Official CBA/Labour Talks Discussion Thread II

[floppymoose]

ranger, if you don't discount the interest on purchase cost, and instead take 57% of that (the last BRI split) out of the players hide, then you are effectively having the players finance a large portion of ownerships loans to buy the teams. In other words, you having the owners buy the teams with the player's money.

A great deal if you can get it.

[ranger001]

That still does not mean you can throw away interest expenses when deciding whether a business is profitable or not. The players cannot just eliminate all interest expenses and say "just use a different capitalization strategy. Pay cash if you want an NBA franchise".

You are absolutely correct that depreciation of TANGIBLE assets, Interest and taxes are real cash flow items. I have acknowledged this fact multiple times since I first posted that table.

I think F4L just posted your table with that statement and must have forgotten to add that acknowledgement.

But on a $76MM purchase price and with GAAP statements "claiming" no taxable income, assuming 100% financing, the (deductible) interest on debt and depreciation of hard assets are not going to come close to turning the Spurs $61MM EBITDA into a loss without that monster roster depreciation allowance.

Where are you getting that 61m ebitda from? Forbes has it at -5m for 2010, 2009 it was 19m.
http://www.forbes.com/lists/2010/32/bas ... 23002.html
Plus do you have records of how the Spurs have capitalized their business since the purchase? I would think that they must have bought assets since then.

[ItsDanger]

There are numerous differences between accounting deductions and ones used for tax purposes. Too many to outline here. One reason why accounting net income and taxable income are different numbers.

[ranger001]

ranger, if you don't discount the interest on purchase cost, and instead take 57% of that (the last BRI split) out of the players hide, then you are effectively having the players finance a large portion of ownerships loans to buy the teams. In other words, you having the owners buy the teams with the player's money.

A great deal if you can get it.

I don't follow. How is the players salary going back to the owners to buy the team?

[Sleepy51]

http://edge-cache.deadspin.com/deadspin/nets0506.pdf

Page 5 of the PDF, or page 3 of the document if you go by the numbers on the scanned page instead. Down near the bottom of the expenses. The details of the amortization and depreciation are on page 12 of the PDF/10 of the document.

Note:

I think Bruce Rather bought the team in 2004, so he would have been using the 5year/50% rule. When Russian Mark Cuban bought the team in 2009, he gets a new Roster Depreciation Allowance under the revised rule, now at 100% depreciable over 15 years.

[Sleepy51]

That still does not mean you can throw away interest expenses when deciding whether a business is profitable or not. The players cannot just eliminate all interest expenses and say "just use a different capitalization strategy. Pay cash if you want an NBA franchise".

You are absolutely correct that depreciation of TANGIBLE assets, Interest and taxes are real cash flow items. I have acknowledged this fact multiple times since I first posted that table.

I think F4L just posted your table with that statement and must have forgotten to add that acknowledgement.

But on a $76MM purchase price and with GAAP statements "claiming" no taxable income, assuming 100% financing, the (deductible) interest on debt and depreciation of hard assets are not going to come close to turning the Spurs $61MM EBITDA into a loss without that monster roster depreciation allowance.

Where are you getting that 61m ebitda from? Forbes has it at -5m for 2010, 2009 it was 19m.
http://www.forbes.com/lists/2010/32/bas ... 23002.html
Plus do you have records of how the Spurs have capitalized their business since the purchase? I would think that they must have bought assets since then.

I am getting $61MM in EBITDA from the cumulative operating income number from 2006-2010.
http://www.forbes.com/lists/2010/32/bas ... 23002.html

I do not have San Antonio's capitalization records. I have accepted Forbes valuations. They have been pretty consistently within reasonable tolerances on recent sales prices and these are the only numbers that the public has to work with that were not produced by a partisan source in the midst of a labor conflagration.

If you are looking for an "Aha I gotcha" in that spreadsheet, I am absolutely positive that you will indeed find several. It was a SKETCH. It was not an audit. If the NBA will give me their books I will have someone on my staff audit them for you. For now, I feel that a sketch based on Forbes research is sufficient for conversation level analysis.

After all we've talked about, do you still believe the league's loss is as large as they have claimed? and do you still disregard capital appreciation as a component of their investment return? If so, I can't imagine that I have any more ammunition or input to offer that you will find of any value.

[Fairview4Life]

I think F4L just posted your table with that statement and must have forgotten to add that acknowledgement.

I linked to where I got the post from and suggested reading the whole thread, which is how you knew to go there and drag him over here.

[Fairview4Life]

ranger, if you don't discount the interest on purchase cost, and instead take 57% of that (the last BRI split) out of the players hide, then you are effectively having the players finance a large portion of ownerships loans to buy the teams. In other words, you having the owners buy the teams with the player's money.

A great deal if you can get it.

I don't follow. How is the players salary going back to the owners to buy the team?

