Report: Cavs Lost $40M During 15-16 Season

[RealGM Wiretap]

The Cleveland Cavaliers had an operating loss of $40 million during the 15-16 season, according to a Forbes report.

The Cavaliers had a payroll of $115 million with a luxury tax bill of $54 million. In addition to benefits, cash involved in trades and the team’s share for total NBA player costs to reach the mandated 51% of leaguewide revenue and the Cavaliers spent roughly $185 million last season on their roster.

Despite the NBA's influx of national television money this season, the Cavaliers are likely headed for another huge operating loss.

All NBA team values are up dramatically thanks to the league's $24 billion TV deal signed in 2014, but the Cavaliers' jump has outpaced the league by 18%. Forbes valued the team No. 19 in the NBA at $515 million before the return of LeBron James and $1.1 billion last year, 12th highest in the league. 

The operating loss by the Cavaliers last season is the fifth biggest since Forbes began tracking NBA team finances with the 1997-98 season.

Dan Gilbert is worth $5.1 billion and Quicken Loans Arena is also receiving a subsidy from taxpayers to pay for half of the $140 million renovation.

The Forbes report follows a week in which James and Gilbert are at odds over the spending on the Cavs' payroll.

Via Kurt Badenhausen/Forbes

[Sam195]

People who believe Dan Gilbert and the cavs's claims can't see the Forrest for the trees. Gilbert has substantial investment in casinos, hotels and real estate surrounding the Quicken Loan's Arena which have all greatly appreciated in value and become profitable since Lebron returned to Cleveland and the Cavs won their first title. Gilbert was the same owner who claimed Lebron turned Cleveland into a ghost town when he blindsided the Cavs by signing with the heat in free agency. Clever accounting can make the Cavs as a singular business look like a sinking ship but Gilbert isn't required to disclose the huge profits he gets from his other ventures and businesses to the nba.

[Slava]

People who believe Dan Gilbert and the cavs's claims can't see the Forrest for the trees. Gilbert has substantial investment in casinos, hotels and real estate surrounding the Quicken Loan's Arena which have all greatly appreciated in value and become profitable since Lebron returned to Cleveland and the Cavs won their first title. Gilbert was the same owner who claimed Lebron turned Cleveland into a ghost town when he blindsided the Cavs by signing with the heat in free agency. Clever accounting can make the Cavs as a singular business look like a sinking ship but Gilbert isn't required to disclose the huge profits he gets from his other ventures and businesses to the nba.

Good post. Also worth mentioning that the value of the franchise itself has appreciated considerably over the years.

[zimpy27]

The company operates at a loss, gets tax breaks for the luxury tax. No doubt they realised they could take on luxury tax without it costing them actual money.

This isn't a sign of teams paying too much for players this is a sign of how big companies can get away with paying no tax.

[carey]

Good post. Also worth mentioning that the value of the franchise itself has appreciated considerably over the years.

That's true for all Sports. You don't buy a sports franchise with the intent of making much operating income. You make the money when you sell the thing decades later.

[koogiking]

So what about the operating cost. That's pennies compared to the value of the franchise, logo brand etc. and the real estate surrounding the Cavs. All of those skyrocket with LeBron. Especially after winning a championship. And they'll go up even more of they win multiple

[Ballerhogger]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

[alienpick]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

Owners SHOULD pay but realise they have leverage over the city. Their team, hopefully successful team, brings a big boost to the local economy, which the city enjoys the benefits of. That is why they lean on the city to help pay for the stadium. When they don't and the team leaves, the local economy feels that loss. In big cities with multiple sports teams it is less, in smaller cities it matters. It's fair from the owners point of view, as they put up a huge amount of capital to support the team. So they want someone to share the risk, but take a lot of the reward.

[Lateral Quicks]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

Couldn't agree more. It's reprehensible that taxpayers are footing the bill for billionaire owners and their (usually) highly profitable teams. This applies to all leagues, not just the NBA.

[likashing]

Doesn't matter how much Dan is worth. Donald Sterling had a huge net worth too and he did not want to pay.

