There are amazing riches to be made in sports, as Frank and Lorenzo Fertitta discovered this week when they sold their Ultimate Fighting Championship for $4 billion. They bought it in 2000 for just $2 million, and have transformed it into an international corporate franchise with some $600 million per year in revenues.
The new owners of UFC include the legendary private equity financiers Silver Lake and Kohlberg Kravis Roberts—companies that exist to transform other people’s money into even more money, and which aren’t exactly famous for being friendly to organized labor. One reason private equity found UFC so attractive? It reportedly gives less than 10% of its revenues to its fighters, the men and women who literally shed blood for the sport.
Similarly left out in the cold are the women playing professional soccer in the U.S. Hope Solo, one of the most famous names in the sport, revealed this week just how miserable and dangerous her life is on the road. Last weekend her team was forced to play a match on a baseball outfield; her post also reveals a litany of unsafe and unsanitary conditions, as well as embarrassingly low pay for the players—sometimes as little as $6,000 to $14,000 for seven months’ hard work.
Solo, like the very top UFC fighters, is doing fine, financially: once you become a household name, you can make a lot of money from your sheer celebrity, in endorsement deals and the like. And some teams are willing to spend insane amounts (like, more than $50 million per year) in an attempt to attract the world’s very best sportsmen. But when you look at the bottom 95% of the athletes in the UFC, or in women’s soccer, the financial picture becomes very ugly very quickly.
As Rob Wile notes, even money-flush sports like basketball would probably pay many players much less than they’re currently earning, were everything left up to individual negotiations between athletes and teams.
Which is where collective bargaining comes in. A lot of the commentary about the latest round of pay negotiations in the NBA concentrates on tactics: what makes sense for individual teams, what makes sense for individual players. (Plus, of course, a lot of good old-fashioned gawking at the enormous numbers being thrown around.)
But take a step back, and what you’re seeing, in basketball, is a prime example of what happens when a strong union does exactly what you’d expect a strong union to do.
Firstly, and most importantly, it evens out the playing field between labor and capital. Basketball players aren’t simply being paid the minimum amount necessary to persuade them to go out there on the court and play for a certain team, as they would be in a purely capitalist system. Instead, they’re contractually obliged to receive, collectively, roughly half of all the league’s revenues. When television-rights income goes sharply upwards, as it recently did, then total payroll has to go sharply upwards as well.
That process was never going to be smooth. Most players are on multi-year contracts, which means the excess money is, for the time being, getting spent on a relatively small number of free agents. That, in turn, is driving contracts up to eye-popping levels: the highest-paid player in the league is now a man I’d never heard of before named Mike Conley, who plays for a team I’d also never heard of, and who is going to receive more than $150 million over the next five years.
If Conley had been a better player, he wouldn’t have signed that contract. Maximum salaries are going to rise every year for the next few years, so it makes sense for the very best players to sign one- or two-year contracts that allow them to get regular pay raises. But either way, a new era of significantly bigger player salaries has now begun, and it isn’t going to go away for the foreseeable future. When billions of dollars have to get paid out every year to a relatively small number of players, that’s a mathematical inevitability.
The union agreement helps to even out the natural winner-takes-all tendencies in sports. There are maximum salaries, and in general the union is mostly interested in looking out for the rank and file players, rather than the very best.
The union also looks after its own—the current players—much more than it does players who haven’t joined teams yet. That explains the relatively low salaries for rookies, no matter how talented they are. You have to earn your dues before you can start earning the really big bucks.
Finally, the union wants to maximize players’ ability to receive the kind of non-financial perks they value the most. When you’re making eight-figure sums, at some point money starts having diminishing marginal returns, and other considerations start becoming equally important, like quality of life, and your chances of winning a championship. Jim Surowiecki seems to lament this, when he says that “even as NBA teams will collectively spend billions of dollars on contracts next season, few will be able to buy their way to success.”
But that’s a feature, not a bug. When a sport becomes overly financialized, without any countervailing force from an athletes’ union, the result is the UFC: a capitalist machine that successfully funnels billions of dollars to the owners, while the men and women doing the hard labor get a tiny fraction of that money.
In professional basketball, by contrast, a sport that is dominated by a powerful union, the influence of money is naturally diminished. The NBA is a throwback to the halcyon days of organized labor: it’s what an industry looks like when labor manages to put itself on an equal footing with capital. That’s a welcome sight, if a sadly rare one, these days.