The owners want the players to give up a bunch of BRI they currently receive in order to cover interest expenses. Interest expenses that can come from the use of lines of credit and loans in the purchase of a team. So the owner is getting the players to in effect pay off their loans used to purchase the team, by giving up BRI. The other 29 owners get their franchise values to go up, and sell at a higher price since the players are paying off loans (in a sense), and they reap all of the benefit, while the players see nothing out of the sale of a team.

[Sleepy51]

I think F4L just posted your table with that statement and must have forgotten to add that acknowledgement.

I linked to where I got the post from and suggested reading the whole thread, which is how you knew to go there and drag him over here.

I've been dragged? Now I feel dirty.

[floppymoose]

Fairview4Life FTW

[ranger001]

Where are you getting that 61m ebitda from? Forbes has it at -5m for 2010, 2009 it was 19m.
http://www.forbes.com/lists/2010/32/bas ... 23002.html
Plus do you have records of how the Spurs have capitalized their business since the purchase? I would think that they must have bought assets since then.

I am getting $61MM in EBITDA from the cumulative operating income number from 2006-2010.
http://www.forbes.com/lists/2010/32/bas ... 23002.html

I do not have San Antonio's capitalization records. I have accepted Forbes valuations. They have been pretty consistently within reasonable tolerances on recent sales prices and these are the only numbers that the public has to work with that were not produced by a partisan source in the midst of a labor conflagration.

If you are looking for an "Aha I gotcha" in that spreadsheet, I am absolutely positive that you will indeed find several. It was a SKETCH. It was not an audit. If the NBA will give me their books I will have someone on my staff audit them for you. For now, I feel that a sketch based on Forbes research is sufficient for conversation level analysis.

If you believe Forbes then are you acknowledging that the Spurs lost money in 2010? (-5m ebitda).

After all we've talked about, do you still believe the league's loss is as large as they have claimed? and do you still disregard capital appreciation as a component of their investment return? If so, I can't imagine that I have any more ammunition or input to offer that you will find of any value.

I haven't ever believed the league has lost as much money as they have claimed, of course there are accounting issues, expenses that should never have been done, etc.

I am closer though to their submission that half of the teams in the league lost money than to your spreadsheet saying that only 2 teams really lost money not of their own choosing.

To me the proof is the length of the lockout. You don't insist on drastic changes and run the risks involved in a court battle when you already have a very profitable business model.

[knickerbocker2k2]

What is frustrating is that owners are really not negotiating in good faith. It is becoming evident that there strategy is wait until the players "feel pain" prior to putting their best offer. I think this is really short-sighted and not well thought through. Players for one are more organized and prepared financially and with addition money through escrow, can hold out a bit more. Even if their strategy works, we are looking at shortened season that starts at the earliest in January. Right now players are offering near the $300M they say they lost, and with projected income growth/increased revenue sharing, every team will be making profit even according to their books. Why are they pushing for more? It really is greed in its purest form.

The other thing I noticed in these discussions is about the "PR" war. Owners are in lose/lose situation here. Even if the public thinks players are greedy/and owners are in the right, it doesn't help the owners because they rely on these players to market their product. Winning the "PR" war might actually hurt them in the long term. It is in their best interests players come off as reasonable/positive light since when the lockout is done we will be hearing of the likes of Kobe/Lebron/KG/etc and not Dan Gilbert, Paul Allen, etc.

[ranger001]

I think F4L just posted your table with that statement and must have forgotten to add that acknowledgement.

I linked to where I got the post from and suggested reading the whole thread, which is how you knew to go there and drag him over here.

Did you read the thread and realized that he had acknowledged that interest expense affects cash flow?

[ranger001]

ranger, if you don't discount the interest on purchase cost, and instead take 57% of that (the last BRI split) out of the players hide, then you are effectively having the players finance a large portion of ownerships loans to buy the teams. In other words, you having the owners buy the teams with the player's money.

A great deal if you can get it.

I don't follow. How is the players salary going back to the owners to buy the team?

The owners want the players to give up a bunch of BRI they currently receive in order to cover interest expenses. Interest expenses that can come from the use of lines of credit and loans in the purchase of a team. So the owner is getting the players to in effect pay off their loans used to purchase the team, by giving up BRI. The other 29 owners get their franchise values to go up, and sell at a higher price since the players are paying off loans (in a sense), and they reap all of the benefit, while the players see nothing out of the sale of a team.

The economy is suffering you know. When a company has financial issues they cut staff to meet expenses. You expect me to cry for millionaire players who get a salary cut so their owners can pay interest on debt?

[BorisDK1]

"There has been ongoing debate and disagreement regarding the numbers, and we do not agree that the stated loss figures reflect an accurate portrayal of the financial health of the league," Hunter said in a statement released during the All-Star break.

