Stern and the NBA Owners Exposed.....

[qtlaw]

I don't care how Stern and his cohorts respond; Nate Silver (538 blog) lays it out in simple terms and has framed the argument on his terms.

http://fivethirtyeight.blogs.nytimes.com/2011/07/05/calling-foul-on-n-b-a-s-claims-of-financial-distress/?ref=sports

 

[LongTimeListener]

Despite what the league has said, much of the reporting has centered on the fact that while the league has a whole is profitable, maybe a third to a half of the teams are losing money. Silver's analysis disregards that very salient point.

Also, as to why they're doing it: Because they can. There may be no group of people anywhere in the world that is dumber with its money than NBA players, and these guys are going to be up against it once they miss two weeks of paychecks. The owners know this.

 

[bigpern23]

I'm no math whiz, so maybe I read this part wrong, but it seems to me that Silver noted the league's operating income before interest and taxes and used that number to calculate it's margin, which he arrived at 5 percent in 2009-10 and 7 percent over the life of the current deal.

He then notes that Forbes 500 companies generally operated on a margin of 4 percent in 2009 and 6.6 percent in 2010 after taxes. I would think that taxes would have a significant effect on the NBA's margin, no?

It seems he's trying show that the NBA operates within the usual margins of any other average Fortune 500 company, but he's using fundamentally different figures to illustrate that point.

Am I correct on this?

 

[Stitch]

It's the same old argument. Do you take money from the players or from rich teams to prop up small markets? It doesn't take a genius to figure out where the consensus is.

What is the current revenue sharing formula?

 

[CarltonBanks]

I also think the lack of competitive balance is going to help the owners as far as the PR war. A lot of fans know their team has no shot to be competitive.

 

[cranberry]

Which is just another reason they should have more revenue sharing in the NBA.

 

[qtlaw]

I'm no math whiz, so maybe I read this part wrong, but it seems to me that Silver noted the league's operating income before interest and taxes and used that number to calculate it's margin, which he arrived at 5 percent in 2009-10 and 7 percent over the life of the current deal.

He then notes that Forbes 500 companies generally operated on a margin of 4 percent in 2009 and 6.6 percent in 2010 after taxes. I would think that taxes would have a significant effect on the NBA's margin, no?

It seems he's trying show that the NBA operates within the usual margins of any other average Fortune 500 company, but he's using fundamentally different figures to illustrate that point.

Am I correct on this?

You're right but a pre-tax profit of 7% is fairly close to an after-tax profit of 4-5%, taxes being 20-30% of the gross profit.

 

[sgreenwell]

I also think the lack of competitive balance is going to help the owners as far as the PR war. A lot of fans know their team has no shot to be competitive.

They should probably copy baseball then and be more of an open market. Open markets lead to owners making more stupid mistakes and letting more teams compete.

 

[BTExpress]

The dirty little secret is that outside of the uncompetitive markets, the average fan doesn't want to see competitive balance.

He wants his Lakers and Celtics and whomever can beat LeBron, and he has no use for seeing laundry that says "Memphis" or "Atlanta" in the NBA Finals, regardless of how good the players might be or how good the games might be.

 

[Michael_ Gee]

Whatever happened to the idea that if you buy a business and can't make money running it, you're the one to blame and you should sell the hell out and do something else? Please note that besides income, the equity value of the average NBA franchise has more than doubled in a decade. It takes one hell of a lot of losses to cover a 100 percent capital gain.
There's no structural reason why, say, the Golden State Warriors can't make a profit except the horse**** product they've presented to consumers for 20 years or more.

 

[MacDaddy]

Despite what the league has said, much of the reporting has centered on the fact that while the league has a whole is profitable, maybe a third to a half of the teams are losing money. Silver's analysis disregards that very salient point.

That was my first thought when reading that — Silver missed the whole point. Yes, the league as a whole is profitable, but a significant number of teams aren't, which is where the problem is. The NBA dispute isn't so much owners vs. players (like with the NFL) but owners vs. owners vs. players.

 

[qtlaw]

Despite what the league has said, much of the reporting has centered on the fact that while the league has a whole is profitable, maybe a third to a half of the teams are losing money. Silver's analysis disregards that very salient point.

That was my first thought when reading that — Silver missed the whole point. Yes, the league as a whole is profitable, but a significant number of teams aren't, which is where the problem is. The NBA dispute isn't so much owners vs. players (like with the NFL) but owners vs. owners vs. players.

Silver did not miss the point, he focused it on who rightfully should be making the concessions necessary to fix the system; the owners themselves.

Here's the basic point, if the negotiations are owners on one side v. players on the others, you look at the owners in the aggregate, not individually. Its industry vs. labor. The industry is healthy, they are making profits. The fact that the owners cannot split up the pie they are making so that some don't starve is their own fault, they have the mechanism for correcting that, they've seen in work in the real world, the MLB model. Revenue sharing.

Why players need to contribute to that simply because they owners cannot help themselves is disingenuous.

