Lockout

[floppymoose]

The "average" owner....however...does need the leverage to stop the big spenders from BUYING success.

Revenue sharing. They already do it with the lux tax, and the escrow payments. They just need to tweak it some to help out the smaller market teams. And if you look at the teams that have spent a ton and paid a lot of lux tax, they haven't all been winners, so the "buying a championship" is not a huge issue right now.

[Sleepy51]

https://spreadsheets.google.com/spreads ... WU0E&gid=0

I put together a table based on the Forbes numbers of the NBA investment performance over the 2005 cba.

I took the purchase price of each franchise and the lesser of the current Forbes valuation or 2010 sale price. From there I calculated the annual rate of return on that investment over the owners true holding period and then the portiom of gain from 2005 through 2010.

Next I pulled the annual operatimg income from the Forbes valuation pages. The Forbes operating income numbers do not allow for the depreciation expense that shiws in the audited financial statements. There are some real cash flow expenses that get left out like interest expenses, but separating those details would really require the individual financial statements.

From there I combined the cumulative cash flows for the 2005 cba period with the portion of appreciation attributed to the same holdimg period. That gives a rough average annual total return.

I know this is a VERY trough sketch and I know that it overstates real cash flow at the least by acyual interest expense, but even if there are enough real cash flow expenses to result in the Net Income figures the NBA is claiming, there is no way that those figures are wiping out the huge gains that most teams have experienced.

On a total return basis, ownimg an NBA franchise has been a pretty outstanding investment with only a few either recently purchased or VERY poorly run exceptions.


The biggest problem that the NBA has experiemced overexpansion to involve undercapitalized owmers and the lack of a hard cap. A hard cap and contraction addresses the real sources of the problems.

[floppymoose]

If the 57% BRI to the players is not the problem, then I'm guessing you support a hard cap that would be based on a player BRI slice of at least 57%? In fact if I'm following your reasoning correctly, it seems the hard cap should be even higher than that, since the idea is that not all teams are at the cap?

[Sleepy51]

It's also a pretty reasonable conclusion from the Forbes numbers that the ONLY way to reach the NBA's claim of "never having a positive year" under the current CBA would absolutely necessitate including that depreciation allowance. The numbers just arent there otherwise to wipe out the positive annual EBITDA numbers.

[Sleepy51]

If the 57% BRI to the players is not the problem, then I'm guessing you support a hard cap that would be based on a player BRI slice of at least 57%? In fact if I'm following your reasoning correctly, it seems the hard cap should be even higher than that, since the idea is that not all teams are at the cap?

Actually, i don't know. I don't know that 57% is the right cap number. I want the cap number to apply competitive pressure to spread the talent around and depress SOME of the irresponsible spending, but then again if I were to get my contractiom wish and the teams that are incurring the real losses are wiped off the books, plus the new TV deal revenue coming on line the leaue would probably be extremely profitable at the current split. I just have started rolling those numbers over in my head yet.

All I want is parity and to axe the 4 crappiest organizations. I would probably like to see how the numbers shake out from those two changes before I start tinkering further ... Up or down

[Twinkie defense]

It looks to me like the players are making the same money recently they made 3 or 4 years ago. I don't know the tv $$$ for the league but I haven't seen reports that they've gone down. Attendance has been pretty flat since the last CBA renewal (2005, I think). Ticket prices I think are higher then last CBA, not sure how much. Playoff viewership is up, which bodes well for the league next negotiations with the tv networks. Where is the money going? Why are profits down?

Well the League says they have been unprofitable every season of the current CBA - you may not buy that but it would explain the results you are seeing - the profits are going to the players' 57% pie.

The players face risk every time they get on the court.

Sorry, but frankly I find that laughable.

In other news, in January Forbes valued the Sixers at $330 mil; the team sold today for $280 mil. Comcast bought the team in 1996 for $125 mil. If my math is correct (probably is not), that's an annual return of 5.52%. Of course, it does not include net operating profit or loss over the years Comcast owned the team.

Philly is a big town, big sports market.

[floppymoose]

Well the League says [...]

And you believe them, right?

[Sleepy51]

The Russell 3000 (98% of the US stock market) returned 4.00% on an average annual basis from 2005 to date.

[Mylie10]

The "average" owner....however...does need the leverage to stop the big spenders from BUYING success.

Revenue sharing. They already do it with the lux tax, and the escrow payments. They just need to tweak it some to help out the smaller market teams. And if you look at the teams that have spent a ton and paid a lot of lux tax, they haven't all been winners, so the "buying a championship" is not a huge issue right now.

Plus not every area that has a team deserves to keep it just because. If fans don't support the team (for whatever reason) then maybe that team should be done away with. The talent pool is spread pretty thin.

[Sleepy51]

Ok I updated that table for the Philly sale price and I corrected a formula error and a typo in the Twolves operating income numbers.

[Twinkie defense]

Definitely, fewer teams. Will never happen though.

