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Old 07-06-2011, 01:27 AM   #1
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Default NYTIMES reporting that nba crying foul over financial crisis

Even as it stands, however, the Forbes data suggests that the league is still profitable. Its operating income — revenues less expenses (but before interest payments and taxes) — is estimated to have been $183 million in 2009-10, or about $6 million per team. The N.B.A.’s operating margin (operating income divided by revenues) was about 5 percent in 2009-10 and has been about 7 percent during the life of the current labor deal.

A 5 percent or 7 percent profit is not dissimilar to what other businesses have experienced recently. Fortune 500 companies, for instance, collectively turned a 4.0 percent profit in 2009 and a 6.6 percent profit in 2010 (both figures after taxes). Profit margins in the entertainment industry, in which the N.B.A. should probably be classified, have generally been a bit lower than that.

So why are N.B.A. owners seeking such significant reductions in player salaries, reportedly to about 45 percent of league revenues? The simple reason is that they think they can — and this reflects an awful lot of money. If salaries were reduced to 45 percent of revenues, this would save the owners roughly $500 million per year, or about $3 billion over the course of a six-year labor contract. It is hard to estimate either the near or the long-term cost of cancelling a season, but the potential gain from a more favorable contract is large enough that it is something the owners might be willing to risk.



Last edited by insidehoops : 07-06-2011 at 01:58 AM.
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