The plight of NBA small market teams

[Ditchweed]

There are too many teams in small markets in the NBA. Five of the 20 largest metropolitan areas in the U.S. have no NBA team but 4 teams are in metropolitan areas outside the top 40.

A lot of posters on realgm want the NFL system because they think it has created parity in the NFL to a greater extent than the NBA. I think it is just the shorter schedule, superstar factor, and single elimination tournament that create the perception of more parity in the NFL. I also think the NFL system is popular with fans because of jealousy a lot of fans have for players. Many people resent star athletes who make millions and still try to control their career. I call these people the STFU and play crowd.

I don’t like the NFL system.

Unguaranteed contracts are unfair because teams can choose to not to honor a contract if they feel the player isn’t performing, but players can’t walk away from the contract if they feel they have over-performed.

The hard cap forces teams to break up their cores in the NFL. This could be devastating in the NBA due to its smaller rosters.

A franchise tag to me is inherently unfair because it treats the player as the property of the team they play for. In the NBA, it would be used to stop superstars from ever reaching free agency. Cleveland would have tagged him forever. I don’t like the idea of superstars being shipwrecked on a team they don’t want to play for.

Under the current rules teams can keep the player they drafted for seven to eight years before they reach free agency. It is very hard for me to accept the idea that a player can’t become an unrestricted free agents after that long of a period of service. Finally, I don’t think the franchise tag can work in the NBA effectively. Basketball players have a lot more power over if their team wins or loses than football players. Hold outs in football are generally annoyances. Hold outs in basketball would be devastating.

Finally, I don’t like the NFL system because it’s goal seems to be to punish well run organizations and reward poorly run ones.

My idea to address superstar movement by thinking of ways to make players want to play in the city that drafted them. I think the simplest thing to do for the NBA would be to get rid of maximum salaries while keeping the soft cap and Bird rights. Under this scenario, Cleveland would have offered Lebron 40 million to stay in Cleveland giving them a huge advantage in free agency that no other team has. Most players under these rules will choose to re-up with the team that signed them. I don’t think anyone should complain about the players who did leave under these rules.

Next is my radical idea. The NBA has too many teams in smaller markets. The NBA myopically moved to smaller cities because they could force those towns to build them stadiums. This is good in the short run but bad for long-term popularity of the league. Metropolitan Seattle is larger and richer than Oklahoma City. It hurts the league to be in these smaller cities.

It also creates major problems with regards to the players. NBA players are extremely talented individuals. Literally they are in the 99.999 percentile of ability in their field. Individuals who are still talented and valuable generally will be able to get what they want. Smaller cities aren’t as attractive to players who would prefer to play in larger markets.

One way to make it more likely that players stay on their home team is to have more large market clubs and less small market clubs. This would never happen but IMO would be better for the league. I found it a fun exercise to realign the league.

Atlantic Division
1. Boston Celtics (4.6 million people)
2. New York Knicks (19 million people)
3. Brooklyn Nets (19 million people)
4. Toronto Raptors (4.6 million people)
5. Montreal Hornets (3.4 million people)

Central Division
1. Chicago Bulls (9.5 million people)
2. Chicago Jazz (9.5 million people)
3. Philadelphia 76ers (5.9 million people)
4. Washington Wizards (5.5 million people)
5. Detroit Pistons (4.4 million people)

SouthEast Division
1. Miami Heat (5.5 million people)
2. Orlando Magic (2 million people)
3. Tampa Bay Cavaliers (2.7 million people)
4. Atlanta Hawks (5.4 million people)
5. Charlotte Bobcats (1.7 million people)

Spreadout Division
1. Vancouver Pacers (2.1 million people)
2. Seattle Supersonics (3.4 million people)
3. Portland Trail Blazers (2.2 million people)
4. Denver Nuggets (2.5 million people)
5. Minn. Timberwolves (3.2 million people)

California Division
1. Los Angeles Lakers (12.8 million people)
2. San Francisco Grizzlies (4.3 million people)
3. Golden State Warriors (4.3 million people)
4. San Diego Kings (3 million people)
5. Los Angeles Clippers 2.0 (12.8 million people) Stearling sells team

SouthWest Division
1. Dallas Mavericks (6.4 million people)
2. Houston Rockets (5.8 million people)
3. Phoenix Suns (4.3 million people)
4. San Antonio Spurs (2.0 million people)
5. St. Louis Bucks (2.8 million people)

The players would love this. A far higher percentage of clubs are now in larger cities and the most popular areas of the country to live are significantly more represented. Southern California, NYC, Chicago, and the Bay Area now have 9 ball clubs instead of 5. I’m not worried about the market saturation issue. A lot of people think that because of the Clippers two teams in one city won’t work. I think the failure of the clippers is solely due to bad management. Baseball shows you can have two teams in one city and have both be successful.

