GrandAdmiralDan wrote:The NBA also is taking an overly cautious and borderline insane approach and issuing an additional warning to teams that it would be prudent not to plan to the 10-11 projection of $53.6 mil salary cap and $65 mil lux tax, but rather to plan for a $50.4 mil salary cap and $61.2 mil lux tax, just in case.........That's going too far, IMO. .
I don't think they are going too far. Last fall when the financial system collapsed the world lost 30% of its wealth. Now much of that 30% was entirely paper based and a product of financial leverage, but it went away. The only thing is that for many, they didn't lose that 30% right away. Some did who had investments in the stock market in Banks and auto companies. But for many other businesses and industries, they haven't felt their entire 30% of pain yet. (we can debate the fine points of that percentage, but to me 30% feels about right give or take a little bit)
Those losses are now working their way through the system. A great deal of them still need to be realized here in the next year. For example there are large condo projects just finishing construction around the United States. The owners/backers of those projects are going to open the doors to zero demand and will take major losses. They know its coming. But the actual financial loss hasn't hit their books yet.
In that same way, pro sports are going to take a hit. Again look to the car dealers who spend massive dollars on advertising during sporting events. Or the big banks and brokerage firms who sponsor all sorts of sporting events. Or firms like Nike or Best Buy that are seeing their sales fall and with no sign of immediate recovery. All of that will result in far lower advertising and sponsorship expenditures. The only thing is that for many of those companies, they had already made their 2008-09 commitments. So the impact hasn't been completely felt yet. But it is coming.
Now will the NBA take a 30% drop in the luxury tax down to $50 million over the next couple years? Maybe not since pro sports can also be a comforting source of entertainment during a recession. Some like the NFL may do well, and individual pockets like the Brewers will continue to sell out for awhile, but the aggregate industry is going to see much reduced revenues. Just as the auto-makers and retailers are right now. It just hasn't worked its way down the food chain yet to the pro sports industry.