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Good article.
we might be in for a long lockout....
This article should be required reading before anyone spouts off about what the lockout is about:
http://goo.gl/c4vk2
It's actually very readable, with clear charts and graphics.
Bottom line:
1. The NBA had an overall profit margin of 5% in 09-10, and it has been about 7% over the past decade.
2. HOWEVER, baseball and football have been chugging along at somewhat higher profit margins.
3. NBA player salaries are pretty much in line with other sports as a percentage of revenue.
4. Yeah, there are a lot of teams in the red, but they are not really bleeding money, and the big-market teams are raking it in. Greater revenue sharing like that baseball has adopted would level the field considerably.
Good article.
we might be in for a long lockout....
If Stern's goal is to make every single team (or most of them) profitable just by cutting salaries from 57% to 45% of revenue WITHOUT some kind of revenue sharing, then he's lost his mind.
If the goal is to get the profit margin closer to 8%, then we're only probably only talking about a matter of about $100-200 million a year, and they may be able to do that by reducing the player shares to somewhere around 55%.
But the real key is whether the owners really care about compe ive balance or are they just about the money. If the former, then they have to do the revenue sharing.
Some of what the article says is correct, and some of it is bull . Either based on conjecture, or simply intentionally misleading. Typical of the NY Times. It does underscore one point that is absolutely true, but it only tells half of the story. The major roadblocks in the process now are 100% due to the fact that the league is controlled by the big market teams AND the superstar players.
The big market teams are making a killing. And they have no intention of sharing. They want a solution that will make the smaller teams more profitable, while making them (the big market teams) even more ridiculously profitable than they already are. They don't want to talk about any solution that has them sharing with small market teams. And the problem is, they have more leverage in the discussions.
But what the article doesn't mention is that the superstar players also have different interests than the second-tier players, which is having a big impact on the part of the negotiations involving contracts. And, once again, it's the players at the top who have all the leverage.
The article really pisses me off, though, when it talks about 17 of 30 NBA teams losing money like that is no big deal. And comparing that to baseball at a time when almost one-third of those teams were losing money. The difference is so stark, it's stupid to even think about comparing the two situations. I don't think the reporter is that stupid - they're being intentionally misleading. Which, to me, says they have an agenda. I don't have much patience for reporters with agendas.
You don't have to be a reporter to figure out that 17 of 30 teams are losing money, 6-7 teams are doing all right, and another 6-7 are making a ridiculous load of money. And you don't have to be a reporter to figure out that the players' salaries are similarly top-loaded. Any solution that doesn't address those problems is flawed before it ever gets started. But the people with the biggest sticks don't want things any other way.
Another good article at this link: http://goo.gl/MP5jh
The best part of the article is the figure below (also for 09-10), emphasizing the disparity among teams. Notice that there's very little dependence on how well the quality of team play or management: the Knicks are a guaranteed lock to make money no matter how badly they are run. No way can a small-market compete with that financially.
This guy has some significantly different numbers than the first article (he claims player salaries in the NFL and baseball are 48% of revenue, while the first article has them around 55-60%.
Can't wait to see a league with profit sharing and better contracts. I hate to see a lockout but I absolutely think it's necessary. It's terrible knowing a whole season will be lost and Tim will be 36 when play resumes.
Obviously the pretentious snobs at the New York Times could care less about the rest of the league, long their precious knickerbockers are raking in the change.
NBA.com's Statement:
NBA responds to NYTimes.com blog based on inaccurate info
By NBA Official Release
Posted Jul 6 2011 12:33AM
The league office released this official statement earlier this evening:
The information from Forbes that serves as the basis for this article is inaccurate and we do not know how they do their calculations. Forbes does not have the financial data for our teams and the magazine's estimates do not reflect reality.
Precisely to avoid this issue, the NBA and its teams shared their complete league and team audited financials as well as our state and Federal tax returns with the Players Union. Those financials demonstrate the substantial and indisputable losses the league has incurred over the past several years.
The analysis that was posted this afternoon has several significant factual inaccuracies, including:
"(The NBA) is a fundamentally healthy and profitable business"
• The league lost money every year of the just expiring CBA. During these years, the league has never had positive Net Income, EBITDA or Operating Income.
