Dollars and sense.
Money management is always a hot topic, but right now it’s a raging inferno. With the economy in the can, at least 22 million Americans have filed for unemployment since March 14 due to the coronavirus. And over the last few weeks, we’ve been able to witness how some sports entities are handling things on the financial front.
On Monday, we learned that the Los Angeles Lakers gave back the $4.6 million they got from the government due to a program that was supposed to “help small businesses” during a global pandemic. According to Darren Rovell, the Lakers were the only NBA team to apply for a Paycheck Protection Plan loan from the Small Business Administration. And since the Lakers have fewer than 500 employees, which 99.7 percent of small businesses do, according to the Small Business and Entrepreneurship Council, it made them eligible to apply for the loan.
But just because you have the right to do something, it doesn’t mean that you need to follow through with it.
Especially when you realize that Forbes lists the Lakers as the eighth-most valuable franchise in sports, with a value of $3.7 billion and an operating income of $147 million. Teams that sell courtside seats for over $1,700, or for $13,000 a season, don’t “need” stimulus checks, as some companies have given the money back after realizing that most of the $349 billion that was supposed to go to small business, didn’t. And in order to keep the loan, The Lakers would have to prove they could not get the money from someplace else.
Just give them a minute.
A White House plan that considers the Lakers a “small business” looks more like a disbursement of wealth to billion-dollar corporations than a plan helping Mom and Pop stores. It’s corporate welfare on steroids’ steroids.
“The Lakers qualified for and received a loan under the Payroll Protection Program,” the Lakers said in a statement to ESPN. “Once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need. The Lakers remain completely committed to supporting both our employees and our community.”
The retrograde decision by the Lakers is similar to what the Philadelphia 76ers initially did last month, when they were about to reduce the salaries of their employees by 20 percent before backtracking. Both franchises only did “the right thing” after realizing the optics of what they’d initially done.
There’s value in making good long-term financial decisions, which has been highlighted by the NCAA and Wimbledon.
With the cancelation of the NCAA’s biggest annual moneymaker, the NCAA Tournament, the nearly $870 million that it brings in never hit the organization’s account this year. According to The Washington Post, 80 percent of the $500 million the NCAA had saved up in case of a canceled tournament had been spent by new leadership in 2015 without increasing the insurance policy.
“It was a managerial error,” said a former NCAA employee in the report. “They made a decision to be exposed. … This didn’t have to happen.”
You would think that a nonprofit that rakes in over a billion a year in revenue would have a better plan in place. Or at least one that rivals that of a tennis tournament that barely generates more than a quarter of what they do each year.
Wimbledon brought in $289 million in 2017 and has wound up being the sole sports entity to look like a financial wizard during this pandemic, as Rovell reported that they received a $141 million payout from an insurance policy that they’d been paying into for 17 years, and which only cost them $34 million.
With the sports world on pause, the NBA is the only league that could return as they have targeted May 8 as the day to reopen practice facilities in cities that allow it, as players agreed to take a 25 percent cut a few weeks ago due to the economic effects of COVID-19.
But no matter when sports returns, it’s interesting, and scary, to realize that the people who run billion-dollar franchises are no better at making financial decisions than the rest of us.
And that the Trump administration considers a sports franchise worth over three billion dollars a “small business” worthy of a taxpayer bailout.