Reinsdorf Facing 9-Figure Losses Amid Pandemic

[Jcool0]

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[drosereturn]

It unfortunate for newspapers to print numbers that are unsubstantiated. He is trying to draw sympathy for the owners. He is going to be just fine. Both the Bulls and Sox are worth billions. Tell him to sell a portion of his shares.

Or gasp — draw a corporate line of credit.

Thing is while it wont cripple JR, it will be a direct hit for Jerry he will reconsider thinking the Bulls as cash cow and more likely sell.
Even if the Bulls are worth billions, you dont have the money until you sell it off so you cannot say they are filthy rich as someone like Bill gates. I mean why would Jerry even want to keep the Bulls when this is a guy that wanted to trade 6 Bulls championship rings for 1 Sox? Unless his son really adores the Bulls, he could potentially deal the franchise.

[Jcool0]

It unfortunate for newspapers to print numbers that are unsubstantiated. He is trying to draw sympathy for the owners. He is going to be just fine. Both the Bulls and Sox are worth billions. Tell him to sell a portion of his shares.

Or gasp — draw a corporate line of credit.

Thing is while it wont cripple JR, it will be a direct hit for Jerry he will reconsider thinking the Bulls as cash cow and more likely sell.
Even if the Bulls are worth billions, you dont have the money until you sell it off so you cannot say they are filthy rich as someone like Bill gates. I mean why would Jerry even want to keep the Bulls when this is a guy that wanted to trade 6 Bulls championship rings for 1 Sox? Unless his son really adores the Bulls, he could potentially deal the franchise.

Reinsdorf has already said he has recommended to his sons they sell the White Sox when he passes.

[Jcool0]

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[dougthonus]

Why would the BRI split increase while the income goes down. I think it's far more likely the players share decreases to 49% then stays the same. As my quote said, it's based on BRI which has taken a beating during covid. I also don't think we'll be back to going to games and the economy will be tight next year, making it a certaintity they miss the mark.

If the cap falls and BRI split decreases then the money just won't be there. With less suitors out there, teams aren't going to overpay for FA's and you'll see many players fall into MLE range and minimum deals. ANd it'll be even worse next year. We've already booked a lot of games this year precovid.

The BRI range is based on how contracts are given out. If the NBA owners just didn't pay guys enough to hit 49%, all contracts would rise until you hit 49%, if the NBA paid people too much, all contracts would be reduced to get to 51%. With BRI falling drastically, the BRI% relative to existing contracts will be way over 51% and then the player contracts will drop until it hits 51%.

So let's say for the sake of argument that BRI was $1000, so the plays get somewhere betwen 490-510. The owners gave the players contracts worth 500. Going into next year, there's 500 on the books, but now BRI is 800. Those 500 are still there, but now 500 is no 62.5% of 800 instead of 50% of 1000. So that 500 is reduced to 408 which is 51% of the new BRI.

That's why the players put money in escrow, to account for the reductions, and escrow percentages were increased from 10% to 20%.

So from a total payout, players will lose tons of money and won't be paid on initial contracts, but percentage of BRI would rise slightly in the short term.

[TheStig]

Why would the BRI split increase while the income goes down. I think it's far more likely the players share decreases to 49% then stays the same. As my quote said, it's based on BRI which has taken a beating during covid. I also don't think we'll be back to going to games and the economy will be tight next year, making it a certaintity they miss the mark.

If the cap falls and BRI split decreases then the money just won't be there. With less suitors out there, teams aren't going to overpay for FA's and you'll see many players fall into MLE range and minimum deals. ANd it'll be even worse next year. We've already booked a lot of games this year precovid.

The BRI range is based on how contracts are given out. If the NBA owners just didn't pay guys enough to hit 49%, all contracts would rise until you hit 49%, if the NBA paid people too much, all contracts would be reduced to get to 51%. With BRI falling drastically, the BRI% relative to existing contracts will be way over 51% and then the player contracts will drop until it hits 51%.

