Why is the NBA losing money?

[B-Ball Freak]

Is it because the leagues popularity is dwindling? is it because of the recession? are the players making too much? should it have revenue sharing similar to the NFL?

Please educate me on this matter.

[Dunkenstein]

The answer is very simple. The owners are spending more than they are making.

That's what happens when you treat a business like a toy. One of the few owners who regularly makes money is Donald Sterling. That's because he treats his toy like a business. And that's why they consistently suck on the court.

That's the conundrum. Unless you are very good and in a top market, to field a competitive team in this day and age, a team is invariably going to lose money.

The one obvious area that the owners have to control costs is to reduce overall player salaries. That's why they plan to take such a hard line in the next collective bargaining agreement.

[B-Ball Freak]

If they are losing money annually, why not sell the team? what kind of owner wants to lose money every year. It has nothing to do with popularity then?

[Dunkenstein]

For a real good answer to the question of this topic read Bill Simmons' column:

http://sports.espn.go.com/espn/page2/st ... ons/100224

[B-Ball Freak]

Thanks for the link, hopefully Stern fixes this problem and brings the NBA back in to prominence, fix your sport at home before you go overseas.

[charrua]

Look, I'm no expert, but I can't see how players's salaries are to blame here. There is a luxury tax, set as a percentage of revenue, which means that if some teams overspend, other teams collect the money. If 80% of teams spend too much, the other 20% are making a lot of money. Under that setup, the only way that the league as a whole can lose money is if revenues drop a lot very suddendly which Oh! it's exactly what has happened.
And sure, if salaries were lower then teams would make money, but that doesn't means that the level of salaries is the problem. Rather, the inability to adjust quickly the level of salaries is the problem. And even if owners get their wish, the new CBA won't solve that. Shortening contracts to 3 or 4 years won't accomplish much when the issue is the need to adjust salaries massively downward in a year or two. Give me a big enough recession and the league will still bleed money for at least a year.

[giberish]

There are several reasons for this:

1) Pro sports teams hide their real books and give out financial numbers massaged for whatever purpose they choose at the time. When looking to renegotiate the next CBA, or get a city to build an arena, they choose the numbers that makes them look poorer than they really are. The dollar figures Stern throws out for what NBA teams are losing now can't be trusted. I'm sure potential franchise buyers see completely different books.

2) Some owners are so wealthy that losing $10-30M/yr is a rounding error to them. If spending the extra money helps their team win, they do it.

3) A lot of long-term contracts were signed assuming steady revenue growth of 5+% each year. A couple of years of flat/downward revenue has left the payroll/revenue balance somewhat off (but with many big contracts ending this summer or 2011 that problem will go away even with no CBA changes).

[see4miles]

Thanks for the article Dunkenstein.

The one thing I hope the Players and agents put as their initial non-negotiable position is better revenue sharing. Once they do that, it'll splinter the Owners and hopfully ensure a more NFL approach to the money and it means teams like Milwaukee can compete.

The other thing that's necessary is to reward teams who stick with a player they drafted. One of the reasons many fans left the NBA was because of all the movement and pouting for a trade which caused more movement.
ONLY teams that draft you can offer the extra year and and 10% increase. Everyone else has to offer 4 year deals and 8% increases. Traded Bird rights are not as good as drafted Bird rights etc.

Finally, they need to increase the minimum spend by the team. if they don't spend it on players, here's looking at you Clippers, it goes directly to the Players pool.

No hard cap, but every year you're over increases the amount you're due to pay ie two consecutive years over you play two dollars for every dollar you're over. 5 consecutive years over, 5 times the actual dollar price. Only the rich are penalised and the other teams can dip their toe into spending a lot.

And the D-League is for all except Championship ring holders. Everyone else.

And with reference to fully guaranteed contracts, that should be tied into winning a championship if that goes ahead.

[Dunkenstein]

Here's another perspective on the issue:

Michael Ozanian on Forbes.com: "... it is the owners who are at fault because most of the teams running big losses produce a lousy product. The Indiana Pacers, Charlotte Bobcats, Memphis Grizzlies, New Jersey Nets and Minnesota Timberwolves are disasters on the hardwood. Why should their owners be making money?"

http://blogs.forbes.com/sportsmoney/201 ... justified/