"Many of the purported losses result from an unusual accounting treatment related to depreciation and amortization when a team is sold."
• We use the conventional and generally accepted accounting (GAAP) approach and include in our financial reporting the depreciation of the capital expenditures made in the normal course of business by the teams as they are a substantial and necessary cost of doing business.
We do not include purchase price amortization from when a team is sold or under any cir stances in any of our reported losses. Put simply, none of the league losses are related to team purchase or sale accounting.
"Another trick...moving income from the team's balance sheet to that of a related business like a cable network..."
• All revenues included in Basketball Related Income ("BRI") and reported in our financial statements have been audited by an accounting firm jointly engaged by the players' union and the league. They include basketball revenues reported on related en ies' books.
"Ticket revenues... are up 22% compared to 1999-2000 season"
• Ticket revenues have increased 12% over the 10 year period, not the 22% reported.
"17 teams lost money according to Forbes ... Most of these losses were small..."
• Forbes' claim is inaccurate. In 2009-10, 23 teams had net income losses. The losses were in no way "small" as 11 teams lost more than $20M each on a net income basis.
"The profits made by the Knicks, Bulls and Lakers alone would be enough to cover the losses of all 17 unprofitable teams."
• The Knicks, Bulls and Lakers combined net income for 2009-10 does not cover the losses of the 23 unprofitable teams. Our net loss for that year, including the gains from the seven profitable teams, was -$340 million.
"Forbes's estimates -- a $183 million profit for the NBA in 2009-10, and those issued by the league, which claim a $370M loss..."
• Forbes's data is inaccurate. Our losses for 2009-10 were -$340 million, not -$370 million as the article states.
"The leaked financial statements for one team, the New Orleans Hornets, closely matched the Forbes data..."
• This is not an accurate statement as operating income in the latest Forbes data (2009-10) is $5M greater than what is reported in the Hornets audited financials.
But really, what else did you expect? Of course the NBA was going to say the data was incorrect or misleading... slander is the name of the game?
Another good article at this link: http://goo.gl/MP5jh
The best part of the article is the figure below (also for 09-10), emphasizing the disparity among teams. Notice that there's very little dependence on how well the quality of team play or management: the Knicks are a guaranteed lock to make money no matter how badly they are run. No way can a small-market compete with that financially.
This guy has some significantly different numbers than the first article (he claims player salaries in the NFL and baseball are 48% of revenue, while the first article has them around 55-60%.
Note the teams that have profited by intentionally sucking. The teams that really get hit are the ones that try to compete (i.e. - spend money on players) without being in a big media market.
This graph alone is enough to see why the big market teams don't want anything to change.
Umm, maybe you weren't around for the last lockout when the superstar players agreed for a cap on individual salaries? Perhaps you didn't how Tim Duncan (for one) probably lost on the order of $40 million (don't recall the exact number) in future earnings as a result of the CBA (not that he complained)? How it was almost unanimously agreed that 1998 lockout was a victory for the owners, which they promptly pissed away by overpaying Rashard Lewis and Troy Murphy.
And ummm, don't you think if it's a problem of relative distribution of player salaries that maybe then the PLAYERS would be complaining about it? Because I haven't heard any. Unlike the owners, who are certainly complaining about revenue distribution.
There are only two fundamental questions:
1. What do you think the owner's profit margin should be (or, alternatively, what should the players percentage of revenue be)? It's already at least 5-8%. Should it be 10%? 20% (higher than the NFLs)?
2. Should there be any sort of revenue distribution between the teams, or should the Knicks, Bulls, and Lakers just continue to make money hand over fist?
If the league as a whole is well profitable, and it is, then it shouldn't be on the players to make further sacrifices to make every team profitable.
lol NBA. Those responses sound like the Iraqi Information Minister.
Thanks Shoog, excellent article. And an interesting reply from the NBA. I'm sure the truth lies somewhere in the middle.
The NBA needs to learn to bring in shorter contracts, teams need to learn to revenue-share, continue to expand NBA League Pass revenues internationally, and GET THE ON WITH PLAYING BASKETBALL.
A lockout will hurt them more than they know. They'll lose fans to other sports and hobbies - there are too many things for people to do today, and they won't stand for crap like this. Hard core fans like you and I will, but they'll lose a lot of mainstream support, and that translates to merch $.