So let's say for the sake of argument that BRI was $1000, so the plays get somewhere betwen 490-510. The owners gave the players contracts worth 500. Going into next year, there's 500 on the books, but now BRI is 800. Those 500 are still there, but now 500 is no 62.5% of 800 instead of 50% of 1000. So that 500 is reduced to 408 which is 51% of the new BRI.

That's why the players put money in escrow, to account for the reductions, and escrow percentages were increased from 10% to 20%.

So from a total payout, players will lose tons of money and won't be paid on initial contracts, but percentage of BRI would rise slightly in the short term.

I understood it as that if 500 is on the books and it drops to 800, then they only have 300 to spend in FA. I believe you're talking about if they already spend it. Due to the CBA and shorter deals, there are a lot of FA's every year.

Remember a drop of 10+mill in the cap will make it that very few teams have max cap space. So guys who are UFA and RFA will have smaller offers since the money is just not out there. Lot's of guys will be pushed to MLE and min deals.

[dougthonus]

I understood it as that if 500 is on the books and it drops to 800, then they only have 300 to spend in FA. I believe you're talking about if they already spend it. Due to the CBA and shorter deals, there are a lot of FA's every year.

Remember a drop of 10+mill in the cap will make it that very few teams have max cap space. So guys who are UFA and RFA will have smaller offers since the money is just not out there. Lot's of guys will be pushed to MLE and min deals.

Here's an article that discusses it pretty in depth:

https://www.peachtreehoops.com/2020/5/8/21249771/nba-salary-cap-2020-21-expectations-details-atlanta-hawks

While Forecasted BRI determines the guaranteed share of BRI for the players, the Salary Cap is not set by Forecasted BRI but instead by Projected BRI (more on this in a bit). The enforcement of this guaranteed share is accomplished by appropriately setting the Salary Cap and through the channels of an Escrow account and Overage payments from the NBA.

Based on what I can tell from the article, the players will only be guaranteed 49% of the share for 19/20, but because of actual salaries being paid out at a much higher level contractually than 49% on the books, they will instead still hit the cap of 51%.

With what will be a decrease in 2019-20 BRI, it is difficult to pinpoint where the revenues will fall and by how much. However, the fall will almost certainly trigger all of the current Escrow account to be paid to the NBA in order to achieve the 51% guaranteed share. The current 10% of salaries in Escrow may not be enough to achieve this guarantee, which is a topic that Jeff Siegel of Early Bird Rights has touched on.

Here, he's talking about how the NBA may not have enough in escrow to force player salaries down to 51% (which is my understanding, and how I viewed it).

So let's go back to your example, say the BRI was 1000 and fell to 800. Let's also say that player salaries which were at 500 have 150 come off the books and are now at 350 entering the new year. You're right that 49% of BRI would be 392 which is greater than the 350 still on the books.

However, it's highly likely that just using all the exceptions available will make salaries raise considerably more than the 42 to stay at BRI 49, but it could happen if NBA owners were disciplined enough. What will probably happen is they'll sign guys more or less normally, presuming that the outage in play will be temporary and not last through the length of the contracts, increase escrow for players, and then get total salaries down to 51% at 408.

[transplant]

I don't understand the hate against Reinsdorf on this. He was asked questions and he gave honest answers. Obviously, these are bad times for professional sports and all other companies in the business of live entertainment. They're taking a bath, but they're all taking it together. All of their short-term and intermediate-term projections have been blown to hell. Anything that they considered certain is no longer certain. We as fans can choose to believe that our comfortable old POVs should still be true, but IMO you need to wake up and smell the coffee. You need to examine the way you look at everything.

[dougthonus]

I don't understand the hate against Reinsdorf on this. He was asked questions and he gave honest answers. Obviously, these are bad times for professional sports and all other companies in the business of live entertainment. They're taking a bath, but they're all taking it together. All of their short-term and intermediate-term projections have been blown to hell. Anything that they considered certain is no longer certain. We as fans can choose to believe that our comfortable old POVs should still be true, but IMO you need to wake up and smell the coffee. You need to examine the way you look at everything.

Will be interesting to see how things work out for the owners. Assuming the worst case is a 40% reduction in revenue and players then take 20% of that hit because its shared evenly. 20% reduction in player salaries isn't really that meaningful. That puts them at a higher salary cap than before the TV deal hit 4 years ago.

