Lockout

[floppymoose]

http://sports.yahoo.com/nba/news?slug=ap-nbalabor

This is proceeding exactly as I thought it would so far. But I don't know how it will end.

The key facts:

1) some teams are losing money
2) the league on the whole is making money
3) there is very little revenue sharing between the teams, compared to football
4) the teams are going to revenue share more
5) the owners refuse to discuss revenue sharing before seeing the new CBA
6) some owners/front-offices have made very poor financial decisions regarding player contracts
7) tv share and team sale price is stronger than ever.

The owners plan:

The owners realize that all the teams could make money if they revenue-shared their way into it. But if they do that they won't have a "we're losing money" argument to use in negotiations with the players over the new CBA.

So they will cry wolf and milk everything they can out of the players first, before addressing revenue sharing.

I firmly believe that bad decision making and poor revenue sharing are the only things stopping almost every team in the league from being profitable. There will be some amount of "digging out" for teams like the Pacers who have really screwed the pooch. But there is no reason all teams can't make money in the current climate.

[azenall]

No Football, No Basketball, whats next?

I think with many of the franchises changing hands, it puts a lot of pressure on the league to make money for the owners.

[Senchu]

A bit Lockout related but I just realized that Biedrins workouts are made by his agent/company which is not related to W's which means that his rehabilitation process won't be affected by the Lockout. If they had decided to use old strategy with "sending Smart to Latvia" then there would have been no workouts for him.

[don nelson]

A bit Lockout related but I just realized that Biedrins workouts are made by his agent/company which is not related to W's which means that his rehabilitation process won't be affected by the Lockout. If they had decided to use old strategy with "sending Smart to Latvia" then there would have been no workouts for him.

That was precisely why the Warriors setup Biedrins' off season development plans without depending on any NBA personnel. The Warriors want to have all their players ready to hit the ground running when the lockout shortened season is actually played. Its not a coincidence the rookies are getting three days of work before the lockout because the Warriors are looking for every possible advantage they can get to help make the playoffs in a lockout shortened season.

[old rem]

The average owner does not want the Steinbrenner-Isaiah Thomas "just buy it" approach to get out of hand...and it has. There's loophooles that let the Lakers run at $80-90 mill ( the Knicks at one point were WAY beyond that), yet GSW...salary dumped like mad and has the cap space to spend a hair more than MLE. The "average" owner wants a level playing field and NOT at $90 mill in salaries. Many "have not" teams...are blocked from catching up...if they could afford to. A few teams can and do spend full tilt, Lux Tax or not, and sustain a payroll advantage of $20-490 mill over the average team.

Players and agents...naturally, are all for wild spending...if they are who gets it.

[floppymoose]

And the owners of the rich teams don't want to share revenues. For one, it's money out of their pocket. And two, it gives the smaller teams more money to compete for players, so it drives up player costs.

But the large teams need the small teams. They need to have someone to play and while I can't prove it, I think the league on the whole is healthier with 25 to 30 teams than it is with say, 15 or fewer teams.

A lot of the red ink on the money-losing teams is from poor decisions. But I do think there is *some* disadvantage in financial ability in being a small market team, and that the league will be healthier, both financially and otherwise, if the teams revenue share enough to level that out a bit.

The owners are fighting each other over this. Revenue sharing is net neutral on the value of teams. The small teams become more valuable, the big teams less. But getting the players to cough up a bigger share of the pie is win-win for all the owners, all the time. They pocket more money. Their books look better. And so their team value goes up. The make more now, they make more later. So of course this is what they want: to shaft the players first so that they can avoid facing the revenue sharing problem.

[Mylie10]

This whole mess is about the owners protecting themselves from themselves....Just get an arbitrator in there and get it done.domes

[BROWN]

http://edge-cache.deadspin.com/deadspin/nets04.pdf

Check out the accounting job done on that bad boy... Nets made a 7M profit look like a 28M loss.

http://deadspin.com/5816870/

[BW32]

So what's a lovable losing NHL team? BW don't root for winners.

[Twinkie defense]

In counter to the OP, it has been said that 22 of 30 teams are losing money, which I would say is more than "some." In fact the Players' Association doesn't seem to be disputing this; instead they are offering a different solution - let us keep almost all our money, and go ask the Knicks and the LA teams to make up the bulk of these losses.

Also, rather than the League as a whole being profitable, what I have heard is that, on the whole, it is losing $300 mil (though of course a small handful of teams are no doubt making plenty).

Regarding bad decision-making: over 70% (22/30) of teams are making really bad decisions about player expenditures, and that's why we're in this mess? To me 70% seems more likely that it's the perverse business structure that is causing the problem. If it's 15% of the teams making horrible decisions, you have a much better case that the system is fine, and teams just need to make better decisions. But if the majority of teams never sign any free agents beyond the Dorell, Lou, or Adrien level, and pass on most of their own free agents because by definition they cost too much, I don't see how you can have a League at all - what you will have is 22 Oakland A's teams with no fans, and a couple Yankee (Knick) and Red Sox (Laker) teams. But if I'm the Knicks or the Lakers, why on earth do I give money to the Kings so they can better compete with me?

For me the bottom line is it's crazy talk for any business to pay out more than half of all their revenue in salaries. That just doesn't happen.

And instead of revenue sharing, the League as a whole would be healthier if some of the teams were eliminated. I don't see how you can argue about that. But the PLAYERS would never allow that solution.

[floppymoose]

In counter to the OP, it has been said that 22 of 30 teams are losing money, which I would say is more than "some."

I give you my personal guarantee that claim is bullcrap.

[Twinkie defense]

And if you plot player salaries against production I think you will indeed see a depreciation effect.

[Twinkie defense]

In counter to the OP, it has been said that 22 of 30 teams are losing money, which I would say is more than "some."

