Send in Lawyers, Accountants, and Money

[Roy H.]

After I posted about mediation, I realized that it sounded very familiar.  Has it been done before, either in basketball or another sport?

MLB and the NHL both have an arbitration system, although it's not in effect for all players, etc., (it's based upon service time and free agent status)  The system isn't perfect, though; it can lead to a lot of tension between players and teams, as the teams basically have to tear down a player to get the arbitrator to award as small contract as possible.

[Moranis]

Seriously, this nothing more than owners trying to browbeat the players into massive Salary cuts, non guarenteed contracts, and poorer benefits for the sake of American Corporate Greed.

I tend to disagree.  If you believe the NBA, 22 out of 30 teams are losing money; if you trust Forbes, it's 17 out of 30 teams.  Either way, it's not a sustainable economic model.  In an industry that generates billions of dollars of revenue, it's ridiculous that any franchise is losing money, let alone two-thirds of teams.  

Yeah but according to Forbes the vast majority of the 17 teams are barely losing money, which might mean the answer is simply better management.  

I'm not sure that simply asking for better management would solve the league's problems; if it was that possible to find management that could keep your team both competitive and profitable, then it would be happening right now.  That being the case, I think the owners are doing the sensible thing, in attempting to control costs and in trying to put more money in the pockets of league owners.

I mean, in what other business do employees get rich, but owners lose money year after year (even if it's a fairly minor amount of money)?  That's just non-nonsensical, and has to change.

I'd be curious to see what list San Antonio, Utah, and Golden State are on, because I think that would say volumes about this particular debate.

[Roy H.]

I'd be curious to see what list San Antonio, Utah, and Golden State are on, because I think that would say volumes about this particular debate.

According to Forbes, the 13 profitable teams (presumably for 2009-10) were:

1. New York Knicks - $64 million
2. Chicago Bulls - $51.3 million
3. Houston Rockets - $35.9 million
4. Los Angeles Lakers - $33.4 million
5. Detroit Pistons - $31.8 million
6. Toronto Raptors - $25.3 million
7. Oklahoma City Thunder - $22.6 million
8. Phoenix Suns - $20.4 million
9. Golden State Warriors - $14.3 million
10. Los Angeles Clippers - $11.0 million
11. Portland Trailblazers - $10.7 million
12. Boston Celtics - $4.2 million
13. Cleveland Cavaliers - $2.6 million

And the 17 unprofitable ones:

14. Philadelphia 76ers - (-)$1.2 million
15. Milwaukee Bucks - (-)$2.0 million
16. Memphis Grizzlies - (-)$2.6 million
17. Utah Jazz - (-)$3.9 million
18. San Antonio Spurs - (-)$4.7 million
19. Washington Wizards - (-)$5.2 million
20. Miami Heat - (-)$5.9 million
21. New Orleans Hornets - (-)$5.9 million
22. Minnesota Timberwolves - (-) $6.7 million
23. Atlanta Hawks - (-)$7.3 million
24. Dallas Mavericks - (-)$7.8 million
25. Sacramento Kings - (-)$9.8 million
26. New Jersey Nets - (-)$10.2 million
27. Denver Nuggets - (-)$11.7 million
28. Indiana Pacers - (-)$16.9 million
29. Charlotte Bobcats - (-) $20.0 million
30. Orlando Magic - (-)$23.1 million

http://www.forbes.com/lists/2011/32/basketball-valuations-11_land.html

[thirstyboots18]

In other words, the players expect to make huge salaries, while the owners should treat owning a basketball team as a hobby...although it may be a profitable hobby?

[Chris]

In other words, the players expect to make huge salaries, while the owners should treat owning a basketball team as a hobby...although it may be a profitable hobby?

Yeah, I just don't think that is fair.  Yes, the players are the product, but the fact that they are a "product" proves that it is a business, and any business' goal is to make money.  And there is nothing wrong when a business wants to control costs from year to year to guarantee profits...as long as you have a minimum built in there, so the players don't get short changed if the bottom falls out.

[thirstyboots18]

The purpose of  owning or investing in a business (unless it is a non-profit) is to make money, at least that is what I always thought.  There is nothing wrong with making money...money is not evil.  The "love" of money (probably to the exclusion of all else) is the evil.   