At the same time, it may not be armageddon for the owners either. While they absolutely will lose more because tehir share isn't straight profits, and they won't reduce all their costs, they will absolutely reduce costs massively by not having to staff games, and will also probably still be in okay shape in terms of turning a profit. I looked at the estimated earnings of all the teams and most of them would lose money if expenses were identical but revenue dropped 40%, but I'd bet that they will find ways to massively cut expenses if they aren't hosting live games.

Granted, that's only the strictly NBA business. A lot of owners have money wrapped up in the stadiums, and that's going to be straight loss.

[TheStig]

I don't understand the hate against Reinsdorf on this. He was asked questions and he gave honest answers. Obviously, these are bad times for professional sports and all other companies in the business of live entertainment. They're taking a bath, but they're all taking it together. All of their short-term and intermediate-term projections have been blown to hell. Anything that they considered certain is no longer certain. We as fans can choose to believe that our comfortable old POVs should still be true, but IMO you need to wake up and smell the coffee. You need to examine the way you look at everything.

It's not a hate on this issue. It's more of a general dislike. No one feels bad for the billionaires. They'll just give them a forgivable loan before the end of this!

[TheStig]

I understood it as that if 500 is on the books and it drops to 800, then they only have 300 to spend in FA. I believe you're talking about if they already spend it. Due to the CBA and shorter deals, there are a lot of FA's every year.

Remember a drop of 10+mill in the cap will make it that very few teams have max cap space. So guys who are UFA and RFA will have smaller offers since the money is just not out there. Lot's of guys will be pushed to MLE and min deals.

Here's an article that discusses it pretty in depth:

https://www.peachtreehoops.com/2020/5/8/21249771/nba-salary-cap-2020-21-expectations-details-atlanta-hawks

While Forecasted BRI determines the guaranteed share of BRI for the players, the Salary Cap is not set by Forecasted BRI but instead by Projected BRI (more on this in a bit). The enforcement of this guaranteed share is accomplished by appropriately setting the Salary Cap and through the channels of an Escrow account and Overage payments from the NBA.

Based on what I can tell from the article, the players will only be guaranteed 49% of the share for 19/20, but because of actual salaries being paid out at a much higher level contractually than 49% on the books, they will instead still hit the cap of 51%.

With what will be a decrease in 2019-20 BRI, it is difficult to pinpoint where the revenues will fall and by how much. However, the fall will almost certainly trigger all of the current Escrow account to be paid to the NBA in order to achieve the 51% guaranteed share. The current 10% of salaries in Escrow may not be enough to achieve this guarantee, which is a topic that Jeff Siegel of Early Bird Rights has touched on.

Here, he's talking about how the NBA may not have enough in escrow to force player salaries down to 51% (which is my understanding, and how I viewed it).

So let's go back to your example, say the BRI was 1000 and fell to 800. Let's also say that player salaries which were at 500 have 150 come off the books and are now at 350 entering the new year. You're right that 49% of BRI would be 392 which is greater than the 350 still on the books.

However, it's highly likely that just using all the exceptions available will make salaries raise considerably more than the 42 to stay at BRI 49, but it could happen if NBA owners were disciplined enough. What will probably happen is they'll sign guys more or less normally, presuming that the outage in play will be temporary and not last through the length of the contracts, increase escrow for players, and then get total salaries down to 51% at 408.

I think we're kind of in the same boat here.

I'm just saying, if it drops 15%, more than 25% of the league will be FA's. The 75% under contract will keep their amount. But that 25% will be fighting for 10% of the pie. So let's total player salaries are 1000 now. The total cap across the league drops 15% to 850. 250 will expire. But there will be only 100 available to the players instead of the normal 250+. That's where I'm saying that a lot of players will be squeezed into the MLE and Min. The money just won't be there. The guys under contract will still get theirs. The FA's will be squeezed. Owner's aren't going to go heavy into the LT with dropping revenues and team values.

[dougthonus]

I think we're kind of in the same boat here.