The realignment I’ve proposed also improves the size and quality of the mid-market clubs. I have dramatically reduced the number of cities in the NBA that would be unappealing to NBA players. Vancouver and Montreal are admittedly stretches but I still believe you can make those cities appealing to NBA players once they actually go there. As a result of this realignment, most players will get drafted into the types of larger cities that are appealing to players. My hope is that players would only leave if management stinks which is fine to me. Poorly run teams should lose their superstars.

I think this would be a good deal overall for fans, but I’ll acknowledge it stinks for the cities the NBA would be leaving. Simply put more people would have access to NBA games live.

The league benefits in a lot of ways. The TV deal is better because there are less small markets. I’ve also created more natural rivals. Chicago and NYC would now have true cross city rivalries and so would LA as Stearling no longer owns the team. The Raptors now have a natural rival in the Montreal Hornets. The pacific northwest rivalry is renewed and the California division would have cool state bragging rights.

I tried to accomplish the goal of discouraging superstar movement by making players actually happy to play for the club they got drafted by rather than trying to figure out ways to force unhappy employees to work. Those players that did move probably had good reason to do so.

Actually, you are a bit short on the Toronto numbers. The Toronto GTA is around 5.5 million now and 8.1million in the "golden hoseshoe". It also doesn't include the population just west and south that also support the Raptors. They definitely have the numbers in the area to support a team.

For Montreal, the problem is that the GMA population is half French and the other half has a high immigrant "Allophone/French" poulation (Allophone = immigrant that speaks their native language plus French as their working language). It is a marketing nightmare for sports teams as shown by the Expos when they were here. Half their fanbase was from the smaller "Anglais" portion of the population and half from the larger "French/Allophone" population. When the Expos directed their marketing to almost exclusively the French population, it just did not draw enough percentage to support the team. Not saying that all these people don't like basketball, but realistically, the draw would for basketball would be difficult and run into the same issues as the Expos had.

[sp6r=underrated]

Actually, you are a bit short on the Toronto numbers. The Toronto GTA is around 5.5 million now and 8.1million in the "golden hoseshoe". It also doesn't include the population just west and south that also support the Raptors. They definitely have the numbers in the area to support a team.

For Montreal, the problem is that the GMA population is half French and the other half has a high immigrant "Allophone/French" poulation (Allophone = immigrant that speaks their native language plus French as their working language). It is a marketing nightmare for sports teams as shown by the Expos when they were here. Half their fanbase was from the smaller "Anglais" portion of the population and half from the larger "French/Allophone" population. When the Expos directed their marketing to almost exclusively the French population, it just did not draw enough percentage to support the team. Not saying that all these people don't like basketball, but realistically, the draw would for basketball would be difficult and run into the same issues as the Expos had.

Thanks for the info. Are you from Montreal? If so, I feel obligated to let you know Montreal is one of my 3 favorite NA cities.

[tisbee]

How much money are the owners really losing?
How many teams are truly losing money?

To start the NBA claims loses of $370mil and want the players to give up $700mil. Nice math.
The problem w/teams is they are carrying huge debt from original purchase and from their share of new buildings. The owners want the players to pay off the owner's debt.

The alleged 22 teams losing money includes Dallas,Portland and Orlando. Mark Cuban has willingly thrown money at his team,the Blazers are owned by Paul Allen and the Magic by the guy who owns Amway,neither of whom are exactly poor and both of whom have spent heavily on their teams. Until last season they accounted for well over 20% of NBA losses.
It was just reported that Bucks owner,who has been crying about losing $20mil+(and signed Salmons,Maggette,Gooden to over $23mil in yearly contracts last season) has borrowed heavily from NBA credit line and put most into his private investment funds. Want to bet his books show the debt,but not the money in the funds?