I give you my personal guarantee that claim is bullcrap.

Even so, every team should be able to play by the rules, keeping players they want and signing new players as free agents - just like the players want - and have a fair shot of making an annual profit.

If this is truly a shared enterprise, which is the assumption behind revenue sharing, and you want to have real parity, dictate exactly how much money will go to players, get rid of free agency, and divide up the pie by actual production. But again, players would never had that.

There are many ways of maximizing revenue, and keeping the League viable, but the players want none of that, they just want to break the bank. But I have very little sympathy for what are often crappy, indifferent players, playing a child's game, and making tens of millions of dollars. The League was better when guys played for love instead of greed.

[floppymoose]

If this is truly a shared enterprise, which is the assumption behind revenue sharing, and you want to have real parity, dictate exactly how much money will go to players, get rid of free agency, and divide up the pie by actual production. But again, players would never had that.

Oh great. We're going to pay players by how much they 'produce'. That'll end well.

[floppymoose]

I have very little sympathy for what are often crappy, indifferent players, playing a child's game, and making tens of millions of dollars. The League was better when guys played for love instead of greed.

And I have very little sympathy for owners who want a guaranteed profit no matter how stupidly they run their business, and want that guarantee on the backs of the players. The players are the ones generating the lion's share of the value in the league. 57% of the pie is not too much to ask.

[cellomac1212]

There's enough billionaires in this world to own the 30 teams and not care about making or losing money... If you're an owner of any sports franchise with the idea of that being the only way of making money, you should just sell the team now. I can't feel bad for billionaires complaining about losing money...

Buying a sports franchise as an investment is equivalent to one of us buying a boat. It's a crap investment and the people that own them do it for the status. You don't like losing money, sell the team to someone who doesn't care about losing money. It ain't the players that are greedy, cause they're broke compared to the owners that lose money every year.

[floppymoose]

David Aldridge:

Is the number of teams that lost money in 2009 really 22, as the league asserts? Probably not. That number "sounds a little high," according to the longtime former team exec. Another source that deals directly with owners on a regular basis believes the actual number of teams losing significant amounts of money is more like eight or nine, and likely includes teams like the Pacers, Nets, Wolves and Kings.

The Pacers, Nets, Wolves, and Kings all deserve to lose money because they have been poorly run (Pacers, Wolves, Kings), or have specifically chosen to suck as part of a rebuild (Nets, Kings). But even so, a modicum of revenue sharing would make their losses small indeed. Do we want absolutely no risk for the owners at all? The players have risk. Any injury could end their chances at the next contract. Why should the owners have no risk no matter how poor their choices are?

[cellomac1212]

Chris Cohan managed to make money...what the hell are these other guys doing???

[TheDeadDodo]

Chris Cohan managed to make money...what the hell are these other guys doing???

Paying Rashard Lewis' lazy ass 100+ million dollars, that's what.

[Sleepy51]

On June 21, 2005, the NBA and the National Basketball Players Association announced today that they had reached an agreement in principle on the key items of a new 6-year collective bargaining agreement (CBA).
NBA Commissioner David Stern, Players Association Executive Director Billy Hunter and President Michael Curry announced the agreement prior to Game 6 of The Finals in San Antonio.
“This new agreement creates a strong partnership with our players, which is critical to our prospects for continued growth on a global basis,” said Stern. “Once the deal is finalized, the NBA and its players will be able to focus on the enormous opportunities we have together.”

The terms of the current CBA have not changed since this statement. The players have not leveraged more freedom or higher salaries or pressured for exceptions and deviations. The NBA economy just a short six years ago was established around a set of know rules and principles establishe to protect owners from irresponsible spending competition. Player salaries at the organizational and individual lecel are subject to explicit limitations and a system of structured and limited exceptions and increases. This was a closed system. NOTHING has changed within that system that owners werw quite satisfied with.

That system was already esigned to insulate owners from mistakes and constrain errant spending. The entire reason for the structures of the current cba as we know it was to idiOt proof the NBA investment opportunity to make it a more attractive investment and diversify the pool of potential buyers. Sports franchises used to be expensive hobbies for the superwealthy. The NBA remarketed their rranchises as lucrative investment opportunoties and primary sources of wealth. This attracted more, but "less rich" buyers. More potential buyers = higher asset appreciation and eventual sales prices, but buyers with more of their personal fortunes at stake. That was the objective and that's what they got. The problem was that they let poorer guys into the club without ever considering the consequences of a down economy.


When asset values across most major asset classes in the world dropped by 30-50% in 08-09 the "poor" NBA owners wanted to cash out. They needed to access the asset values of their franchises which had declined substantially less than the values of equity and real estate assets. There has been a veritable run on NBA franchises over the last two yeats as the broke guys have tried to cash out in a hurry.

That is what this ginned up NBA financial crisis is about. The league is facing it's first serious threat to asset values in the last 30 years and it does not come from negative annual cash flows due do to paper losses. The threat comes from illiquid owners. Guys who's pockets were never deep enough to take on the responsibility of a $400mm economy and who lacked the resources elsewhere to weather a storm. It was as unsuitable investment for guys with no other substantial business assets or revenue streams and theie panic has created this situation. Player salaries are irrelevant other than they represent a built in sympathy for the kind of fan who holds jealpus and hostile attiudes towards players wealth.

Fans who are prone to being played are being played by this melodrama.

When the dust settles and the poor owners are able to leverage this fabrucated crisis into good exit prices the next set of owners will jus reap even greater financial rewards for passive ownership at the moat favorable tax rates under the law. None of this is about real financial hardahip in NBA operTions. It is about squeezing every cent out off franchise values that they can to protect tye image of the overall investment product. It wasn't quite idiot proof enough so they are going back to the well again.