I'm just saying, if it drops 15%, more than 25% of the league will be FA's. The 75% under contract will keep their amount. But that 25% will be fighting for 10% of the pie. So let's total player salaries are 1000 now. The total cap across the league drops 15% to 850. 250 will expire. But there will be only 100 available to the players instead of the normal 250+. That's where I'm saying that a lot of players will be squeezed into the MLE and Min. The money just won't be there. The guys under contract will still get theirs. The FA's will be squeezed. Owner's aren't going to go heavy into the LT with dropping revenues and team values.

Looking back at the article, and reading through the CBA, I believe the author said that they don't know if the escrow will pull them down to 51% guarantee for the owners rather than the players, I read it as the players, but I now believe I was incorrect after reading the CBA and think you were correct that the players share would fall to 49% based on revenue shortfall (to be made up by escrow if they have enough money in escrow), or in other words, you were right, they should get 49%.

One thing that will be interesting in our fictional example is that if the cap goes down by 200 and players salaries drop by 250, you wont have 200 worth of players filling in 50 worth of cap room, exceptions will raise a lot of that value higher, but not to the full 250, so now it will go to say 150 those players will take instead of 250, but over the cap room of 50, which means existing contracts will then help fill in the difference.

CBA section dealing with this quoted below:

The Designated Share for each Salary Cap Year covered by the term of this Agreement shall equal fifty percent (50%) of BRIfor such Salary Cap Year, provided that the Designated Share for aSalary Cap Year shall be increased or decreased in accordance withthe following: (i) in the event that BRI for a Salary Cap Yearexceeds the amount of BRI forecasted for such Salary Cap Year asset forth below, then the Designated Share for such Salary CapYear shall equal fifty percent (50%) of the amount of BRIforecasted for such Salary Cap Year, plus sixty and one-halfpercent (60.5%) of the difference between the BRI for such SalaryCap Year and the BRI forecasted for such Salary Cap Year; and (ii)in the event that BRI forecasted for a Salary Cap Year as set forthbelow exceeds BRI for such Salary Cap Year, then the DesignatedShare for such Salary Cap Year shall equal fifty percent (50%) ofthe amount of BRI forecasted for such Salary Cap Year, less sixtyand one-half percent (60.5%) of the difference between the BRIforecasted for such Salary Cap Year and BRI for such Salary CapYear. Notwithstanding anything to the contrary in the foregoing,in no event shall the Designated Share for any Salary Cap Year beless than forty-nine percent (49%) of BRI or greater than fifty-onepercent (51%) of BRI. To illustrate the foregoing, (X) if BRI forthe 2021-22 Salary Cap Year were to equal $6.442 billion, then theDesignated Share for the 2021-22 Salary Cap Year would equal$3.2315 billion ($3.171 billion (forecasted BRI of $6.342 billionmultiplied by 50%) plus $60.5 million (60.5% of $100 million -- thedifference between BRI of $6.442 billion and forecasted BRI of$6.342 billion), which would equate to 50.16% of BRI; (Y) if BRIfor the 2021-22 Salary Cap Year were to equal $6.242 billion, thenthe Designated Share for the 2021-22 Salary Cap Year would equal$3.1105 billion ($3.171 billion (forecasted BRI of $6.342 billionmultiplied by 50%) less $60.5 million (60.5% of $100 million -- thedifference between forecasted BRI of $6.342 billion and BRI of$6.242 billion), which would equate to 49.83% of BRI; and (Z) ifBRI for the 2021-22 Salary Cap Year were to equal $7.084 billion,then the Designated Share for the 2021-22 Salary Cap Year wouldequal $3.6128 billion or 51% of BRI (since the amount per thecalculation would exceed 51% of BRI -- $3.171 billion (forecastedBRI of $6.342 billion multiplied by 50%) plus $448.9 million(60.5% of $742 million -- the difference between BRI of $7.084billion and forecasted BRI of $6.342 billion) would equal $3.6199billion or 51.1% of BRI).

[TheStig]

I think we're kind of in the same boat here.