Re a hard cap,lower max contracts,fewer yrs. It's going to make super friends teams more likely. If you're a star player,who's salary is limited,where are you going to want to go? To cities that will max your off-court revenue-NY,LA,Chicago. If there is a bonus for re-signing your own player,so what? Why would any star want to stay in small-market town,surrounded by decent players,when he could go join a large market team,take a few mil less(as LeBron,Wade and Bosh did)and make up for it in endorsements and Titles? Dwight isn't going to leave Orlando because another team is offering more money-they can't even offer what Orlando can now.
And if the League gets it's no guaranteed contracts wish,I would love to be there when the players and their agents refuse to sign anything other than 1 yr deals. After all,if the money's not guaranteed,what's the point in signing a multi-yr contract?

A strike season kills off the casual fans. W/College Football and NCAA Basketball to fill the void,casual fans are going to be lost. MLB got most it's fans back by ignoring steroids and letting McGuire,Sosa and pinball baseball rule. Expect the NBA to REALLY push it's stars and if you thought they got favorable calls before...

[captaincrunk]

Big markets get an advantage by having teams in smaller markets because they get exposure in areas that they wouldn't otherwise. They also get an advantage in that those teams are prevented from moving to bigger cities- the league doesn't allow for there to be 4 teams in NYC even though the market could likely support it. So absolutely I do think that the bigger markets should be helping to subsidize the smaller markets.

Not to mention that nobody wants an 8 team NBA.

[Nanogeek]

There is no perfect solution but the owners current path is the way to go.

First, you have a hard salary cap.

Second, the hard salary cap is adjusted on a team by team basis based on the effective tax rate in that particular city/state. Thus, a Florida team would have a much lower cap than a NY team.

Third, no guaranteed contracts. I am tired of watching some clown ride the pine making $100k-200k per game (Hello, Eddie Curry and a host of other players in the past several years). We want the best players to be playing in the league not the best players who can fill out the remainder roster spots after we take into account the lazy jackasses that have immovable, guaranteed contracts. Players want stability? Well, owners and fans want stability in player performance. This works fine in the NFL with bonuses. It can work in the NBA.

Fourth, all existing contracts are immediately written down by 33% and become non-guaranteed. Then teams can cut the clowns with the crazy contracts. There can be transition rules to get under the cap. This approach would also put pressure on the recent trend of several superstars trying to get together. Unless they want to have a team of 3 great players and a bunch of scrubs
(Miami) or take a major concession in salary they will need to come up with some other way to create a dynasty.

As a result the rules are much simpler. I should need a 40 page FAQ to figure out what the rules are and we should need 20 page threads filled with a bunch of armchair lawyers trying to out nitpick one another about some nuance here or there to figure out what can and can't happen in the league.

[droponov]

I don't understand why a hard cap breaking up championship teams is such a bad thing. I think most fans enjoy seeing different teams compete for the championship each year instead of having revolving 3 year+ dynasties. If anything, I think it would put a greater emphasis on good management because you wouldn't be able to just sit on the core you have and only make small tweaks every year. You'd have to be constantly re-tooling and looking at more variables to building a team.

And besides, if you have a good management, those teams should at least be able to manage their cap room ahead of time to find a way to keep their key players down the road.

Because team-players continuity is good for business. Fans like to identify players with teams. It's also good for the product on the floor, teams that stay longer together have chemistry gains and play better.

Plus, with a hard cap you'd have more teams like the current Miami Heat and less like the Reggie Miller's Pacers or the San Antonio Spurs. And your last paragraph is implausible. The Spurs would never be able to retain Parker and Ginobili with a hard cap. Retooling would be basically impossible. So teams would operate on a boom/bust cycle - be terrible and carry lots of cap space until you draft a star and then go all in and spend the money in the best free-agents available. It works, great, you're a contender for a few years. It doesn't, you're a mediocre expensive team for a few years till you have the opportunity to be a cheap and terrible team again. Repeat.

[jazzfan1971]

My solution would be to give the players 50% of BRI. Forever.
Then give teh owners a free hand to run the league as they want. As long as the players end up with 50% of the revenue, they just do as the owners like.

200 game season? Sure.
Need 4 years in college? Sure.
Hard cap? Whatever.
No tats rule? Why not.