[nickagneta]

What is being left unsaid here is what exactly is each owner taking out of the team as salary and perks? As I have said before, my own business adheres to GAAP yet a break even or lose money as a business most years. But....I do very well, personally.

Also, I would love to see what each franchise sold for the last time or two they were sold and a list of what their current valuation is. My guess is most, if not a massive majority of the time, owners are making huge money on franchise sales.

Sure, New Orleans didn't but Shinn ran that team into the ground and went from the NBA's worse market, to it's second worse market that then became the worse market because of a hurricane.

So I don't feel bad for the billionaires because they have to pay millionaires millions. Without the millionaires they have no business.

That doesn't mean that the players aren't getting paid too much, they are. But over expansion and poor management caused as much of this problem of some teams not making money as did the players demands in the last CBA.

As I said before, NO BUSINESS is GUARANTEED to make a profit. The players are the product. You HAVE to invest in the product. Airlines have millions to billions of passengers every year, almost guaranteed because the world can no longer NOT have airlines. They have to invest in some really expensive stuff and constant upgrades and maintenance. But many go under because there's NO GUARANTEE of profit even though if you go into business as an airline you are almost guaranteed to get passengers.

[thirstyboots18]

So a franchise should be regarded as a piece of real estate...buy, hold for a time,  and sell, hoping for a profit?

If you are paying your employees more than you make, Nick, and you said you make a living...can  I have a job?  I am a very good secretary,  ...but, despite the business income flow in any year, I would like a guaranteed contract.

On the other hand, the owners seem to be acting in concert now, too bad they couldn't agree before they paid way over value for parts of their "product".

[nickagneta]

So a franchise should be regarded as a piece of real estate...buy, hold for a time,  and sell, hoping for a profit?

If you are paying your employees more than you make, Nick, and you said you make a living...can  I have a job?  I am a very good secretary,  ...but, despite the business income flow in any year, I would like a guaranteed contract.

On the other hand, the owners seem to be acting in concert now, too bad they couldn't agree before they paid way over value for parts of their "product".

If you were my product you would get loads more money than I make. The money I put into product I invest in and resell is many many many times more than the money I make in a year.

You have to stop looking at the players as employees and look at them as the product.

[LooseCannon]

So a franchise should be regarded as a piece of real estate...buy, hold for a time,  and sell, hoping for a profit?

That is actually what a lot of owners seem to be doing.  If you average operating losses of $5-8 million/year for ten years but sell for a $200 million profit, some might see that as a nice deal.

I'm thinking of doing some number crunching to estimate the capital gains of team owners.

[action781]

That doesn't mean that the players aren't getting paid too much, they are. But over expansion and poor management caused as much of this problem of some teams not making money as did the players demands in the last CBA.

As I said before, NO BUSINESS is GUARANTEED to make a profit. The players are the product.

I agree with the overexpansion bit particularly.  If you enter a market that's oversaturated, you shouldn't expect to make a profit and you can also expect to eat into every other corporation's profits in that sector.  As much as the NBA wants 30 teams, I'm not sure it's in the NBA's best interest if they really are that concerned with maximizing profit.

[LooseCannon]

I'd be curious to see what list San Antonio, Utah, and Golden State are on, because I think that would say volumes about this particular debate.

According to Forbes, the 13 profitable teams (presumably for 2009-10) were:

1. New York Knicks - $64 million
2. Chicago Bulls - $51.3 million
3. Houston Rockets - $35.9 million
4. Los Angeles Lakers - $33.4 million
5. Detroit Pistons - $31.8 million
6. Toronto Raptors - $25.3 million
7. Oklahoma City Thunder - $22.6 million
8. Phoenix Suns - $20.4 million
9. Golden State Warriors - $14.3 million
10. Los Angeles Clippers - $11.0 million
11. Portland Trailblazers - $10.7 million
12. Boston Celtics - $4.2 million
13. Cleveland Cavaliers - $2.6 million

And the 17 unprofitable ones:

