Union Doubts Stern’s Claim Of $400 Million In Losses For League
SportingNews
During All-Star weekend, NBA commissioner David Stern announced that NBA owners will lose $400 million this season. It took players union head Billy Hunter a month to respond, but he’s now disputing that mark.
"Based upon our review and what we’ve done thus far, we dispute the $400 million figure," Hunter told CBSSports.com. "And we plan to present our rebuttal to David and the owners at an appropriate time. Our contention is that the number’s overstated."
Hunter didn't have a specific number but said he has employed a leading economist from the University of Chicago to analyze the financial statements turned over by the league.
He also said he hopes to submit a proposal on a new collective bargaining agreement—the current one ends after next season—in either May or June, so the two sides can negotiate through the summer.
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The CBS Sports piece.
What's a few hundred million among friends?
Ken Berger
David Stern says the NBA will lose $400 million this season. Billy Hunter has crunched the numbers and disagrees. How could the two men charged with negotiating a new collective bargaining agreement for a $4 billion industry potentially be hundreds of millions apart when it comes to the focal point of their argument?
Well, it’s tax season, so to paraphrase Mark Twain, one way is this: Liars, damn liars, and accountants.
Aside from the fundamental argument over whether players or owners should bear the brunt of a difficult economic environment, the two sides disagree on what figures should be included in the league’s profit-loss statements. When asked for a response to Hunter disputing Stern’s number Friday, NBA spokesman Tim Frank said, “Our financials are based on GAAP accounting.” This is important because GAAP – Generally Accepted Accounting Principles – allow for non-operating expenses such as interest and depreciation to be included when depicting the health of a business. These expenses, and how they are taxed and depreciated, allow companies more leeway in reporting earnings. (The NBA is not a public company, and thus is not required by law to disclose such things.)
The players believe that they shouldn’t be asked to make concessions to account for expenses such as interest associated with an owner’s purchase of his team or arena. Since no major American pro sport has ever given players an ownership stake, the players never share in the upside of rising franchise values. That’s an investment risk taken by the owners, most of whom stand to reap huge returns if they ever sell their teams.
Another tricky aspect of the NBA business that makes deciphering its health difficult is related-party transactions. At least five teams – the Knicks, 76ers, Nuggets, Raptors and Bulls – are the property of owners who also own the arena and local TV network. (The Bulls are co-owners of their arena and network.) Six more – the Kings, Pistons, Hawks, Wizards, Jazz and Lakers – are property of owners who also own the arena. (The Lakers are part-owned by AEG, which owns Staples Center.) More teams, like the Spurs and Pacers, don’t own their arena but operate it.
This means that if the Sixers, for example, are losing money, chances are a significant portion of that money comes from arena and TV expenses, which all flow to Comcast-Spectacor, which also owns the team. It’s a dream scenario – like losing millions of dollars to yourself.
Do these issues account for all the difference between Stern and Hunter when it comes to the financial health of the NBA? According to CBSSports.com’s analysis of the NBA’s ticket sales projections for the 2009-10 season, probably not.
Stern’s $400 million figure appears rooted in a doomsday projection of a double-digit league-wide decline in gate receipts – the money teams bring in from all ticket sales – during the 2009-10 season. Based on ticket sales data from July 2009 obtained by CBSSports.com, the league was looking at a 17 percent decline in revenues from full- and partial-season ticket plans this season. The figures excluded three teams – the Knicks, Lakers and Thunder – because they had not reported season-ticket sales in July 2008 for comparison purposes.
Season-ticket sales are important not only because they provide teams with revenue certainty, but also because they account for the vast majority of ticket revenues. Of the more than $1.1 billion in league-wide gate receipts during the 2008-09 season, $917 million – or 83 percent – came from full- and partial-season ticket plans, according to league data.
At the 2009 NBA Finals – weeks before the July report obtained by CBSSports.com was produced – Stern floated the possibility that the league could see as much as a 10 percent decline in basketball-related income during the 2009-10 season. (Gate receipts are about one-third of BRI, which determines the salary cap.) That figure was later revised to a reduction of between 2.5 percent and 5 percent in a league memo to teams. In the memo, the league warned that the resulting drop in the 2010-11 cap would be $5-8 million from its previous level of $58.7 million.