I figure it's all about the money for the players and mostly about control for the owners. And I think if you give the owners a free hand, they'll probably enrich the fortunes of the players along with their own fortunes.

Put X dollars into escrow and let the players union have the responsibity to disperse the funds as they like to get to the 50% mark. I think the unions jump on this because this puts them in a terrific spot to line their pockets. Owners agree because they get the keys to the asylum.

[droponov]

There is no perfect solution but the owners current path is the way to go.

First, you have a hard salary cap.

Second, the hard salary cap is adjusted on a team by team basis based on the effective tax rate in that particular city/state. Thus, a Florida team would have a much lower cap than a NY team.

Third, no guaranteed contracts. I am tired of watching some clown ride the pine making $100k-200k per game (Hello, Eddie Curry and a host of other players in the past several years). We want the best players to be playing in the league not the best players who can fill out the remainder roster spots after we take into account the lazy jackasses that have immovable, guaranteed contracts. Players want stability? Well, owners and fans want stability in player performance. This works fine in the NFL with bonuses. It can work in the NBA.

Fourth, all existing contracts are immediately written down by 33% and become non-guaranteed. Then teams can cut the clowns with the crazy contracts. There can be transition rules to get under the cap. This approach would also put pressure on the recent trend of several superstars trying to get together. Unless they want to have a team of 3 great players and a bunch of scrubs
(Miami) or take a major concession in salary they will need to come up with some other way to create a dynasty.

As a result the rules are much simpler. I should need a 40 page FAQ to figure out what the rules are and we should need 20 page threads filled with a bunch of armchair lawyers trying to out nitpick one another about some nuance here or there to figure out what can and can't happen in the league.

Basketball players are more valuable than that, especially the best ones. Unless you're under the protection of the government, via a legal monopoly, you can't beat the market like that on a consistent basis.

It's perfectly possible - it's easy - to run a profitable basketball league offering players much better conditions than those. If the NBA owners don't want or can't do it, someone else will eventually step up. We don't know when, but it will happen. It's how the market works. Otherwise, everybody would be making the minimum salary.

[Laowai]

It is difficult for small market teams to make money especially with owners that haven't deep pockets Indy, Memphis, Sac and Carolina as examples.
Phoenix makes money but the owner has lost a lot on other investments that is why they hold on to Steve Nash because he sells tickets when he leaves they will be losing money.

The reality isn't pretty because of exemptions and Bird rules teams like LA & NYKs have an unfair advantage and can have a 100 million payroll because of local TV rights. Teams like Portland, Dallas, Orlando, Miami. NJ have owners who do not treat the clubs as a business rather a toy.

Teams like OKC are OK now they are shiny and new but also have low payrolls what happens when the owners start to lose huge amounts.

It is also unrealistic by the NBA for every team to make money unless local TV rights are divided up equally and 40 of revenue from attendance is divided up.

NO is the example that teams like the Bucks, Indy, Carolina, SAC, Memphis will follow.

Putting teams in larger population C and multiple teams in some is more realistic.

[darthkiller]

I don't understand why a hard cap breaking up championship teams is such a bad thing. I think most fans enjoy seeing different teams compete for the championship each year instead of having revolving 3 year+ dynasties. If anything, I think it would put a greater emphasis on good management because you wouldn't be able to just sit on the core you have and only make small tweaks every year. You'd have to be constantly re-tooling and looking at more variables to building a team.

And besides, if you have a good management, those teams should at least be able to manage their cap room ahead of time to find a way to keep their key players down the road.

by most fans , you mean few fans. because when spurs were in the finals, the rating was TERRIBLE. also see Lakers-Celtcis drew much higher ratings than Lakers-Magic. The big market teams are what brings in the casual viewers, and that's what makes money.

[Twinkie defense]

The old CBA had revenue sharing. The new CBA will have to have more revenue sharing. But revenue sharing alone isn't going to solve the problem of 20+ teams losing money each season... and even if it did, if you own the Knicks why should you give all your profits away to the Hornets and T-Wolves? These are still independently-owned franchises.

What really needs to happen is a contraction. But neither the League or the players would agree to that.

[Teen Girl Squad]

Well you can still have revenue sharing and have teams entitled to profits. Revenue sharing isn't 100%. People are citing the need for contraction but that doesn't solve the main issue, which is that you can't successfully run a league with a reasonable salary cap (aka not ridiculously low) and no revenue sharing.