[dice]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

Owners SHOULD pay but realise they have leverage over the city. Their team, hopefully successful team, brings a big boost to the local economy, which the city enjoys the benefits of. That is why they lean on the city to help pay for the stadium. When they don't and the team leaves, the local economy feels that loss. In big cities with multiple sports teams it is less, in smaller cities it matters. It's fair from the owners point of view, as they put up a huge amount of capital to support the team. So they want someone to share the risk, but take a lot of the reward.

i'm not sure there's a whole lot of evidence to support the idea that the benefit to the local economy outpaces the expense to taxpayers

[Ballerhogger]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

Owners SHOULD pay but realise they have leverage over the city. Their team, hopefully successful team, brings a big boost to the local economy, which the city enjoys the benefits of. That is why they lean on the city to help pay for the stadium. When they don't and the team leaves, the local economy feels that loss. In big cities with multiple sports teams it is less, in smaller cities it matters. It's fair from the owners point of view, as they put up a huge amount of capital to support the team. So they want someone to share the risk, but take a lot of the reward.

i'm not sure there's a whole lot of evidence to support the idea that the benefit to the local economy outpaces the expense to taxpayers

If your small market team and without a star no way. Even with star it's not enough, you need lots of winning to grow the economy to out pace tax payers. Or to be even close

[dice]

People who believe Dan Gilbert and the cavs's claims can't see the Forrest for the trees. Gilbert has substantial investment in casinos, hotels and real estate surrounding the Quicken Loan's Arena which have all greatly appreciated in value and become profitable since Lebron returned to Cleveland and the Cavs won their first title. Gilbert was the same owner who claimed Lebron turned Cleveland into a ghost town when he blindsided the Cavs by signing with the heat in free agency. Clever accounting can make the Cavs as a singular business look like a sinking ship but Gilbert isn't required to disclose the huge profits he gets from his other ventures and businesses to the nba.

Good post. Also worth mentioning that the value of the franchise itself has appreciated considerably over the years.

will it maintain that position after lebron is gone? if not, gilbert will have to sell the franchise pretty quickly to capitalize on lebron returning to town if he's gonna be eating annual losses

the bottom line (pardon the pun) is that lebron seems to feel entitled to having another ring purchased for him by ownership. dan gilbert increased team salary over 20% this year. the LOSING warriors increased their payroll by only 8%. what is lebron whining about? he got a huge pay bump. the team shelled out to re-sign j.r. smith. they upgraded to kyle korver just recently. c'mon lebron!

[Black Jack]

Pretty smooth by Dan. Owners should pay for thier stadiums. Ridiculous the tax payers have to pay for it all. This is sports wide issues . Look at the chargers , they just moved because the city wouldn't help fund a new stadium.

Owners SHOULD pay but realise they have leverage over the city. Their team, hopefully successful team, brings a big boost to the local economy, which the city enjoys the benefits of. That is why they lean on the city to help pay for the stadium. When they don't and the team leaves, the local economy feels that loss. In big cities with multiple sports teams it is less, in smaller cities it matters. It's fair from the owners point of view, as they put up a huge amount of capital to support the team. So they want someone to share the risk, but take a lot of the reward.

i'm not sure there's a whole lot of evidence to support the idea that the benefit to the local economy outpaces the expense to taxpayers

It's hard to stop local politicians from burning money like this. The only real fix is national legislature taking away all tax breaks for franchises that get subsidized. Not holding my breath.

[JonFromVA]

People who believe Dan Gilbert and the cavs's claims can't see the Forrest for the trees. Gilbert has substantial investment in casinos, hotels and real estate surrounding the Quicken Loan's Arena which have all greatly appreciated in value and become profitable since Lebron returned to Cleveland and the Cavs won their first title. Gilbert was the same owner who claimed Lebron turned Cleveland into a ghost town when he blindsided the Cavs by signing with the heat in free agency. Clever accounting can make the Cavs as a singular business look like a sinking ship but Gilbert isn't required to disclose the huge profits he gets from his other ventures and businesses to the nba.

It's always been that way ... sports teams when run correctly are a write off for other business operations, Gilbert's just gotten very creative about it.

Bruce Ratner of the Nets, though, probably still holds the crown for convincing NY officials to hand him "eminent domain" over 22-acres in the middle of Brooklyn.

That luxury tax is still real loss as much as any business expense/investment.

