On Tuesday, in response to a question at a press conference after a Board of Governors meeting, NBA commissioner Adam Silver asserted that a “significant” number of NBA teams were losing money. This mirrored what Silver said at the beginning of the season, which the league repeated two months ago.
Today the National Basketball Players Association has issued a response to Silver’s claim. While prefacing her statement by saying “we agreed not to debate the finer points of negotiation in public”—Silver said something very similar after his comments—NBPA president Michele Roberts said “business is thriving,” and added these “facts of this business”:
- Under the CBA, we do not have a gross compensation system. The players 50% share is calculated net of a substantial amount of expenses and deductions.
- New and renovated arenas around the league have proven to be revenue drivers, profit centers, and franchise valuation boosters. That has been the case over the past few years in Orlando, Brooklyn, and New York, to name a few. In some instances, owners receive arena revenues that are not included in BRI. Many teams also receive generous arena subsides, loans and other incentives from state and local governments as part of their arena deals.
- Virtually every business metric demonstrates that our business is healthy. Gate receipts, merchandise sales and TV ratings are all at an all-time high. Franchise values have risen exponentially in recent years, and the NBA has enjoyed high single digit revenue growth since 2010-11.”
Make no mistake: both Silver and Roberts are negotiating in public, and setting the table for an ever-more-likely lockout/strike in 2017.
Roberts’s “facts” about the business are similar to points made in a Deadspin article about how owners can manipulate revenue to bypass the Collective Bargaining Agreement. She is arguing that there are numerous ways NBA owners can accumulate off-book profit from their teams, such as bamboozling municipalities into build them arenas and profiting from “arena revenues that are not included in BRI.” Even if teams are technically losing money, the argument goes, if you look at the whole enterprise, owners are not.
Four years ago, the owners locked the players out, and eventually won the lion’s share of concessions in the ensuing CBA. The biggest of these was a reduction of Basketball Related Income paid to the players from 57 to 50 percent; this came after the league claimed that 22 of 30 teams were losing money, and that the league as a whole was losing $300 million annually.
With the league performing so well—curiously, Silver’s statement came almost directly after he proclaimed that the long-term outlook of the league was very positive, and that “the league is very healthy”—it would seem natural that the players would seek a new, more favorable CBA at the first possible opportunity. That opportunity is after the 2016-17 season; either side can announce their intention to opt out by December 15, 2016.
Adam Silver bans the hell out of Donald Sterling.
But Silver’s statement is a caution against doing that. While the NBA doesn’t dispute that it is in better shape than it was in 2011—remember the “high single digit revenue growth since 2010-11” Roberts mentioned—the league argues that it isn’t in such good shape that owners are ready to just give money back to the players. If the players opt out of the CBA in an attempt to win back some of the money they lost, the league is attempting to warn, they will be in for another long fight.
Basically nobody buys the NBA’s arguments. Silver’s statements the other night were panned at ESPN, CBS, Yahoo, SB Nation, and most other places. The reasons he gave for teams losing money were arena costs (the majority of arenas are heavily subsidized by local municipalities), building new practice facilities (a relatively small cost that only a few teams are undertaking), and having to hire sales and marketing staffs (c’mon). The biggest expense teams have, player salaries, are constrained in aggregate at 50 percent of revenues (or, as Michele Roberts made clear in her statement, 50 percent of revenue “net of a substantial amount of expenses and deductions”).
According to a league memo Grantland’s Zach Lowe obtained, nine teams lost money in 2013-14. The outlier was Brooklyn, which lost $144 million because of all the old veteran players on terrible contracts they gleefully obtained in a mistaken belief that it would lead to great playoff success. The next money-losingest team was the Washington Wizards, at just $16 million dollars.
Adam Silver announcing a draft pick, probably one the Nets traded away for a zombie.
After a year that saw the lowest luxury tax payments since the luxury tax was implemented, as well as all of the positive trends mentioned above, it would seem obvious that teams are in better health than the year before. And in 2013-14, with the exception of the dumb Nets, they weren’t that unhealthy. With each team’s share of the national television contract increasing from roughly $15.5 million to $44 million even after paying for salaries—that’s a $28.5 million increase—and perhaps a slightly different revenue sharing system, there is no reason beyond bad management that each NBA team shouldn’t be wildly profitable for the next several years.
If this dispute over how profitable teams are—never mind related disputes such as whether the players have actually have any responsibility to help teams be profitable, or whether the players deserve any proceeds from the sale of NBA franchises—cannot be resolved, we’re in for an ugly 2017. The NBA has made it clear that they aren’t going to budge, and the NBPA has made it equally clear that they think the league has plenty of money it can share with the players.
At the same time, both sides have a strong incentive to avoid a work stoppage. The NBA is clearly thriving—the league is in its best position since at least the mid-1990s—and there is no telling how much fan goodwill and support will erode during a lockout, especially a prolonged one. There seems to be an alternative here, involving the league and players’ union quietly negotiating an increase in the players’ share of revenue large enough to make a strike not worthwhile, but not so large of as to dent the owners’ near-guaranteed profitability. There are other issues, but they can wait.