I'm just saying, if it drops 15%, more than 25% of the league will be FA's. The 75% under contract will keep their amount. But that 25% will be fighting for 10% of the pie. So let's total player salaries are 1000 now. The total cap across the league drops 15% to 850. 250 will expire. But there will be only 100 available to the players instead of the normal 250+. That's where I'm saying that a lot of players will be squeezed into the MLE and Min. The money just won't be there. The guys under contract will still get theirs. The FA's will be squeezed. Owner's aren't going to go heavy into the LT with dropping revenues and team values.

Looking back at the article, and reading through the CBA, I believe the author said that they don't know if the escrow will pull them down to 51% guarantee for the owners rather than the players, I read it as the players, but I now believe I was incorrect after reading the CBA and think you were correct that the players share would fall to 49% based on revenue shortfall (to be made up by escrow if they have enough money in escrow), or in other words, you were right, they should get 49%.

One thing that will be interesting in our fictional example is that if the cap goes down by 200 and players salaries drop by 250, you wont have 200 worth of players filling in 50 worth of cap room, exceptions will raise a lot of that value higher, but not to the full 250, so now it will go to say 150 those players will take instead of 250, but over the cap room of 50, which means existing contracts will then help fill in the difference.

CBA section dealing with this quoted below:

The Designated Share for each Salary Cap Year covered by the term of this Agreement shall equal fifty percent (50%) of BRIfor such Salary Cap Year, provided that the Designated Share for aSalary Cap Year shall be increased or decreased in accordance withthe following: (i) in the event that BRI for a Salary Cap Yearexceeds the amount of BRI forecasted for such Salary Cap Year asset forth below, then the Designated Share for such Salary CapYear shall equal fifty percent (50%) of the amount of BRIforecasted for such Salary Cap Year, plus sixty and one-halfpercent (60.5%) of the difference between the BRI for such SalaryCap Year and the BRI forecasted for such Salary Cap Year; and (ii)in the event that BRI forecasted for a Salary Cap Year as set forthbelow exceeds BRI for such Salary Cap Year, then the DesignatedShare for such Salary Cap Year shall equal fifty percent (50%) ofthe amount of BRI forecasted for such Salary Cap Year, less sixtyand one-half percent (60.5%) of the difference between the BRIforecasted for such Salary Cap Year and BRI for such Salary CapYear. Notwithstanding anything to the contrary in the foregoing,in no event shall the Designated Share for any Salary Cap Year beless than forty-nine percent (49%) of BRI or greater than fifty-onepercent (51%) of BRI. To illustrate the foregoing, (X) if BRI forthe 2021-22 Salary Cap Year were to equal $6.442 billion, then theDesignated Share for the 2021-22 Salary Cap Year would equal$3.2315 billion ($3.171 billion (forecasted BRI of $6.342 billionmultiplied by 50%) plus $60.5 million (60.5% of $100 million -- thedifference between BRI of $6.442 billion and forecasted BRI of$6.342 billion), which would equate to 50.16% of BRI; (Y) if BRIfor the 2021-22 Salary Cap Year were to equal $6.242 billion, thenthe Designated Share for the 2021-22 Salary Cap Year would equal$3.1105 billion ($3.171 billion (forecasted BRI of $6.342 billionmultiplied by 50%) less $60.5 million (60.5% of $100 million -- thedifference between forecasted BRI of $6.342 billion and BRI of$6.242 billion), which would equate to 49.83% of BRI; and (Z) ifBRI for the 2021-22 Salary Cap Year were to equal $7.084 billion,then the Designated Share for the 2021-22 Salary Cap Year wouldequal $3.6128 billion or 51% of BRI (since the amount per thecalculation would exceed 51% of BRI -- $3.171 billion (forecastedBRI of $6.342 billion multiplied by 50%) plus $448.9 million(60.5% of $742 million -- the difference between BRI of $7.084billion and forecasted BRI of $6.342 billion) would equal $3.6199billion or 51.1% of BRI).

Oh they will naturally go over the cap. Teams will keep players they really truly value or can afford. But I think it will push a lot of bigger dollar players into the MLE and some guys into the minimum. But I have a hard time seeing a normal owner going into the LT. And most smaller markets will be crushed. They're not going to be free spending like they were last year.