[Daddy 801]

Owners SHOULD pay but realise they have leverage over the city. Their team, hopefully successful team, brings a big boost to the local economy, which the city enjoys the benefits of. That is why they lean on the city to help pay for the stadium. When they don't and the team leaves, the local economy feels that loss. In big cities with multiple sports teams it is less, in smaller cities it matters. It's fair from the owners point of view, as they put up a huge amount of capital to support the team. So they want someone to share the risk, but take a lot of the reward.

i'm not sure there's a whole lot of evidence to support the idea that the benefit to the local economy outpaces the expense to taxpayers

It's hard to stop local politicians from burning money like this. The only real fix is national legislature taking away all tax breaks for franchises that get subsidized. Not holding my breath.

There have been studies done that show it is NOT a net benefit to the community to spend tax dollars on stadiums/sports teams. It is a big scam and people should be rioting in the street over their money being stolen and used to fund stadiums. I applaud any community who rejects paying for a stadium. Not to mention the public who doesn't care about the sports team and doesn't benefit from the money spent by individuals at businesses near the stadium. Total scam.

I couldn't agree more that national legislation needs passed to stop public funding of stadiums.

[LakersLegacy]

The franchise is worth so much more now than it was
Before the championship.

If the Clippers are worth 2 billion I wonder what the Cavs are worth W LeBron, Kyrie, Love, Korver, TT....

[Simmons25]

The franchise is worth so much more now than it was
Before the championship.

If the Clippers are worth 2 billion I wonder what the Cavs are worth W LeBron, Kyrie, Love, Korver, TT....

It won't be worth $2 Billion if the next owner comes in and sees $40m losses every year in the books... although I am sure he is cooking them.

Anyway as of right now... yes it's worth more than before the championship. But the next owner knows Lebron isn't going to be around for more than another 3-4 years. Then what will the Cavs be worth? Much less. It will be another 40 years before the Cavs sniff a championship and Cleveland isn't exactly a business paradise.

So I personally don't believe just because the LA Clippers value was high being in LA... that it means Cleveland will be post Lebron. I know I wouldn't buy that franchise at this moment if I had the money.

[LakersLegacy]

The franchise is worth so much more now than it was
Before the championship.

If the Clippers are worth 2 billion I wonder what the Cavs are worth W LeBron, Kyrie, Love, Korver, TT....

It won't be worth $2 Billion if the next owner comes in and sees $40m losses every year in the books... although I am sure he is cooking them.

Anyway as of right now... yes it's worth more than before the championship. But the next owner knows Lebron isn't going to be around for more than another 3-4 years. Then what will the Cavs be worth? Much less. It will be another 40 years before the Cavs sniff a championship and Cleveland isn't exactly a business paradise.

So I personally don't believe just because the LA Clippers value was high being in LA... that it means Cleveland will be post Lebron. I know I wouldn't buy that franchise at this moment if I had the money.

The value the Clippers got was all about the TV ratings and an over pay to get the racist owner out of the NBA. It's crazy that Sterling probably made an extra 800 million or so for being a racist

There is an untapped opportunity for more TV ratings for LeBrons team especially as he approaches Jordan's level
In the opinion of some fans. Instead of offering Cavs TV to just Cleveland, I wonder if Gilbert could offer it to other cities without the big cost of league pass. Maybe $6 a month? With lots of behind the scenes access and specials.

[dice]

i'm not sure there's a whole lot of evidence to support the idea that the benefit to the local economy outpaces the expense to taxpayers

It's hard to stop local politicians from burning money like this. The only real fix is national legislature taking away all tax breaks for franchises that get subsidized. Not holding my breath.

There have been studies done that show it is NOT a net benefit to the community to spend tax dollars on stadiums/sports teams. It is a big scam and people should be rioting in the street over their money being stolen and used to fund stadiums. I applaud any community who rejects paying for a stadium. Not to mention the public who doesn't care about the sports team and doesn't benefit from the money spent by individuals at businesses near the stadium. Total scam.

I couldn't agree more that national legislation needs passed to stop public funding of stadiums.

to be fair, it DOES give the community a team to support. assuming that team would otherwise relocate. but yeah, the economic benefit argument needs to stop being used