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Old 07-06-2011, 12:27 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.

More:

http://fivethirtyeight.blogs.nytimes...medium=twitter

Last edited by insidehoops : 07-06-2011 at 12:58 AM.
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Old 07-06-2011, 12:32 AM   #2
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Default Re: NYTIMES reporting that nba crying foul over financial crisis





Other expenses are up 42.9% over the last 10 years, while player salaries are only up 24.3%. Looks like to me that if the owners were better able to control those other expenses, they would not be losing so much money.
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Old 07-06-2011, 12:41 AM   #3
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by Sarcastic




Other expenses are up 42.9% over the last 10 years, while player salaries are only up 24.3%. Looks like to me that if the owners were better able to control those other expenses, they would not be losing so much money.
look at it over the entire graph. player salaries go from 420 to 2200 (a 525% increase) while other expenses go from 394 to 1400 (355% increase). so...., basically the cost of paying players has grown much more than other operating expenses. It is also the largest operating cost (accounting for 61% of total expenditures) for the league.



Just look at the operating margins across the entire graph and then since the last cba. Its pretty clear than owning an nba team in the modern era has never been less profitable. And I cant blame the owners for wanting to fix that. Especially when we see a small latin american countries entire GNP riding the pine or barely playing every year. Partial guarantee contracts would be the best thing to ever happen to this league imo.
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Old 07-06-2011, 12:46 AM   #4
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by boozehound
look at it over the entire graph. player salaries go from 420 to 2200 (a 525% increase) while other expenses go from 394 to 1400 (355% increase). so...., basically the cost of paying players has grown much more than other operating expenses. It is also the largest operating cost (accounting for 61% of total expenditures) for the league.



Just look at the operating margins across the entire graph and then since the last cba. Its pretty clear than owning an nba team in the modern era has never been less profitable. And I cant blame the owners for wanting to fix that. Especially when we see a small latin american countries entire GNP riding the pine or barely playing every year. Partial guarantee contracts would be the best thing to ever happen to this league imo.


The last 10 years represent the period since the last work stoppage. Prior to that there were no cap on max contracts, so there was a huge spike in salaries. If you look at just the last 10 years you will see the salaries have come back in line with revenues, and have only grown 24.3%. Revenue increases have actually increased more than salaries at 27.9%.
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Old 07-06-2011, 12:57 AM   #5
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by Sarcastic
The last 10 years represent the period since the last work stoppage. Prior to that there were no cap on max contracts, so there was a huge spike in salaries. If you look at just the last 10 years you will see the salaries have come back in line with revenues, and have only grown 24.3%. Revenue increases have actually increased more than salaries at 27.9%.
the point is, during this last CBA (which the owners "won", a really stupid platitude the media like to use that means nothing), the operating margin went from a pre-cba average of nearly 20% to barely over 7% during the current cba. of course the owners want to move it back. just look at the operating income 5yr and 10 yr changes.
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Old 07-06-2011, 12:58 AM   #6
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

The NBA has disputed this and says the financials used in that blog are wrong.

Here's the NBA's response:

http://www.insidehoops.com/blog/?p=7944
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Old 07-06-2011, 01:00 AM   #7
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by boozehound
the point is, during this last CBA (which the owners "won", a really stupid platitude the media like to use that means nothing), the operating margin went from a pre-cba average of nearly 20% to barely over 7% during the current cba. of course the owners want to move it back. just look at the operating income 5yr and 10 yr changes.

Right, they are a lot less profitable since their "other expenses" have grown out of proportion with their revenues. That is the expense that has gotten out of hand.
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Old 07-06-2011, 01:10 AM   #8
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by Sarcastic
Right, they are a lot less profitable since their "other expenses" have grown out of proportion with their revenues. That is the expense that has gotten out of hand.
but, again, the player salaries are by far the largest operating expense. 62%. so, where are you gonna trim?


also, as insidehoops points out, these figures are estimates by forbes and have been directly disputed by the nba, so take them with a grain of salt. however, even with these numbers, its clear why the owners would want to reduce their largest operating cost moving forward.
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Old 07-06-2011, 01:17 AM   #9
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

If you take out the 5 most profitable teams ( Bulls, Lakers, Mavericks, Heat, Knicks) then the league is bleeding all over the place. You can't have a league when essentially 5-6 teams are making all the money.
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Old 07-06-2011, 01:21 AM   #10
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by boozehound
but, again, the player salaries are by far the largest operating expense. 62%. so, where are you gonna trim?


also, as insidehoops points out, these figures are estimates by forbes and have been directly disputed by the nba, so take them with a grain of salt. however, even with these numbers, its clear why the owners would want to reduce their largest operating cost moving forward.