Ms. Sawdye's response to the Deadspin article appears to have been issued on or around June 30, 2011. The statement of Mr. Hunter is said to have occured during the All-Star break, some 4 months prior.

I agree that lack of response does not establish truth of a proposition, but sure is suspicious when it's lacking.

[Reignman]

What is frustrating is that owners are really not negotiating in good faith. It is becoming evident that there strategy is wait until the players "feel pain" prior to putting their best offer. I think this is really short-sighted and not well thought through. Players for one are more organized and prepared financially and with addition money through escrow, can hold out a bit more. Even if their strategy works, we are looking at shortened season that starts at the earliest in January. Right now players are offering near the $300M they say they lost, and with projected income growth/increased revenue sharing, every team will be making profit even according to their books. Why are they pushing for more? It really is greed in its purest form.

There's a lot wrong with this paragraph. First, how do you come to the conclusion the owners are not negotiating in good faith? They've stated their stance from the beginning and are working towards that goal. In fact, Hunter has stated publicly that Stern notified him 2-3 years ago about what was going to happen. If anything the players should've expected this to happen.

Also, in ANY CBA negotiation, making the other side "feel pain" is always the way you win. The first side to flinch is usually the first to lose. In this negotiation the owners have clearly been prepared to dust the entire season to get what they want. The players are not prepared for that. Maybe the top 10% of players but not the other 90%.

[floppymoose]

Yes, the economy is suffering. How is a millionaire going to buy a team these days? Oh wait, I've got an idea!

[I_Like_Dirt]

The economy is tough for a lot of industries, but not for the NBA right now, and apparently not for the other businesses the NBA pays money to (whoever or whatever they may be) since the NBA's operating expenses have been rising so quickly.

Ranger, nobody is expecting you to cry for millionaire players. I don't see a single person here doing that. The point is that nobody should be crying for billionaire owners, either. Both owners and players were doing fine in the previous agreement and comparable agreements for the past couple of decades. The owners decided they suddenly wanted more money from their NBA franchises and appear willing to sacrifice an NBA season at the very least in order to get a bigger piece of whatever pie is left once they're done with their cash grab.

Overpaying players to the point where the league can no longer fuction is a problem, but there isn't a whole lot of proof supporting the notion that such is actually the case right now. There are just a lot of 'trust us' statements coming from the owners, and it extends to their concessions where they appear to expect the players to trust them to start making concessions once the players have given up all their bargaining power. Accepting 'trust us' statements without any prove (not to mention some hints that the opposite is actually the case) from business moguls hasn't actually proven to be a pretty bad risk over the past few decades. If not for the players, what other means would you suggest to actually hold NBA owners accountable to anyone? Surely you don't suggest politics should get involved.

[Sleepy51]

If you believe Forbes then are you acknowledging that the Spurs lost money in 2010? (-5m ebitda).

Yes I believe that some NBA teams lose money. I even believe some lose money consistently. I do not believe that constitutes a systemic crisis.

After all we've talked about, do you still believe the league's loss is as large as they have claimed? and do you still disregard capital appreciation as a component of their investment return? If so, I can't imagine that I have any more ammunition or input to offer that you will find of any value.

I haven't ever believed the league has lost as much money as they have claimed, of course there are accounting issues, expenses that should never have been done, etc.

We agree there.

I am closer though to their submission that half of the teams in the league lost money than to your spreadsheet saying that only 2 teams really lost money not of their own choosing.

I think that the league as a whole is profitable. I think that the teams that are losing money, have been by and large poorly run. I think the league needs to contract (eliminating player jobs) and become smaller to become healthier. I know that will never happen under the Stern regime, but that's what I believe.

To me the proof is the length of the lockout. You don't insist on drastic changes and run the risks involved in a court battle when you already have a very profitable business model.

That really depends on what the final deal looks like. Missing even profitable games today in favor of a much more profitable CBA for the next 15 years could be considered an investment. I think most of this is about owners grabbing as much as they can before implementing revenue sharing. And ultimately if they are playing a brinksmanship game with players there was never going to be an agreement until some game checks got missed. To be sure that they got the best deal they could at this CBA expiration, they needed to test and break player resolve. I agree with Hunter when he says this has all been scripted.

[Sleepy51]

"There has been ongoing debate and disagreement regarding the numbers, and we do not agree that the stated loss figures reflect an accurate portrayal of the financial health of the league," Hunter said in a statement released during the All-Star break.

Ms. Sawdye's response to the Deadspin article appears to have been issued on or around June 30, 2011. The statement of Mr. Hunter is said to have occured during the All-Star break, some 4 months prior.

I agree that lack of response does not establish truth of a proposition, but sure is suspicious when it's lacking.

Did you get caught up on the 05 and 06 financials yet?

I'd like to not assume anything based on your lack of a response.