[dougthonus]

Oh they will naturally go over the cap. Teams will keep players they really truly value or can afford. But I think it will push a lot of bigger dollar players into the MLE and some guys into the minimum. But I have a hard time seeing a normal owner going into the LT. And most smaller markets will be crushed. They're not going to be free spending like they were last year.

The one thing worth noting in the article I quoted is that the expectation is the 20/21 cap will be based on projected 20/21 earnings not influenced by a shortfall in 19/20. If there is a vaccine and they plan to have people in stadiums, the cap may not move much. If there is no vaccine and they are playing in a bubble or empty stadiums then the cap will probably take a big hit.

If the cap does take a big hit, then there will be very few teams under the cap, and almost all the money spent will be for exceptions (guys signing extensions or MLE). Too bad for the Bulls that they don't have any players worth negotiating with that would be in that cheap deal scenario. Kris Dunn and Denzel Valentine would be the guys they could do that with, but Kris is probably already an MLEish player and Denzel is less, so no money to be saved by playing hardball.

For that reason, you may also see an uptick in guys taking the QO if teams try to play hard ball, or FAs taking one year deals, because the expectation is probably if there is a lower cap number this year, that it will only be for one year. Of course, who knows what will happen medically, but that's probably the scenario people are expecting.

[TheStig]

Oh they will naturally go over the cap. Teams will keep players they really truly value or can afford. But I think it will push a lot of bigger dollar players into the MLE and some guys into the minimum. But I have a hard time seeing a normal owner going into the LT. And most smaller markets will be crushed. They're not going to be free spending like they were last year.

The one thing worth noting in the article I quoted is that the expectation is the 20/21 cap will be based on projected 20/21 earnings not influenced by a shortfall in 19/20. If there is a vaccine and they plan to have people in stadiums, the cap may not move much. If there is no vaccine and they are playing in a bubble or empty stadiums then the cap will probably take a big hit.

If the cap does take a big hit, then there will be very few teams under the cap, and almost all the money spent will be for exceptions (guys signing extensions or MLE). Too bad for the Bulls that they don't have any players worth negotiating with that would be in that cheap deal scenario. Kris Dunn and Denzel Valentine would be the guys they could do that with, but Kris is probably already an MLEish player and Denzel is less, so no money to be saved by playing hardball.

For that reason, you may also see an uptick in guys taking the QO if teams try to play hard ball, or FAs taking one year deals, because the expectation is probably if there is a lower cap number this year, that it will only be for one year. Of course, who knows what will happen medically, but that's probably the scenario people are expecting.

I think Lauri could be that guy that falls into the MLE if he doesn't improve. And we shall see. As you said, it all depends on people feeling comfortable going to games. I think that will be one of the last to return, it's expensive (recession concers) and cramped.

[dougthonus]

I think Lauri could be that guy that falls into the MLE if he doesn't improve. And we shall see. As you said, it all depends on people feeling comfortable going to games. I think that will be one of the last to return, it's expensive (recession concers) and cramped.

Lauri isn't due to sign an RFA this year though, so he'd just wait it out next year, and I think people are optimistic that there will be a vaccine before the start of 21/22 season at which point the cap should be back to normal.

Hard for me to guess on people returning to games. The types of people who have season tickets are probably generally in the group that is less likely to be impacted by COVID (people who just transitioned to remote work), and many people are just anxious to get out and do things.

I think it will be less than it was before, at least initially, some people will be conservative, and some people will have lost money, but I don't think it will be say 30% less or something drastic. If they get close to what they had before, say game day stuff is 75% of what it used to be, then the cap won't fall by all that much.

[johnnyvann840]

Boo hoo, my girlfriend's career (performance) is over.

Pretty much how I feel about it. Sorry, but I'm having a hard time feeling sorry for the Reinsdorf's over this. There are a lot of people suffering right now who cannot afford to even pay their bills or feed their families. JR and his family can certainly afford this and much more before they have to start worrying about anything. Cry me a river.