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Here is an example of the 80/20 principle at work. In 1998 the National
Basketball Association (NBA) team owners locked out the players in a
dispute that lasted seven months. The issue was determining how the
owners and players would divide $2 billion in annual revenue. Everyone
was convinced that the players would not want to miss a paycheck, and
assumed that the lockout would be concluded by the beginning of the 1998
basketball season. Some of the richest players were making decisions on
behalf of the players' union, and these players, who could well afford a
lengthy strike, voted to decline the owners' initial offer of 50 percent
of the revenues. So the season started, and there was no basketball. The
next theory was that an agreement would be reached prior to the All Star
game because the best players would never agree to miss that. But the
All Star game came and went, and there was no basketball. In the first
three months of the season, losses in players' salaries exceeded $500
million. On November 7, the New York Times published an article that
revealed a fact most people didn't know. It was the underlying reason
why the majority of owners were so unwilling to back down and give in to
the players' desire for 60 percent of the NBA revenue. The NBA is a
league of "haves" and "have nots." Some teams, like the Los Angeles
Lakers ("haves"), are very profitable. Other teams, like the Los Angeles
Clippers ("have nots"), lose money every season. The team owners who
were "have nots" were losing less money when the team was not playing.
They were actually financially better off during the strike and had less
financial incentive to settle quickly.
Finally, David Stern, the NBA commissioner, set a deadline of January
7, 1999, for the owners and players to come to an agreement. If a
settlement could not be reached by that deadline, he said, the entire
basketball season would be cancelled. On January 6, with the time clock
for negotiation running down, the owners and players agreed to a new
contract, and basketball resumed on January 7. The 80/20 rule had taken
effect.
Like most labor negotiations that end in a lockout or strike, the
players and owners both lost by failing to come to a timely agreement.
And they weren't the only losers. What about the fans, and the hourly
workers at the basketball arenas? And, as if these collective losses
were not enough, an ESPN poll conducted from October 31 to November 1,
just before the games were originally scheduled to begin, reported that
47 percent of the NBA fans said that even when the lockout ended, they
would attend fewer games, and 26 percent said they would watch fewer
games on television. This is clearly an example, not only of the power
of the 80/20 rule, but also of a lose-lose outcome.
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