Billy Hunter addresses NBA Players

TO: ALL PLAYERS

FROM: G. WILLIAM HUNTER

DATE: November 01, 2011

RE: COLLECTIVE BARGAINING UPDATE (NOVEMBER 1, 2011)

As you have undoubtedly heard, negotiations with the owners aimed at ending their 4-month lockout collapsed on Friday, October 28. After three days of productive talks, which followed a week of negotiations aided by the Federal Mediation & Conciliation Service, the owners held firm to their ultimatum that we take a 50/50 split in BRI. It was at this moment that the Negotiating Committee and I decided that it no longer made sense for the union to continue the negotiations, and I led our group out of the room. Derek sent out a thoughtful letter last night summarizing his thoughts, and I want to follow up to reinforce his message of solidarity and reflect on where we may go from here.

Let me begin with some positive news. During the marathon session last Wednesday and the two days that followed on Thursday and Friday, we made great progress in working through many of the system issues that must be resolved before a deal can be reached. While the soft cap/luxury tax system we are negotiating is far from perfect and contains positives and negatives for both sides, I believe that if the last few system issues are resolved in our favor, it will be one that we can recommend to you. Without question, we have given more than the owners, but at bottom, we are determined to defend the principles we have fought for throughout -- guaranteed contracts, healthy minimums, fair maximums, a strong middle class, and a true market for free agency.

Unfortunately,

there is still work to do before we can declare these victories, and several important system issues must be resolved. So far, we have agreed to raise the team salary floor and implement a more punitive tax system that will diminish the gap between high and low spending teams. However, we still must fight to keep all teams in the market for player services, and as a result many key issues remain, including limiting additional penalties for repeat taxpayers, insuring that the luxury tax is not overly oppressive, and the continued availability of the midlevel exception and sign and trade transactions for taxpaying teams. While these issues may sit outside the spotlight, they have a major effect on player working conditions and the ability to create a robust and fair market for player services. Further, we must have additional discussions on revenue sharing. Based on the limited review we were finally granted last Friday, the revenue sharing system proposed by the NBA addresses the profitability issues of small market teams. However, it reduces the incentive for small market teams to grow revenues and improve.

Our meeting on Friday, however, did not collapse because of system issues. Our Negotiating Committee reached the unanimous conclusion that the NBA's 50% ultimatum, combined with the league's hard line position on the remaining system issues, was unacceptable for the players.

As you know, NBA players have received 57% of BRI for many years. In an effort to make a deal and save the season, in past meetings we have offered to reduce our share to as low as 52.5% with certain system issues in our favor. On Friday, considering the many system points we had already conceded, I hoped and expected the owners would move towards our proposed BRI number. Instead, Commissioner Stern insisted that the NBA would move no further than 50%, and I ended the meeting.

In my view, a 50/50 split of BRI does not adequately compensate the players for our services to the NBA. Remember that BRI does not reflect the total revenues generated by the NBA. The NBA is allowed to take hundreds of millions in "expense credits" before sharing any revenue with the players ($543m in 2010-11). Given this, under the NBA's proposal, the players would receive only 44% of total revenue generated by the league. By comparison, we received 50% of total revenue under the previous CBA, and our 53/47 proposal would reduce the player share to 46.4% of total revenues. In addition, compared to our former 57/43 split, the owner's proposed 50/50 shifts more than $300 million per year to the owners, which equates to more than $3 billion over a 10-year deal. A move of this magnitude guarantees operating profits for all owners irrespective of quality of management and does not allow players to adequately share in the growth of the league.

It is important that you know that our Negotiating Committee has made every possible effort to resolve this conflict. We have proposed a diverse array of ideas and concepts to address the NBA's concerns about competitive balance and salary disparities. Regarding the BRI split, we have made significant compromises in an effort to bridge the financial gap that separates us. In fact, our offer of 53% amounts to an average of $185 million per year in financial givebacks, which, even under the most pessimistic interpretation of the league's financial statements, covers the league's entire purported operating loss.

The NBA, however, seems resigned to testing the resolve of our players through intimidation and hard bargaining tactics. They have given us "take it or leave it" ultimatums, threatened to end the season prematurely, reached out to players in an attempt to divide us, misled the press, and pre-conditioned further talks on our acceptance of significant concessions. This is an unacceptable form of negotiation, especially where the respective fates of the players and the owners are inextricably related. Moreover, it does nothing but damage the relationship between the league and union.

Furthermore, in recent weeks you have no doubt seen, heard or read Commissioner Stern in the media as he embarked on a media blitz intended to scare players and inflame the public. Do not buy into this. This public saber rattling is common in high profile and high stakes negotiations, and we anticipate that it will continue and intensify as the lockout continues. We will not be intimidated by public threats, ultimatums and manufactured drop dead dates. We will stand firm in our resolve to negotiate a fair deal for our current membership and those who will join our ranks in the future.

Your role is an important one. The owners need to know that we will stand strong until they are ready to finish negotiating a fair deal -- not one reached with preconditions, and not one forced down our throat with the threat of missed paychecks. We have prepared for this moment for over two years and now we are here. We are proud of the actions of our Committee and take great comfort in knowing that we have your support.

One final note before I conclude. Contrary to what is being said in the media, Derek, myself and the Negotiating Committee are of one accord. Derek is a fearless defender of player rights both at the bargaining table and behind the scenes, and he carries out his duties as President with the same degree of courage, focus and tenacity that he has exhibited on the court as a five-time champion. We are all well served to have Derek in a leadership capacity during these negotiations.

We will communicate more details on short-term and long-term logistical plans in dealing with this lockout and updates on the negotiations. Thank you again, and please feel free to contact me or the staff with any questions or concerns.

G. WILLIAM HUNTER
G.W.H.