Wizards lost money again

[Dark Faze]

The NBA expects nine teams will end up having lost money once luxury-tax distribution and revenue-sharing payments are finalized. The Nets, with that monster $144 million figure, are the biggest losers. Next in line? The Wizards, with projected losses of about $13 million. That’s right: The Nets lost $131 million more than any other NBA team last season. This is what happens when you pay $90 million in luxury tax for an aging roster and play in a market so large you are ineligible to receive any revenue-sharing help.

- from grantland

Sent an email to Prada about it at BF and he says he's looking into it, but I think it bears discussion now. How could this team have possibly lost money with some of the ticket hikes while making the playoffs and not even paying the tax?

What are the ramifications of this given that Ted has one of the thinnest pockets among owners in the NBA?

It explains a lot about him keeping Flips staff around, being completely comfortable with keeping Witt around, generally staying around the status quo and under the cap...

Really concerning stuff.

[colts18]

That explains selling the 2nd round picks. I would imagine that the team would have been really profitable this season.

[Nivek]

This is pretty baffling news, to be honest. Either Leonsis is sucking out a bunch of money to service the debt on the team, or they're BURNING money in "operations."

[nuposse04]

those **** urinal cakes :/

[LyricalRico]

That explains selling the 2nd round picks.

Yep, pretty much what I thought. And this looks like it's a $13M loss AFTER luxtax payments and revenue sharing monies go out (of which I would expect the Wizards to get a little bit of both)? Wow...

[verbal8]

those **** urinal cakes :/

They must be gold-plated in the luxury boxes

[payitforward]

Because you pay taxes on profits, any organization is happy to minimize the profit they must declare. It's also possible that there is some tax or other benefit to declaring a loss this year.

As well, "the Wizards" is not the same as "Monumental Sports." Nor do we know where/how the dividing lines work.

In short, there's no way to know what this means.

[miller31time]

Wow, didn't see that coming. So it cost us a 2nd rounder. I wonder how far Ted is going to go with his sudden cost cutting measures?

[nate33]

Remember, last season the Wizards were pushing the luxtax while also paying Blatche's salary. They may not have exceeded the luxtax, but their actual expenditures were probably the highest among all non-luxtax teams.

Hopefully, this would be another reason for EG to plan dump Nene and Webster in an effort to generate cap room in 2015. The public argument would be that we are taking a modest step back to prepare for the future. Privately, they would be extremely happy in 2015 with a team salary at just the salary cap level rather than the $7M or so they are currently over the cap.

[keynote]

I know the Phone Booth isn't sold out for every game, but man, I had *no* idea they were that upside down.

It still doesn't make any sense. Sure, they have room to improve in terms of ticket revenue, but that can't be the entire picture. They must have a *terrible* TV deal with CSN. I'm sure Ted can't get his Monumental Network off the ground fast enough.

[Rafael122]

Keep in mind, Andray Blatche was owed $7 million. Crappy attendance. This is what years of sucking does to you, you lose money.

Edit: Will be the same next year too unless Blatche gets paid. This is probably why Ted doesn't want to go over the luxury tax unless its absolutely necessary. A Durant is a game changer and you're guaranteed a sell out every game.

[keynote]

That explains selling the 2nd round picks. I would imagine that the team would have been really profitable this season.

It explains it -- but it doesn't justify it. Losing $13M hurts, but I'm still not convinced that throwing away basketball assets is the smartest way to recoup that loss.

[payitforward]

That explains selling the 2nd round picks.

Yep, pretty much what I thought. And this looks like it's a $13M loss AFTER luxtax payments and revenue sharing monies go out (of which I would expect the Wizards to get a little bit of both)? Wow...

Maybe, maybe not altogether. Why? Well, we have 7 guys under contract, 8 if we've picked up Rice's extension. We'll need 14 to enter the season. That R2 pick guy would have cost us $400K.

If you sell the pick, you still have to feel that you (because "you" are oh so very smart) can get a good guy among the undrafted (and that guy is still going to cost you $400K).

