The NBA announced on Monday that it was cancelling the first two weeks of the regular season, which means that for the second time in 13 years the league will miss games. To the union this was an inevitable conclusion to a process that began two years ago when the two sides informally began talks.

"I'm convinced this was all just part of the plan," Billy Hunter, executive director of the National Basketball Players Association told reporters on Monday.

The plan is shorthand for “missed paychecks,” as in once the players miss a few checks they will come running back into the fold willing to accept whatever draconian measures the league has in mind. This is the owners’ lockout and they’ve been calling the shots from the beginning.

Players get paid twice a month and will miss their first paychecks on Nov. 15. It doesn’t seem like a coincidence that NBA commissioner David Stern is canceling the schedule in two-week blocks.

Still, revenue is revenue and The NBA stands to lose $700-800 million for every month of the season that arenas remains dark and Stern indicated the offers will get worse as more and more money is lost.

According to Stern, the two sides, “remain very, very apart on all the issues.” Here’s a look at the issues: 

REVENUE SPLIT

By now you are probably familiar with the term basketball related income, or BRI. The NBA generates almost $4 billion annually and a certain percentage is guaranteed to the players. Each percentage point equals roughly $40 million.

What was in the last CBA: Players received 57 percent

What the owners proposed: 47 percent

What the players proposed: 53 percent

This represents the deepest concession from the players, a deduction of roughly $160 million in salaries annually. The owners started below 40 percent, so while their offer constitutes movement, there’s still a long way to go.

Perhaps you remember when Stern floated the idea of a 50-50 split to reporters last week. Stern called it a “concept,” although the concept would have represented a giveback of some $280 million annually.

On Monday, Stern said it was the union’s idea. The union said it was Stern’s. Either way, the 50-50 split appears to be off the table for now. This was thought to be the most divisive issue, but it’s the system, or cap issues, that the two sides spent 13 hours negotiating and here’s where it becomes troublesome. 

SYSTEM ISSUES: Contracts

Contracts for players with Bird rights (i.e. players who re-sign with their former team):

• What was in the last CBA: Six years
• What the owners proposed: Four years
• What the players proposed: Five years

Contracts for players without Bird rights (i.e. players who sign with new teams)

• What was in the last CBA: Five years
• What the owners proposed: Three years
• What the players proposed: Four years

Mid-level exception

• What was in the last CBA: Five years for league-average salary (last year started at $5.8 million).
• What the owners proposed: Two years, starting at $3 million per season
• What the players proposed: Four years, starting at $5 million per season

At first glance this looks like things that can be negotiated, assuming either side wants to give a little here and there. The biggest difference between the two sides is the mid-level exception, which has been a drain on cap space and is rarely a good investment.

But, the mid-level also represents a way for free agents join other teams and if teams that are over the cap use that space wisely they can add pieces. The Celtics split their mid-level to sign James Posey and Eddie House during their championship season, which worked perfectly. They also signed Rasheed Wallace and Jermaine O’Neal with decidedly mixed results. 

This cuts right through the heart of the NBA since the vast majority of players would never be in line for a Max payday and for many the mid-level is one last chance at a sizeable contract. This has the potential to become a divisive class issue among the players.

SYSTEM ISSUES: Luxury Tax

Now we get to the heart of the matter. Sports Illustrated’s Zach Lowe obtained a breakdown of the NBA’s proposal to strengthen the luxury tax – formerly a dollar for dollar penalty over a certain team-salary threshold. Last year it was $70 million. 

Lowe has all the details, but essentially the tax would increase to $1.75 and go up 50 cents per dollar for each increment of $5 million. So a team like the Lakers who had salaries of $90 million last season would have paid $50 million in tax as opposed to $20 million.

Yahoo! also reported that owners want to penalize teams that go over the tax twice in a five-year stretch. Penalties could include loss of the mid-level exception or even using Bird rights to sign their own players. The player’s union has two words for that: hard cap.

“You can’t say you’re moving away from a hard cap, but then do everything else that brings about the same result,” Hunter said on Monday. “You’ve compressed salaries, and then you’ve fixed it so nobody is going to spend. You’ve got a hard-cap situation. That’s the reality.”

According to SI, the players offered a tax at $1.25 for every dollar spent over the threshold with smaller increases thereafter. Thus the “gulf” that Stern mentioned.

So, where do we go from here? The owners will wait for the players to crack and the players will wait for the more sensible owners to declare victory and say that enough is enough. That’s assuming that there are still sensible owners out there, an assumption because their radio silence has been deafening. If no one breaks, this could drag on for months, if not the whole season.

Yet there is still room to make a deal. The system issues can be negotiated like they should have been last summer. The revenue points can be bargained. But that will require compromise and there seems to be very little of that.