14. Philadelphia 76ers - (-)$1.2 million
15. Milwaukee Bucks - (-)$2.0 million
16. Memphis Grizzlies - (-)$2.6 million
17. Utah Jazz - (-)$3.9 million
18. San Antonio Spurs - (-)$4.7 million
19. Washington Wizards - (-)$5.2 million
20. Miami Heat - (-)$5.9 million
21. New Orleans Hornets - (-)$5.9 million
22. Minnesota Timberwolves - (-) $6.7 million
23. Atlanta Hawks - (-)$7.3 million
24. Dallas Mavericks - (-)$7.8 million
25. Sacramento Kings - (-)$9.8 million
26. New Jersey Nets - (-)$10.2 million
27. Denver Nuggets - (-)$11.7 million
28. Indiana Pacers - (-)$16.9 million
29. Charlotte Bobcats - (-) $20.0 million
30. Orlando Magic - (-)$23.1 million

http://www.forbes.com/lists/2011/32/basketball-valuations-11_land.html

The losses of the 17 unprofitable teams totaled $144.9 million.  The players' offer would decrease salaries by about 5%.  In 2009-2010, 5% of the average team's payroll was about $3.5 million.  I could easily imagine modest revenue sharing that would give many small market teams $3-5 million.

If the Forbes numbers are close to correct, moving player salaries down a bit more plus some revenue sharing would probably have easily more than half the league at least breaking even and most of the rest having relatively small losses.  Add in the economy not being in the toilet and it's possible that only a handful of teams would be in bad financial shape.

[Moranis]

I'd be curious to see what list San Antonio, Utah, and Golden State are on, because I think that would say volumes about this particular debate.

According to Forbes, the 13 profitable teams (presumably for 2009-10) were:

1. New York Knicks - $64 million
2. Chicago Bulls - $51.3 million
3. Houston Rockets - $35.9 million
4. Los Angeles Lakers - $33.4 million
5. Detroit Pistons - $31.8 million
6. Toronto Raptors - $25.3 million
7. Oklahoma City Thunder - $22.6 million
8. Phoenix Suns - $20.4 million
9. Golden State Warriors - $14.3 million
10. Los Angeles Clippers - $11.0 million
11. Portland Trailblazers - $10.7 million
12. Boston Celtics - $4.2 million
13. Cleveland Cavaliers - $2.6 million

And the 17 unprofitable ones:

14. Philadelphia 76ers - (-)$1.2 million
15. Milwaukee Bucks - (-)$2.0 million
16. Memphis Grizzlies - (-)$2.6 million
17. Utah Jazz - (-)$3.9 million
18. San Antonio Spurs - (-)$4.7 million
19. Washington Wizards - (-)$5.2 million
20. Miami Heat - (-)$5.9 million
21. New Orleans Hornets - (-)$5.9 million
22. Minnesota Timberwolves - (-) $6.7 million
23. Atlanta Hawks - (-)$7.3 million
24. Dallas Mavericks - (-)$7.8 million
25. Sacramento Kings - (-)$9.8 million
26. New Jersey Nets - (-)$10.2 million
27. Denver Nuggets - (-)$11.7 million
28. Indiana Pacers - (-)$16.9 million
29. Charlotte Bobcats - (-) $20.0 million
30. Orlando Magic - (-)$23.1 million

http://www.forbes.com/lists/2011/32/basketball-valuations-11_land.html

so there is a rather large net positive in the league.  I mean the Knicks alone covers the losses of 14-25 with a million left over to go towards the Nets.  Add in the Bulls and Rockets and all the losses are covered plus an extra 6 million or so. 

The league has a net positive of 200 million or so. 

To me that says it is more about the league revenue sharing then overpaying the players.  That isn't to say the players aren't overpaid a bit and shouldn't be cut back some, but the real problem is in how the owners divide the wealth.

[Chris]

The purpose of  owning or investing in a business (unless it is a non-profit) is to make money, at least that is what I always thought.  There is nothing wrong with making money...money is not evil.  The "love" of money (probably to the exclusion of all else) is the evil.   

And the funny thing is, the purpose of non-profits are to make money also.  The difference is that non-profits then need to invest that money into the community rather than individual investors, but the goal is still to make money.

[thirstyboots18]

You are correct, Chris.    I spoke a half truth,  .  Sorry, my bad.