So, we're still dealing w/ the same attitude about R2.

[payitforward]

That explains selling the 2nd round picks. I would imagine that the team would have been really profitable this season.

It explains it -- but it doesn't justify it. Losing $13M hurts, but I'm still not convinced that throwing away basketball assets is the smartest way to recoup that loss.

It isn't. And put me on record doubting that we actually lost $13m except that the accounting was done in a way to show a loss. Cash/debt in vs. cash/debt out shows a loss? I doubt it.

[verbal8]

Because you pay taxes on profits, any organization is happy to minimize the profit they must declare. It's also possible that there is some tax or other benefit to declaring a loss this year.

As well, "the Wizards" is not the same as "Monumental Sports." Nor do we know where/how the dividing lines work.

In short, there's no way to know what this means.

From the article:

The NBA expects nine teams will end up having lost money once luxury-tax distribution and revenue-sharing payments are finalized. The Nets, with that monster $144 million figure, are the biggest losers. Next in line? The Wizards, with projected losses of about $13 million. That’s right: The Nets lost $131 million more than any other NBA team last season. This is what happens when you pay $90 million in luxury tax for an aging roster and play in a market so large you are ineligible to receive any revenue-sharing help.

It’s important to note the figures here stem from basketball activities only, and do not appear to include benefits the Nets and Prokhorov get from their ownership stake in the Barclays Center. And Prokhorov, of course, is heli-skiing levels of rich. But taking a $144 million bath when the rest of the league is swimming in profits does not sit well.

Pro sports owners are pretty notorious for hiding profits. Having ownership of the arena is one of the easiest ways to do this, so it shouldn't be too shocking that the biggest losers are both teams were the owner controls the arena.

If this number is indeed accurate EG should be fired for purely financial reasons. There is no reason the Wizards should not be able to support a payroll of $65 million and at least break even. Especially when hosting 5 play-off games this season. One drag on the Profit/Loss is the roughly $7.5 million in amnesty payments to Blatche. Also the $5 million in dead salary that EG agreed to take on in the Gortat deal. Not to mention the $2 million in salary for Eric Maynor.

[Dat2U]

Andray Blatche sends Ernie & Ted his best regards.

[keynote]

Andray Blatche sends Ernie & Ted his best regards.

Speaking of Blatche:

[Kidd] impressed higher-ups when he unilaterally banished Andray Blatche from the team in December. The Nets couched Blatche’s absence as due to “personal reasons,” but Kidd really booted him out of concerns over his conditioning and preparedness, per multiple sources familiar with the matter. The timetable on Blatche’s absence was open-ended; Kidd told Blatche to come back only when he was ready to play. It was a suspension in all but name, and the organization privately applauded Kidd for taking a strong stance.

Oh, Blatche. Don't ever change.

[Dark Faze]

It can't all be attendence because the Wizards were rated just slightly below average in attendence last year and that number couldn't have gotten much worse (if not better) this season:

http://espn.go.com/nba/attendance

The Nuggets actually made a profit while being below us in attendence

[nate33]

Yeah, I think PIF nailed it. I don't believe the numbers.

The Wizards had equal or better attendance numbers than the likes of Memphis, Denver, Minnesota and New Orleans; all of whom had payrolls in the same general neighborhood as ours. With Washington being a more financially well-off area, I'm sure our tickets cost more per seat. So the math just doesn't add up.

[fishercob]

Because you pay taxes on profits, any organization is happy to minimize the profit they must declare. It's also possible that there is some tax or other benefit to declaring a loss this year.

As well, "the Wizards" is not the same as "Monumental Sports." Nor do we know where/how the dividing lines work.

In short, there's no way to know what this means.

Agreed, 100%.

Keep in mind, while the Wizards may have run a deficit this year, the recent franchise sales are such that the team's value has likely skyrocketed.

Accounting treatments and the fact that Monumental also owns the building, the ticketmaster franchise, etc., make it such that it's really impossible to know what to make of the $13M loss on its face.