[Trueblood]

The old CBA had revenue sharing. The new CBA will have to have more revenue sharing. But revenue sharing alone isn't going to solve the problem of 20+ teams losing money each season... and even if it did, if you own the Knicks why should you give all your profits away to the Hornets and T-Wolves? These are still independently-owned franchises.

What really needs to happen is a contraction. But neither the League or the players would agree to that.

Which is why I like the idea of a sliding scale for the national tv money. Big market teams aren't going to want to share their revenue with smaller market teams.

OTOH, if you have disperse the national tv money based on small market/low revenue teams getting more of the tv money pie and less money going to the big guy, you even things out to the point where small markets would profit and large markets would still be very profitable but just not as much as before. Here's how it works...

You rank teams at the end of the year based on how much revenue they created before collecting the national tv money that the LEAGUE negotiated on their behalf. For example, let's say the rankings go...

1. Lakers
2. Knicks
3. Bulls
4. Houston
5. Miami
6. Phoenix
7. Golden State

and then at the bottom

25. New Jersey
26. Memphis
27. Minnesota
28. New Orleans
29. Milwaukee
30. Sacramento

Now, teams are getting around $32 million a year. Every team gets an equal share. In my scenario, the amount given would be inverse order so that the team ranked #30 would wind up with 46.5 million, #29 Milwaukee would get $45.5 million, #28 New Orleans would get $44.5 million and so on, adding a million.

With this in place, #1 Lakers would get just $17.5 million, #2 Knicks would get $18.5 million and so forth until you get to the bottom. The #15 and #16 teams would straddle the $32 million average at $31.5 and $32.5 million.

According to Forbes, teams like Milwaukee and New Orleans lost between $5-10 million a season. Add $10-15 million to that loss and you get a profit of somewhere in the $5-10 million. Coupled with lower salaries as a result of a new cba, you would have a league where everyone profits.

Plus, there isn't much fight that can come from the large markets. They have a right to the revenue that they created but the national tv money is something that Stern negotiates. IMO, the league should be able to disperse this money the way they see fit. If more parity and profitability is in their best interest and the best interest of the league in general, I think this is something that should be seriously considered.

[giberish]

Do you go by market size, or revenue. Either one has issues.

If you scale by revenue you end up rewarding teams that don't bring in as much income on their own as they could, and punishing teams that do a good job at creating revenue.

If you scale by market size then you effectively encourage teams to move from big (or at least medium-sized) markets to small ones - which overall is bad for the league.

IMO a market size based system is better (the reason the Knicks can have huge income dispite incompetant management is that other teams can't move to NY and compete for fans with them), but with a cutoff - below a certain size (say 15-20th biggest market) everyone gets the same

[Trueblood]

Do you go by market size, or revenue. Either one has issues.

If you scale by revenue you end up rewarding teams that don't bring in as much income on their own as they could, and punishing teams that do a good job at creating revenue.

If you scale by market size then you effectively encourage teams to move from big (or at least medium-sized) markets to small ones - which overall is bad for the league.

IMO a market size based system is better (the reason the Knicks can have huge income dispite incompetant management is that other teams can't move to NY and compete for fans with them), but with a cutoff - below a certain size (say 15-20th biggest market) everyone gets the same

It's based on revenue but that comes as a combination of market size and effort and hard work on the part of the organization. No matter how hard teams in New Orleans or Milwaukee try and sell tickets and create revenue, they'll be at a disadvantage compared to the big markets because the corporate money isn't there. Therefore, I came up with this system that at least closes the gap some.

I say combination of market size and other factors because one horse small markets have an advantage over small markets that have pro sports competition. It's easier for Sacramento, OKC, Utah, Portland and Orlando to create revenue over slightly larger markets in Charlotte and Indiana because there is no other pro sports competition. Charlotte, Indy and New Orleans have been in the bottom 5 of revenue created and you have to consider that all 3 have NFL competition whereas the one horse towns don't. Therefore, they're at a bigger disadvantage and should therefore be rewarded the greatest by the sliding scale.

[fengshan]

However, the need for revenue sharing is not an angle the union can force. Revenue sharing depends on the idea that the league's revenues simply need to be reallocated - but to do so, they are asserting single entity status for the league, and that's a direction they don't want to travel. Absent that argument, the 22-23 owners losing money have no right to the revenues of the 7-8 making money, which means there needs to be a change to the system where all 30 can make money and still compete.