If 2009-10 gate receipts declined 17 percent – as the league’s July report suggested would be the case – it would’ve resulted in a loss of approximately $200 million in ticket revenue. Potentially, there’s the difference between Stern’s stated annual losses of $200 million in the first four years of the CBA and the $400 million he projected for 2009-10.
But the latest data available on gate receipts showed a decline of only 7.4 percent for 2009-10, according to another league ticket sales report through Nov. 29 that was obtained by CBSSports.com. The 7.4 percent decline in revenue was associated with a 3.7 percent decline in paid attendance, the report said. No updated figures have been made public since then, but Stern said during All-Star weekend that attendance would be down about 2 percent this season. “It is doing better this season than we were actually projecting it,” he said.
If the decline were to have held steady at 7.4 percent since Nov. 29, the resulting loss of ticket revenue would be about $80 million – not the $200 million reflected by the league’s July projections.
Frank, the NBA spokesman, declined to discuss league financials, saying the appropriate data were being provided to the players’ union.
Which can only mean that those damn accountants have a lot more fun ahead of them.
NBA players are way TOO ing overpaid.
But there claim is completely different and you have to understand that if they don't get that money, the owners of the team do.
The owners are not going to charge less money blah blah, they are just going to pocket it otherwise I'd be for it.
agreed... a "superstar contract" nowadays should be 20 million for 4 years.. yeah I said it AND it's never been more proven than this year especially when attendance and ratings are at a serious low for the league as a whole.
the only teams makin a loss are probably the small market teams cause there share of the tv rights is low compared to the big teams or teams that attract alot of viewers....this is probably where most of a teams source of income comes from.
And tickets shouldn't cost $100 a game either, but good luck with that.
Only people believe NBA teams makes profit are the ones that believe stupid marketing and hype machines of NBA. Any person with brain knows most NBA teams lose many millions every year.
The fix is right now eat it, and going forward smaller contracts. If not you'll see teams going under eventually. Players are overpaid, but dumbass owners gave them the contracts as pointed out to me here numerous times. If players want to be rich, play your ass off and get some Nike love.
Dumbass, brainwashed fans believing in the owners dishonest whining. $400 millions my ass. If more than a few NBA franchises don't turn out profits, even in the current economic climate, it's due to mismanagement from the ownerships or because the owners simply don't care about the bottom line.
NBA players can't make more than 57% of the revenue league-wide. I lie, 57% of part of the revenue. Last season they returned $120 millions to the owners because the revenues were smaller than projected. PLayers salaries are (or should be) such a big part of the NBA expenses that this cost-control mechanism basically assures that pretty much every ing franchise equates to a printing money machine. The exception are those in very small markets + high salary roll + not winning + bad arena deal/antiquated arena (I think you need all these 4 factors put together to not be a profitable franchise: Sacramento, Indiana, etc.).
lol you fail at math. NBA teams spends $70-$80 million on salaries and coaches plus $100 millions in expenses. Most NBA arenas are half to 2/3 empty all year long. TV and merchandise income is across league and spread as small payment to clubs.
Only NBA teams that have any chance to make profit is Lakers, Knicks, Bulls, Clippers, Cavs, Rockets, Celtics, Raptors. Not one other NBA team can come close to make any money. If you have economic 101 class you will know this.
Everyone go to the Euroleague and get bigger contracts! USA is broke.
lol Splitter 3yr/36M
Which part of "the players can't make more than 57% of part of the revenue" (more precisely, of the BRI) you didn't understand? The fact that NBA teams have salary roll of $70 millions on average doesn't mean they're actually paying it. It's the escrow system, stupid.
I'm not going to bother to refute all the ignorant nonsese you're certain to babble over this issue (and others), but the national TV deal pays + $900 millions/season league-wide that are distributed to the franchises. From national/int. tv revenue alone each NBA franchise receives almost $35 millions per season and this does not include the local tv/radio revenues.
Even in flush times, unless you were, like, the Lakers, if you wanted to put a compe ive team on the floor, you only made money when you sold the team or your share of the team. Even last season, I noticed for the first time in probably 25 years, the lower bowls weren't filled. They also started shooting many of the games like the WNBA, close court shots only, in order to hide the ty attendance.
