Great Larry Coon article detailing the reasons behind lockout

[nickagneta]

http://sports.espn.go.com/nba/columns/story?columnist=coon_larry&page=NBAFinancials-110630

Some interesting quotes:

In either case their argument is the same: some issues simply aren't the players' problem. Unless the players can share in the profit when a team is sold, they don't want to be burdened with the costs associated with buying the team in the first place. And if they don't have a say in the team's management decisions, they don't want to pay the cost when those decisions go awry.

To repeat, we can't extrapolate from just two franchises to draw any firm conclusions about the league as a whole. But Hunter is privy to current documents for all 30 teams and claims that at least $250 million of the league's $370 million loss comes from these sorts of accounting quirks. Based on what we've seen from these two teams, he indeed may have a point.

From the owners' perspective, accounting quirks or not, the league still loses money each season. They insist that the whole financial model of the league is broken, and that much more is required beyond better team management and increased revenue sharing.

"Revenue sharing doesn't solve the problem if there are losses," Stern said, "because you can't revenue share your way to a profit as a league."

In 2009-10 salaries totaled $2.1 billion, and the CBA includes a system to ensure that players receive 57 percent of the league's gross revenues.

A $45 million hard cap would lower league-wide salaries to $1.35 billion, a 36 percent decrease. This would represent a staggering $760 million drop in salaries from this season to next.

"If we had to choose between this [proposal] and a lockout, we'd welcome a lockout," Hunter said.

Based on the $370 million loss figure, it's about double what the league needs to cut in order to break even. Of course, the league's goal is to do more than just break even.

"It's about getting the percentage down so our teams and our league are profitable," Stern said.

The league later offered to guarantee the players at least $2 billion in each season of a 10-year deal, but hold the salaries relatively steady over the lifetime of the agreement while revenues continue to increase over time. This would achieve the same cost reductions the owners seek -- reducing salaries from 57 percent of revenues to around 40 percent over 10 years -- but phase those reductions in slowly, rather than asking the players to take a massive pay cut at the start of the agreement.

There's a lot more with an explanation on the amortization of purchasing costs as well as other financial practices the owners are using, much like any business uses, to state they are losing money. But being employees and product of the league, it just doesn't make sense to me why the players who don't get a share of the profit when it is made now have to give back to make up for poor management and accounting losses made by owners and management.

As the article says, the answer is somewhere in the middle and it's just a matter of who decides to cave first or whether the sides agree that keeping fans is better than getting their way.

[greenpride32]

To repeat, we can't extrapolate from just two franchises to draw any firm conclusions about the league as a whole. But Hunter is privy to current documents for all 30 teams and claims that at least $250 million of the league's $370 million loss comes from these sorts of accounting quirks. Based on what we've seen from these two teams, he indeed may have a point.

From the owners' perspective, accounting quirks or not, the league still loses money each season. They insist that the whole financial model of the league is broken, and that much more is required beyond better team management and increased revenue sharing.

Just as an FYI it is standard accounting practice to deduct interest and depreciation.  This is how every company balances their books; hardly what I would call a "quirk".

[nickagneta]

To repeat, we can't extrapolate from just two franchises to draw any firm conclusions about the league as a whole. But Hunter is privy to current documents for all 30 teams and claims that at least $250 million of the league's $370 million loss comes from these sorts of accounting quirks. Based on what we've seen from these two teams, he indeed may have a point.

From the owners' perspective, accounting quirks or not, the league still loses money each season. They insist that the whole financial model of the league is broken, and that much more is required beyond better team management and increased revenue sharing.

Just as an FYI it is standard accounting practice to deduct interest and depreciation.  This is how every company balances their books; hardly what I would call a "quirk".

There's a lot more with an explanation on the amortization of purchasing costs as well as other financial practices the owners are using, much like any business uses, to state they are losing money.

As I stated

[nickagneta]

Also, it is standard operating practice to depreciate capital assets such as machinery, autos, equipment and such but but in this case the owners are depreciating the actual players.

Also, business owners may amortize purchase costs into their expenses over years but that doesn't mean they are actually losing money in those years. It is an accounting practice for tax purposes.

My company hasn't shown a profit in 4 years. Guess what, I'm making money every year.

[cman88]

alittle unrelated, but...Dont you kind of think its like a chicken and the egg situation? some GM's and owners have made bad spending decisions...but alot of times the "superstars" of their team hold the cards and if they dont succomb to their contract wants, theyll leave. Granted, ainge has been smart in not giving out bad contracts that would hurt our flexibility...but thats cost us losses of Perkins, tony allen, possibly BBD

A hard cap needs to be put in place. we're trending down this road where all the stars are becoming mercenaries and looking to pull a "lebron" and create super-teams...this is bad for the NBA and bad for the fans.

what good is there being 2-5teams who have a legitimate shot and the rest stuck in mediocrity??

unless the NBA wants to become MLB then something needs to be done to keep the league competitive and allow it so that super-teams cant be created.

NBA players are some of the most overpaid players. I can understand why they don't want a hard cap...but its worked in the NHL and NFL and they're much more competitive leagues because of it.

[LooseCannon]

alittle unrelated, but...Dont you kind of think its like a chicken and the egg situation? some GM's and owners have made bad spending decisions...but alot of times the "superstars" of their team hold the cards and if they dont succomb to their contract wants, theyll leave. Granted, ainge has been smart in not giving out bad contracts that would hurt our flexibility...but thats cost us losses of Perkins, tony allen, possibly BBD

Giving in to those contract demands are the bad spending decisions.  It's not a chicken or the egg situation, it's a chicken or the chicken situation.

[cman88]

True, but looking at it from the GM's perspective you end up going into mediocrity or losing talent by doing so....its a lose-lose situation really...look at the hate Ainge got by letting perkins go and not giving him a big contract.

say tyson chandler wants a rediculous contract from the mavs. you either let a big reason you won the championship walk, or give him a bad contract and cripple your teams future? its a gamble

[LooseCannon]

True, but looking at it from the GM's perspective you end up going into mediocrity or losing talent by doing so....its a lose-lose situation really...look at the hate Ainge got by letting perkins go and not giving him a big contract.

Well, I think Ainge was right to trade Perk, so you're not going to convince me with that argument.  It's the bad GMs who are afraid of criticism and get locked into overpaying because they don't want to risk going against the conventional wisdom and being wrong.

It's unrealistic and idiotic to try and turn sports into a risk-free venture.

[PosImpos]

It's unrealistic and idiotic to try and turn sports into a risk-free venture.

Except in the NFL even the weakest franchises are making money, so from an NFL owner's perspective, it is a fairly risk-free venture.