Last edited by RuffnReadyOzStyle; 07-06-2011 at 02:58 AM.
the current nba share tv revenue, how is it allocated? evenly among teams? or the bigger clubs getter the bigger piece of the pie...
I don't know if the NBA isn't losing money but what I'm quite sure is that they aren't bleeding money like Stern say it.
There are some flexibility in accounting methods and owner's best interest is to have a league that is "losing" money to lower players salaries.
Since you can't really trust accounting numbers, the best way to know NBA's financial state is to look at facts:
- Last summer, teams have spend a crazy amount of money. Average players like Drew Gooden got a lot of money.
- Teams have been sold for a lot of money like GSW for $500M. Even the Hornets could have been sold for $300M but the league decided it wasn't enough and bought them for $350M.
- TV ratings have been great this year and new TV deals should be better.
- Celtics gave $35M to Doc Rivers.
Facts show a league that generate a lot of interest with owners spending a lot of money on players/coaches and with owners able to sell their teams for a lot of money. Facts don't compute at all with a league bleeding money.
lol independant "estimates"The Forbes data may suffer from this lack of publicly-available information, but they remain the only independent estimates of the league’s financial condition. In my view, a degree of skepticism is appropriate toward any claims made about the N.B.A.’s finances.
I know when we won one of the championships it was reported that the Spurs lost money. If that is true, something has to change.
National US tv (ESPN and TNT) it's evenly shared among the 30 teams I believe.
Local TV revenues is where there are big gaps between the big and the small markets.
Obviously a team like the Lakers who has a huge local tv contract isn't interested in sharing that money with the rest of the league. That makes sense, but it will also make sense that they aren't allowed to spend much more than the rest of the league.
I was reading somewhere that the two lockouts are totally different. The NFL is sharing 70% of ALL revenues. With the NBA, the figure is around 25-30%. They need to get their own house in order before they ask for give backs more than the players have already offered, about $100,000,000 a year, last I heard.
The NBA financials remind me of how Hollywood does their financials. Thus Harry Potter films which gross billions of $$$ actually lose money.
Yeah right.
Billions in revenue for television. Much more for advertisers like Nike, Coca Cola, etc ad nauseum? Luxury boxes going up like crazy and most cities pay for the arenas which is the 2nd biggest cost (next to salaries).
I could run a pretty profitable business with that as a basis. Don't think these owners can? These guys are the ones that own car sale businesses. As the saying goes about used car salesmen.... you get the point.
Despite what the league says, I don't think all the cards are on the table.
We need:
1. Profit sharing
2. A stiffer luxury tax (such as calculating the tax as being the # of millions over the tax threshold times itself. So $1M over is $1M in tax. $5M over is $25M in tax. $10M over is $100M in tax. $20M over is $400M in tax and so on. If the Lakers, Mavs, etc can afford that, then the teams who can't won't mind because they'll still be swimming in their share of the divided up Luxury Tax $$$.
3. A lower max salary per player
4. Get rid of the mid-level exception... actually with #2 above, who cares?
5. Maximum of 2 years guaranteed at any time on a contract (This will in the future quickly free up most teams from bad contracts like RJ's). You can still have longer contract length, but the guaranteed portions are rolled out as the contract matures with the team able to "opt-out" of any unguaranteed portion at any time.
6. Allow teams to designate 3 players as "franchise players" so that they can keep top talent. So long as the teams can pay these players max contracts, the players must stay with the team.
the owners want 10 years
tv deals run out in 5
could they not work out something for the new % with the new tv deals?
or could the players have the option of lockout in 5 years when tv runs outs
or could they extend the tv deals now
Required reading over the summer? Thanks but no thanks High School English Teecharbear.
That's to me the biggest problem.
The Spurs can turn a modest profit by being under the cap and receiving payment form those under it.
09/10 the Spurs payed the following luxury tax
Spurs 10,160,736
Lakers 21,421,066
Despite this the Lakers turn a huge profit the Spurs lose money.
Even if they had not gone after RJ and stayed under the cap they would still
have have significantly lower profit margin
If everything is so transparent, as the league likes to say, then release the numbers publicly, so everyone, including Forbes, can scrutinize them.
Once the numbers are out, it should be fairly simple to tell whether they're trying to con the players or not.
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