[d-train]

Small market teams should collectively demand equal TV money as large market teams or small market teams should defect from the NBA and start their own league. The new small market league would crush the NBA in no time. The small markets could sell new franchises in the large markets and split the revenues from the sale. Investors would lineup to buy the new franchises. The NBA would never be able to regain their small markets and the lost revenues.

[I_Like_Dirt]

A big part of the problem that hasn't really seemed to be discussed much is the fact that the owners can write-off 'depreciation' of the team on their taxes lends itself to inflating the purchase price of the team itself. I mean, if everything else is equal, the business that you can write-off the purchase price on your taxes will sell for more than the one that you can't. In the end, this pushes the value of teams to the point where owners are paying more for the tax write-off than they are for the money-making potential of the franchise. Push that limit far enough and you get situations where the owners are better off not playing games because they get that tax write-off anyway and they can generate more money (or lose les) through not playing games.

Ultimately, there are 3 possible solutions to the problem that will be more than band-aid solutions that don't result in the problem cropping up again and again every decade or two (we're seeing this in pretty much every pro sports league at this point, too). Option 1: continually agree to CBAs where the owners get to make gobs of money over and above their tax write-offs which in turn increases the value of the franchise, which in turn increases the tax write-offs and everything for the owners spirals upwards until nobody in the world can afford to actually buy the franchise (seems to be the path the NFL is on). Option 2: get rid of that silly law where owners can write-off depreciation of their franchise (doesn't seem likely to happen and can't be negotiated by the owners or the players anyway). Option 3: have some sort of ownership conduct/financial code where they need to have a certain amount of income to keep their team afloat in order to buy a ranchise, and even to remain an owner of a frahise (doesn't seem likely to come either, because the owners won't agree to police themselves like that and it would hurt their franchise values).

In the end, we'll probably get some sort of stop-gap situation and we'll see another locking in 10-15 years. Stupid.

[shrink]

The old CBA had revenue sharing. The new CBA will have to have more revenue sharing. But revenue sharing alone isn't going to solve the problem of 20+ teams losing money each season... and even if it did, if you own the Knicks why should you give all your profits away to the Hornets and T-Wolves? These are still independently-owned franchises.

How about because NYK gets revenues by competing against someone? If they played 42 home games with the Lakers, fans stop going, and that's bad for everyone's bottom line.

Let me set aside the big market teams advantages of more generous TV contracts and superstars who choose to join big market teams for personal reasons. Let me just focus on gate revenues, and inject a few numbers to demonstate the huge advantage big markets have:

Current numbers are hush hush, but in 2008-09, the Lakers were able to clear over $2 mil in net ticket revenue per game, with tickets averaging $126 each. The Minnesota Timberwolves struggle to price tickets at half that, and even then, can't fill their arena. Their revenues per game? $350,000. Their size? Middle of the NBA.

Now when a team is making six times as much every game, this translates into the roster side as well. Nearly any team in the league would have been forced to let Andrew Bynum go when his rookie contract expired, but the Lakers could afford to give him a near-max deal, even when they are over the lux, simply because they can afford to gamble he'll finally be healthy. In other words, the Lakers can have a $15 mil player sitting in the trainer's room, costing them double, and still afford a team on the floor with salary over the lux.

Unfortunately, team success doesn't negate pricing power. The Hornets George Shinn simply couldn't get the limited number of people in New Orleans to buy tickets at higher prices, even when they were successful and had a superstar like Chris Paul. The successful Utah Jazz struggled to break even for years, even when they were selling out nearly every game -- simply because salt Lake City can't support higher ticket prices.

Now, there is probably nothing that the NBA can do about the demographics here. Fans in NYC and LA are going to spend a lot of money and fill stadiums. However, the Bynum dilemma is a real problem if we believe there is value in having a league with longterm competitive parity. Revenue sharing needs to be a part of this solution.

[DBoys]

Revenue sharing is going to happen. I'm not sure why the angst and advocacy in this forum, as if it was somehow blocking a deal, since both owners and players seem clearly committed to making it a part of the upcoming NBA landscape. What issues we can see, they also can see, and appear resolved to solving.