And whether the League has lost money for every single year or only some years doesn't matter to me - its absurd on its face that player-employees would get 57% of revenues. That's just plain bad business!

And it's important to point out that both sides agree there have been losses.

[Sleepy51]

The "average" owner....however...does need the leverage to stop the big spenders from BUYING success.

Revenue sharing. They already do it with the lux tax, and the escrow payments. They just need to tweak it some to help out the smaller market teams. And if you look at the teams that have spent a ton and paid a lot of lux tax, they haven't all been winners, so the "buying a championship" is not a huge issue right now.

Plus not every area that has a team deserves to keep it just because. If fans don't support the team (for whatever reason) then maybe that team should be done away with. The talent pool is spread pretty thin.

Charlotte was a mistake.Dust off an nuke the site from orbit. It's the only way to be sure.

New Orleans has demonstrated that they will not support an NBA team during college or pro football season so shut that puppy down before the taxpayers get Al Davis'ed into gurantaeeing ticket sales.

I thought Toronto should be contracted initiallly but they are doing great financially AND the profits are going to the Ontario teacher's pension fund. good for them . New Jersey loses on merit, but they are tied into a huge real estate deal to turn Brooklyn into little Manhattan so that's a non starter.

Memphis is on an upswing now that they aren't sill living down Larry Riley's drafts. That market probably doesn't work out long term, but they stayed execution with a good season this year.

Sacramento should be contracted before allowed to move to Anaheim.

Milwuakee probably has the toughest demographic market in the country, but they have a ton of history and the fans are supporting the product.

That leaves Indy as the last of the least. That market is not viable in a post rust belt universe. Plus it's another football first town.

That's my 4. Indy, Sac, Charlotte and New Orleans. Players give up jobs. Owners give up rich guy old boy club socialism/corporate welfare. Slap a hard cap on that bad boy that makes Miami LAL and Dallas shed some talent and we're in business. All the other dominoes will fall into place after you contract the trash.

[Twinkie defense]

What happens to the teams that get shut down, does the League pay the owners? And where does tht money come from?

[Sleepy51]

Some terms of contraction are probably specified in the NBA franchise operating agreement. I do not have access to that agreement.

Since these are millionaire corporate welfare socialists, I would guess that there are exorbitant buy out provisions to insulate an owner from actually taking a real or significant loss despite having completely failed at running their enterprise.

I found a report that Jerry Buss has already suggested passing the hat to the tune of $20MM each from the remaining 28 teams to shut down 2 of the league's worst operations. That sets a contraction value of $280 MM which is pretty comical considering what your employer would get for the inventory, furniture and unopened supplies if they closed their business, but whatever. It's their money.

Also of note in that article was this blurb from Jerry West:

The owners have long said their current economic format is unworkable, that the league is losing hundreds of millions a season. The players counter that such talk is just so much bargaining hype, that the NBA continues to rake in billions each year.

West obviously saw this situation building two years ago when he told me, “You look at the propaganda that comes out of the league office and you know that a lot of that stuff is not true.”

Read more: http://blogs.hoopshype.com/blogs/lazenb ... z1S5n1UOHR

[Sleepy51]

I'm also going to revise my list. Indy and Minnesota are equally worthy of taking a dirt nap. I say we have a best of 7 play-in series. Loser has to keep playing in the NBA, winner gets to put their fans out of their misery.

[Mylie10]

I'm also going to revise my list. Indy and Minnesota are equally worthy of taking a dirt nap. I say we have a best of 7 play-in series. Loser has to keep playing in the NBA, winner gets to put their fans out of their misery.

[Mylie10]

Do it before the free agency period and roster setting starts for the rest of the teams so that a draft could be held to grab the crappy teams' players.

[Left*My*Heart]

Regarding contracting, do the owners vote out a franchise?

I don't think the owners would belly up to buyout more than a couple of franchises at one time, I might be wrong.

I would like to contract seven teams the Pacers, Kings, Bobcats, Hornets, 76ers, Grizz, Wolves and the Nets, Bucks and Pistons would be planned for contraction a couple of years down the road depending their performance.

[Sleepy51]

I'm pretty sure Contraction is just a form of buyout, although there are certain to be standards and requirements that owners must adhere to. If someone were grievously mismanaging the franchise to the detriment of the league investment image (like George Shinn was in New Orleans) I'm sure there is a nuclear option to vote a bad owner out. But, unless the guy wanted to take the buyout cash there would likely be a long and expensive court battle. So contraction for all practical purposes probably requires the consent of the contracted. Consent that other owners would have to buy with ridiculous buy out prices for failed enterprises . . . I tell ya if I have a billion lying around I would definitely get in on this racket. It really is an amazing hustle.

[Left*My*Heart]

I could see the Grizz owner Michael Heisley accepting a buyout and possible the Pacer's owner Herbert Simon. Supposedly Heisley has tried to sell the Grizz in the past.

I feel sorry for the major market teams in the rust belt, Pistons, 76ers and Cavs. Detroit in particular may never recover from it's economic doom, where one in three is unemployed.