David Berri on League Losses and Payroll

[The Walker Wiggle]

Wages of Wins' David Berri today makes the case against NBA owners on Huffington Post.

By claiming the losses have existed since 2005, though, the NBA runs into another problem. Are we to believe that the NBA signed an agreement that immediately led to losses? Certainly it is possible that in 2005 the NBA did not know revenues and costs in 2010-11. But shouldn't the NBA have known what revenues and costs were likely to be in 2005-06 and 2006-07?

It is not unreasonable to expect that the NBA should be able to project revenues and costs for one or two years. And therefore - if the NBA's claims are to be believed - we must believe that the NBA made an agreement knowing the league would lose money. Oddly enough, at the time the CBA was renewed in 2005, the NBA did not announce that losses were going to soon follow.

Again, we are back to skepticism.

[The Walker Wiggle]

And here's Berri on the league's salary disparity "problem."

If we believe that spending on players leads directly to wins, and if we believe the Kings would suffer massive losses with the payroll of the Lakers, then the NBA might have a problem.

Unfortunately for the NBA's argument, from 2005-06 to 2010-11 a team's relative payroll (i.e. pay relative to the league average in that season) only explains about 12% of the variation in team wins. In other words, 88% of team wins is about something else besides how much a team pays its players. To illustrate, the Utah Jazz were fifth in the NBA in total payroll and missed the playoffs. The Chicago Bulls had the best record in the NBA with a payroll that ranked 27th in the league. Again, how much a team spends doesn't tell us much about how much they win.

But what if you really believed - despite the evidence - that payroll equity would solve the NBA's problems? There are two ways to achieve this objective.

Here is the NBA plan: Reduce the percentage of revenue that is paid to the players. This plan could bring the Lakers payroll down to a level closer to what we see in Sacramento. And this would also mean that NBA players would get much less.

Here is another plan that also leads to payroll equity: The NBA could force the high revenue teams to share more revenue with the low revenue teams. And if they also required that the low revenue teams spend this money on players, then we would also see more payroll equity in the NBA. This move could also be taken with the league still committing 57% of revenue to players. In other words, payroll equity doesn't necessarily require a pay cut for players.

The NBA clearly favors the first choice. This choice gives the NBA more equitable payrolls and higher profits. But if payroll equity is the real goal, the second choice would also work. The problem is profits would be lower.

[greenpride32]

The article is garbage because the author's entire premise is that the league is not actually losing money, but he has no facts to back it up.  Also he says something along the lines of the league suffering only recently because of the ecomonic downturn.  The players have known for 3 years (ie before the ecomonic collapse) that a lockout was likley brewing when the last CBA expired.  That seems to indicate the players knew they got the better end of the last deal and the owners were not going to accept the same terms again.

[LooseCannon]

The article is garbage because the author's entire premise is that the league is not actually losing money, but he has no facts to back it up.

The author's premise is that the owners are either idiots who are losing a ton of money or non-idiot liars who are not losing anywhere near as much as they claim and might actually be profitable.  Anything else would contradict known facts.  Berri finds it easier to believe the owners are non-idiots.

[The Walker Wiggle]

The article is garbage because the author's entire premise is that the league is not actually losing money, but he has no facts to back it up.

Well Berri does link to the numbers out there that contradict the owners claims, courtesy of Fortune and the NYT, of course the NBA disputes their accuracy while declining to offer much in the way of actual evidence to the contrary.

Berri is offering a lot of evidence that payroll equity doesn't lead to better competitive balance, a fact that should interest NBA fans if not NBA owners.

[Chris]

The article is garbage because the author's entire premise is that the league is not actually losing money, but he has no facts to back it up.

Well Berri does link to the numbers out there that contradict the owners claims, courtesy of Fortune and the NYT, of course the NBA disputes their accuracy while declining to offer much in the way of actual evidence to the contrary.

What kind of "evidence" do you expect them to offer?  Why would they open their books to the public, just because a couple news papers are making "false" reports?

All that matters is that the owners, players, and their lawyers have the real numbers and records.  Everything else is just a lot of noise and politics.

[The Walker Wiggle]

The article is garbage because the author's entire premise is that the league is not actually losing money, but he has no facts to back it up.

Well Berri does link to the numbers out there that contradict the owners claims, courtesy of Fortune and the NYT, of course the NBA disputes their accuracy while declining to offer much in the way of actual evidence to the contrary

What kind of "evidence" do you expect them to offer?  Why would they open their books to the public, just because a couple news papers are making "false" reports?

All that matters is that the owners, players, and their lawyers have the real numbers and records. Everything else is just a lot of noise and politics.

Yeah, sure. But weird to throw out Berri's article as "garbage" in favor of equally dubious claims by Stern, Silver, and NBA owners.

Remember what we learned when five MLB teams' financial reports leaked last year?