 

[sgreenwell]

Despite what the league has said, much of the reporting has centered on the fact that while the league has a whole is profitable, maybe a third to a half of the teams are losing money. Silver's analysis disregards that very salient point.

Silver did not miss the point, he focused it on who rightfully should be making the concessions necessary to fix the system; the owners themselves.

Here's the basic point, if the negotiations are owners on one side v. players on the others, you look at the owners in the aggregate, not individually. Its industry vs. labor. The industry is healthy, they are making profits. The fact that the owners cannot split up the pie they are making so that some don't starve is their own fault, they have the mechanism for correcting that, they've seen in work in the real world, the MLB model. Revenue sharing.

Why players need to contribute to that simply because they owners cannot help themselves is disingenuous.

That was my first thought when reading that — Silver missed the whole point. Yes, the league as a whole is profitable, but a significant number of teams aren't, which is where the problem is. The NBA dispute isn't so much owners vs. players (like with the NFL) but owners vs. owners vs. players.

I agree with QT, despite his problems quoting From Silver's analysis, it seems like the magic number for the revenue split for MLB and the NFL is around 50 to 60 percent of revenues. The NBA was in this window.

 

[LongTimeListener]

qtlaw -- if the players can hold out and force the owners to spread their wealth among each other and not take it out of the player pool, as the baseball union did, more power to them. The owners don't think the players can do that. I'm betting the owners will be proven correct.

Because, remember:

"Sure we make a lot of money, but we spend a lot too." -- Patrick Ewing

 

[qtlaw]

qtlaw -- if the players can hold out and force the owners to spread their wealth among each other and not take it out of the player pool, as the baseball union did, more power to them. The owners don't think the players can do that. I'm betting the owners will be proven correct.

Because, remember:

"Sure we make a lot of money, but we spend a lot too." -- Patrick Ewing

I do not disagree. I still recall Kenny Anderson's quote about having $60K just for "hanging around money."

I just get sick of the owners crying poor when the solution is right in front of the mirror, themselves. All franchises have made ridiculous decisions.

Hell, my beloved GSWs gave Stephen Jackson a cap-choking three year extension even though he still had 2 years left on his deal and what did Jackson do right after signing? Plede allegiance to the plight of the GSWs? Nope, demanded a trade.

Reigning World Champion Mavericks gave Diop $27M!! Dampier $12M/yr!!!

Lakers have Luke Walton on the bench for $6m/yr!! They gave Radmonovic $9M/yr!!

 

[TheSportsPredictor]

Or maybe not:

http://bizofbasketball.com/index.php?option=com_content&view=article&id=843:as-nba-enters-lockout-numbers-show-why-system-is-broken&catid=42:articles-a-opinion&Itemid=57

 

[DanOregon]

Hasn't half the league's teams changed hands in the last 10-15 years? That says a lot. And it's hard to pay back a loan to buy a team if you aren't making a profit. Of course, maybe the NBA should hire Dean Singleton as a consultant.

 

[LongTimeListener]

Before going too far down the road into debating which numbers are most applicable, realize that none of them truly apply. These are private companies that have an enormous interest in not allowing their financials to be made public, so any number should be viewed with skepticism. Accounting tricks alone could make 90 percent of the league look like it's losing money. Forbes in particular has always received too much credit for figures that are just guesses when it comes down to it.

 

[Starman]

Silver quite accurately points out (as I have repeatedly) that the NBA is basing its strategy on the NHL lockout of 2004-05.

The strategy: Shut the whole shebang down for a year then reopen under whatever rules YOU see fit to impose. Make a DOA opening offer, then just keep moving the goalposts. The unconditional-victory strategy as seen in many other venues these days.

Oh, and although the article relies almost completely on the Forbes financial figures (as pretty much by definition any story of this sort must, since there really is no other source for much of this information) he does allude near the end to the possibility the Forbes figures may be somewhat less than completely accurate (i.e., cooked).


The owners will win for two reasons:

1) The players cannot survive a lengthy lockout, and

2) Our entire social/political/legal/media/economic system is now entirely devoted to lovingly licking the nether regions of the billionaires.

 

[JC]

Silver quite accurately points out (as I have repeatedly) that the NBA is basing its strategy on the NHL lockout of 2004-05.

The strategy: Shut the whole shebang down for a year then reopen under whatever rules YOU see fit to impose. Make a DOA opening offer, then just keep moving the goalposts. The unconditional-victory strategy as seen in many other venues these days.

Oh, and although the article relies almost completely on the Forbes financial figures (as pretty much by definition any story of this sort must, since there really is no other source for much of this information) he does allude near the end to the possibility the Forbes figures may be somewhat less than completely accurate (i.e., cooked).


The owners will win for two reasons:

1) The players cannot survive a lengthy lockout, and

2) Our entire social/political/legal/media/economic system is now entirely devoted to lovingly licking the nether regions of the billionaires.

The NHL did not impose whatever they wish on the players. If you have a look the players are doing far better than they were before and the NHL is looking at changing their system again