into the owners’ pockets. The battle is over the spoils of the revenue pie.

Indeed, in the NBA the owners as a rule contribute little of value to the basketball experience itself. They mostly screw it up by hyper-commercializing the experience. In effect, the owners pay a fortune to earn the right to live off the value created by the players. It is a largely speculative investment; they create no jobs and develop no new technologies or industries. The main risk they take is that the players might win in collective bargaining to get a larger slice, since the scab—oops, I mean “replacement worker”—option is not viable in an entertainment industry based on “rents.”  No one is going to pay hard money to watch a bunch of fat duffers or playground hacks play basketball.

That is why these negotiations are central to their business model. It will determine how much their speculative investment will return when they sell their franchises, which, if history is any guide, many of the current owners will do within the next 5-10 years.

Over in the NFL, the Green Bay Packers have shown how unnecessary owners are. That is why the owners in the NFL subsequently banned community ownership of teams, though thankfully the Packers were grandfathered in.

There is one other risk the owners run, and in my view, it provides the players with a nuclear option. If the season is going to go down for the count, it is one the players would be very wise to explore, and quickly. If it is resisted by the NBA owners, it may provide more ballast for the antitrust law suit.

The players should start a new basketball league. They should do it in such a way that all eligible players will start the 2012-13 season in the new league, and all others will join them shortly thereafter. They should plan to bury the NBA, and have the tombstone read 1946-2011. 

I do not write these words with any pleasure. I am a fanatical NBA fan, and devoted to the Boston Celtics. I have a strong emotional attachment to the league’s history. But when I see gazillionaires like Paul Allen cavalierly supporting the cancellation of a season so he can make even more money, after the players have made large concessions, in an industry where many of the teams are already profitable, I think they need to pay a price for their drone attacks on the fans. They need to face the full fury of a more truly competitive market. This is it.

It is the only leverage the players have. End the monopoly the owners are using to drive down salaries and fatten their profits. Decertification gently dips its toe in those waters; starting a new league is like dropping a bomb in the waters.

There is an important history here. Back in 1890, the Major League Baseball players revolted from the National League owners, and started the Players League. It ran for one season and historians agree is provided a successful model. After a season it folded and the players returned to the National League and the American Association, but some argue it gave the players a measure of increased leverage with the team owners.

How the new basketball league would be funded, whether it would have new owners or be a cooperative, how it would be structured, all those matters that need to be studied and examined. I have my own thoughts—there are a number of steps the new league could take to make the experience much better for fans and players alike—but they are orthogonal to the point of this piece.

What I can say is that the notion of launching a new basketball league is greatly abetted by the NBA’s own short-sightedness. Indeed, it is this short-sightedness that drives the present crisis. I am not making a general condemnation of greed here; rather I am specifically pointing to the absurd franchise pattern in the NBA. It explains much of the current crisis, and it provides a gaping hole for the players to develop a competitive league with superior markets to the existing NBA.

We all know that the reason for the present stand-off is primarily to placate the owners of the NBA’s many franchises littered in peculiarly small markets, with quite limited TV revenues. Indeed, the NBA counts fully six franchises in small population cities that have no other major league teams. The NBA has no franchises in scads of cities that are de riguer for other professional sports leagues: San Diego, Seattle, Kansas City, St. Louis, Cincinnati, Pittsburgh, Tampa Bay, Baltimore spring to mind.

What the NBA owners are demanding is that the players make sufficient concessions so even the owners of teams in pipsqueak markets like Utah and Memphis and Oklahoma City are guaranteed profits regardless of how incompetent their management might be. For the players to make those sacrifices, the players would be in effect guaranteeing already profitable large market teams—with huge local TV contracts—spectacular super-profits at their expense. The players’ reluctance is perfectly rational.

But this also offers an opportunity for the players in forming a new league. There are a number of major metropolitan areas that do not have NBA teams. Nearly all of them have first-rate or at least decent arenas, often because they host NHL teams. The players could start a new league with 30 franchises, enough to maintain current employment levels, and offer equal if not superior market penetration to the existing NBA. It would have to only put duplicate franchises in a handful of cities: Chicago, Boston, Dallas, Philadelphia, Miami. A New York franchise could be based on Long Island and an LA franchise could be based in Anaheim.

The league could also start with fewer teams, with plans to expand up to 30 over three years. (Leave out the Canadians and a few marginal towns, and a 16 or 18 team powerhouse league could be assembled.) It would take time for the NBA players to move over as their contracts expired.

So what would the league possibly look like? Here are the 30 teams in four divisions.  (I put the metropolitan area population rank in parentheses after the city name.)

West:

Los Angeles (Anaheim) (2)
San Francisco (11)
Seattle (15)
San Diego (17)
Las Vegas (30)
San Jose (31)
Vancouver (28^th if in USA) 

North:

Calgary (50^th if in USA)
Edmonton (52^nd if in USA)
St. Louis (18)
Cincinnati (27)
Kansas City (29)
Columbus (32)
Chicago (3)
Louisville (42) 

East:

Ottawa (43^rd if in USA)
Montreal (15^th if in USA)
New York (Long Island) (1)
Buffalo (47)
Boston (10)
Baltimore (20)
Pittsburgh (22)
Philadelphia (5) 

South:

Austin (35)
Tampa Bay (19)
Miami (8)
Nashville (38)
Jacksonville (40)
Dallas (4)
Raleigh (48) 

Would this be a longshot? Of course. The problems are enormous. That is why no sane person would consider this in normal times. But these are anything but normal times and the NBA owners have overplayed their monopoly hand. In doing so they have left themselves exposed to genuine competition.

If nothing else, and most important, it would likely force the NBA owners to sweeten their deal to the players in the near term. (Recall the opening of Godfather II when Michael Corleone makes his revised offer to the Nevada Senator, allowing the Senator to pay the Corleone family’s gambling license.) The players have nothing to lose and everything gain by pursuing this option. The one thing a new league would certainly do is drive up salaries, because there would be actual market competition as long as two independent leagues existed. That is the NBA owners’ second-worst nightmare. Their worst nightmare is going out of business altogether. The threat of a new league puts both of these options on the table. It is the players’ nuclear option.