Player salaries are at 58% which is exactly in line with every other sports league, and the players have agreed to bring it down to 54%. Don't forget the players are the product, and I would argue that NBA athletes are the best athletes in the world and deserve a little more than most others.
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Old 07-06-2011, 01:23 AM   #11
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by IN-PAX-WE-TRUST
If you take out the 5 most profitable teams ( Bulls, Lakers, Mavericks, Heat, Knicks) then the league is bleeding all over the place. You can't have a league when essentially 5-6 teams are making all the money.

Which is why either cutting teams or revenue sharing is the best way to fix the crisis. Baseball and football both have better revenue sharing than the NBA.
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Old 07-06-2011, 01:24 AM   #12
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by Sarcastic
Player salaries are at 58% which is exactly in line with every other sports league, and the players have agreed to bring it down to 54%. Don't forget the players are the product, and I would argue that NBA athletes are the best athletes in the world and deserve a little more than most others.
2,204,000,000/3,622,000,000
you do the math. it aint 58%

again, these numbers are at best a very pro-player optimistic look at the actual numbers for the league.
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Old 07-06-2011, 01:30 AM   #13
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by boozehound
2,204,000,000/3,622,000,000
you do the math. it aint 58%

again, these numbers are at best a very pro-player optimistic look at the actual numbers for the league.

Everywhere I have seen it was always at 58% or 2.1 billion. Regardless the players have agreed to come down to 54% which is lower than all the other sports. The owners are asking for 45% which is a total joke.
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Old 07-06-2011, 01:36 AM   #14
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

just to rehash, its pretty clear these numbers are not the numbers that the league openly shares (unlike the NFL!) with the players union. the players union does not deny operating losses, not just for this year, but across the current cba (2005 onwards).

Quote:
A New York Times blog post Tuesday titled "Calling Foul on NBA's Claims of Financial Distress" called the league "fundamentally a healthy and profitable business" with an estimated operating income of $183 million in 2009-10, making a 5 to 7 percent profit during the life of the collective bargaining agreement that expired last week.

The story was based on estimates prepared by Forbes and Financial World magazines. NBA spokesman Mike Bass said the information was inaccurate, saying Forbes "does not have the financial data for our teams and the magazine's estimates do not reflect reality."

"Precisely to avoid this issue, the NBA and its teams shared their complete league and team audited financials as well as our state and federal tax returns with the players' union," Bass said. "Those financials demonstrate the substantial and indisputable losses the league has incurred over the past several years."

The league has projected losses of $300 million last season after losses of several hundred million dollars in each season of the CBA, which was ratified in 2005. Owners locked out the players last week after they could not agree on a new deal.

The union has frequently questioned the league's financials, saying it believes there were losses but not anywhere near what the NBA has stated. The players offered to give up $100 million in salary costs annually in a recent proposal for a new five-year deal, believing that was more in line with the true losses.

Because the NBA had such a successful 2010-11 season, with growth in TV ratings and merchandise and ticket sales, the league has struggled to convince fans it needs the massive financial changes owners are seeking from the players.

But Bass said the league never had a positive net or operating income in the last CBA and that 11 teams had net losses of more than $20 million in the 2009-10 season.

He said the losses from that season, the one studied in the article, were $340 million and that 23 of the 30 teams lost money that season. Forbes estimated there were 17.

"We do not know how they do their calculations," Bass said.

The union did not respond to a request for comment.
http://sports.espn.go.com/nba/news/story?id=6741219


Now, Im not saying the owners arent trying to push it further than they need to, and I am fully behind the players union choosing to hold their ground. But I do think it needs to be recognized by the fans (not the players), that there is clearly a need to restructure this league. Just look at the decline in profitability over the last 10 years (or longer). 11+ teams losing 20 million? That is ridiculous and not the way a smart sports league or any business/franchise operates.
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Old 07-06-2011, 01:40 AM   #15
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Default Re: NYTIMES reporting that nba crying foul over financial crisis

Quote:
Originally Posted by insidehoops
The NBA has disputed this and says the financials used in that blog are wrong.

Here's the NBA's response:

http://www.insidehoops.com/blog/?p=7944
this is much better than the espn short version, but I didnt want to post the entire thing. I think every dedicated fan of this league should read this response to this yellow journalism.
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