That's BS. Even last season only 12 teams had a negative EBITA and, as the article suggests, the accounting techniques of the NBA franchises are su ious. Owners have a big incentive to paint a dire picture and make it seem worst than it is due to the public money/arena deals they get and even more now with the CBA negotiations. I know one case where the arena expenses, including those from other events, go to the franchise books while the revenues go to a 3rd party.
In any case, try to understand 2 simple things: ticket revenue sans luxury suites is relatively unimportant these days. Marc Cuban even said recently they're going to slash prices because they simply don't care much about the revenue.
More importantly, the salary cost is variable. Less revenue -> less salary paid to the players. You don't need to renegotiate contracts, it's automatic. It's amazing that most fans don't know this mechanism and then fall to the doom and gloom bull from the owners and Stern.
The NBA problem from a financial perspective is lack of parity. It's basically impossible to lose money with a team like the Clippers or the Knicks no matter how badly managed they are while teams like Bucks, Pacers, Hornets, even the Spurs need to be well-managed/successful to not lose money.
You believe most NBA teams is make $300-$400 million a year revenues? Because that is how much they have to make to get net profits due to how much expenses they have and that they keep at most half of what they earn in first place.
Only big sports league where most teams make money is in big soccer leagues. I do not think even all NFL teams make profit.
Lose 400 million? The only way it sounds plausible is if the league was expecting 1.2 billion in revenue and only got about 800 million.
This is nothing. You do not figure expenses. Revenue means nothing only the profit. Euroleague had $3 billion revenue last season. The profit for Euroleague was $100 million. Revenue and profit is much different thing.
NBA can make billions but they have only a very small amount of it that they pocket.
You're nuts. What are those spectacular expenses - more than $300 millions per year - that NBA teams have? Do you know how much money is $300 millions?
The league had a $3.2 bil. in BRI last season (and this leaves out all the revenue that doesn't qualify as BRI - arena signage, naming rights, parking, luxury suites, etc). The overal EBITA was $320 millions. All this before mentioning the creative accounting used by many owners to make things look worse than they are. To lose 400 millions they'd need a +$700 millions turnaround. It's just impossible. But Stern and the owners know the public loves to fall for the "pro sports in trouble, not a viable business model" angle as long as it meets anecdotal evidence (less people visible in the stands).
sons is anyone surprised that David Stern and the league would lie and exaggerate about something like this? they lie to the fans on a nightly basis with their officiating. no surprises here. NBA = most corrupt professional sports league in the world
Ding ding ding. MLB did the same "poor owners" shuck and jive when they were squaring off to renegotiate their CBA a few years back. The MLB players' union is very strong and didn't give in to their phony accounting (Bud Selig was claiming the same preposterous "losses in the 100s of millions" nonsense... their accounting practices would make Enron execs blush). Players basically won. Still no salary cap.
Amazes me how people so quickly side with ownership in these disputes... they look at player salaries and somehow decide that it's the players getting over? Most NBA players do make a ton of money (which isn't true in MLB) but it's still strange that people choose the capitalists over labor.
Don't get me wrong, the owners are all en led to make a ton of money exploiting the talents of players. Just don't expect me to feel sorry for being in such a great business.
The owners are to blame since they sign the players to the ridiculous contracts, but they have the right to fix the system and agree on what kind of contracts they want to give players. The big problem is the length of contract. Honestly, no one should be signed for more than 4-5 years and that's even stretching it. Also, role players should not be making 10 million per year because they don't sell tickets and really aren't helping the franchise in making revenue. Basically they need a hard salary cap, and also need to minimize the length of contracts from 6 years max to 4 years max. Dollar per year should not be maximized, only length of the contract.
That's an easy one. People care about seeing the product. They don't care about the business or player side of it. Fact it, the owners paint themselves as the bringers of the product and if they say that their precious events will vanish without fan backing, then the backing of the fans they shall have.
I could care less which side wins. As a Spurs fan, I care about allowing small markets to stay in contention with the big names and nothing else. Whatever side that ends up screwing the other is no big deal. They both swim in dollar bills in the end.
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