I'd feel bad for all the people who would lose their jobs (which I have not seen anyone mention). Sure the players would lose a couple mil (I feel so bad for them 0.0)... what about all the people behind the scenes?
many people across the country lose their jobs every year when companies downsize or shut down, it happens. If they were good as an organization then they wouldn't be talked about for contraction. I'm sure most of the people in the organizations can find other jobs, and the players that don't make it onto other teams shouldn't be paid as NBA players anyway. It's a much more fair option than asking people to pay good money to see teams like the bobcats and the clippers on a regular basis.
The reality is that if those teams were continually losing money they would either move, be sold, or fold. Fans are attending those games....Paying good money to watch them. So why contract?
http://deadspin.com/5708313/the-new-orleans-hornets-sad-financial-documents/gallery/
"The New Orleans Hornets' Sad Financial Documents
We've obtained audited financial data for David Stern's new prize, the New Orleans Hornets. The statements cover 2008 and 2009, and among other things they paint a picture of a team already in hock to the NBA.
Two things jump out, at least to this layman's eyes: the team's operating income, which in 2008 was a $6.4 million loss and in 2009 was a $5.9 million gain (slide 11), though that latter figures includes $3.4 million in revenue assistance from the NBA (slide 28); and the team's net cash in operating activities, which represents the "measurement of money [owner George Shinn] is being asked to take out of his pocket to keep operations going," according to sports economist Andrew Zimbalist. In 2008, that amount was $7.4 million; in 2009, $1.4 million (slide 13). Zimbalist points out that "things got much more problematic for the franchise" the following year."
Just take a peek through those financial documents and realize the Hornets still exist this year.
Looking at that stuff is pretty interesting (of course it would nice to be able to compare it to other teams to know if some numbers are high or not, also it would be cool to see a more detailed, itemized listings to get a better idea of where the money is going).
What I found interesting:
Revenue from season tickets and playoffs was $45M, and then another $41M for broadcasting rights, add in a few other minor revenue streams and total revenue is $110M.
Now for expenses, player salaries was $75M, and everything else (cost of operating the arena, front office personal, marketing, advertising, etc.) brought total expenses to $105M.
With such slim margins, I'm surprised so many coaches and GM's get fired with their multi-million dollar salaries. It also makes it seem a lot harder for the small market teams, to just sign a veteran for the minimum and cut him if things don't work out (like we discuss so often here).
They had to pay a $30M relocation fee when they moved from Charlotte to NO, which is paid at about $4.3M per year, and they're still paying that! That's a lot of money to move, especially to another small market, and when you're barely making money.
And wow, the League Office takes a lot of money from playoff teams to pay Stern's salary. To cover "league expenses", the NBA takes 6% from regular season home game gate receipts (seems reasonable), but a whopping 45% from playoff game gate revenue! That playoff jump just seems ridiculous to me. I always thought the league just took it's money out of the broadcast deals. Wow.
They have what appears to be a HUGE amount of debt (but have no other teams to compare it to) at $110M. If they didn't have $110M in long term debt (which they pay about $9M in interest on every year) then they wouldn't be doing so bad, and if they still didn't have to pay $4.3M per year from relocating (they have like 3 more payments yet to make, which is being put off for a few years as their finances straight). Although not present in the numbers, they also fired Byron Scott last year, and he had a $5M salary, so they probably owed him at least $4M of that for doing nothing. Overall, it just seems like some poor management decisions (but everything does in hindsight, and who knows how much of that debt they had to take on because of Katrina - though it looks like they took out $66M in debt in 2003, so before Katrina).
Interesting stuff to look at and read (if you like financial statements).