Tuesday, July 5, 2011
Assigning blame for NBA losses
By Henry Abbott
The NBA is fantastically popular, but says it is losing quite a lot of money.
In most businesses, the conversation would then turn to management -- are they doing a good enough job?
And yet in the bizarro world of the NBA, that very management team hypes the losses with the assumption that just about everybody will blame them on the employees. Meanwhile, Nate Silver of The New York Times digs into the publicly available financial data surrounding the NBA and says, essentially: Gotcha! Your league is doing much better than you said!
Silver found that when you adjust for various bookkeeping trickery, integrate data from Forbes and Financial World and ignore what the league says, the best guess is that the league actually made money last year.
And yet the league insists the model is broken, prompting this tweak tweet:
Click the link above and you'll see that Silver writes this in jest -- his reporting strongly suggests the league is not losing money at all. But the "bad management" line of conversation is an interesting one. To the extent the league complains of losses, should the league's leaders be pointing the fingers of blame at themselves? Tough to say.
- Stern et al. get off the hook, by and large, because their story is that 22 of 30 teams are losing money (more recently the league has said they have lost $300 million in 2010-2011). Stern works for those 30 owners. If 22 of them want to lavish more on their teams than they should have, he has little power to stop them. So, it's a story of bad management, perhaps. But it's not necessarily a story of Stern's bad management, to the extent the story is Mark Cuban deciding to spend deep into the red time and again to try to win a title.
- Stern's only big role in creating the team's losses was in negotiating the existing CBA, which allows the Cubans of the world to spend like that. At the time that thing was signed, the general feeling was that it was a victory for owners -- and before the recession, nobody expected the union to even consider anything like a hard cap, which may be the only way to constrain Cuban et al.
- Remember that total player salaries have been flat compared with inflation and league revenues, however, which limits the damage Cuban et al can do to the league's bottom line.
- The league offices themselves certainly seem to be slimming down. People who have left over the last year have, in many cases, not been replaced. The staff got significantly smaller with Turner taking over a lot of media operations at NBA TV and NBA.com. You know how the draft lottery is held at the NBA Entertainment offices in Secaucus, New Jersey? That won't be the case next year, as the league is giving up that space with the big TV studio. They're leaving that building entirely, for a smaller space across the street.
- Of course, none of this means Stern is blameless. Some of those $300 million undoubtedly were the fault of Stern's office. The league does plenty of things that lose money, from buying the Hornets (for ... $300 million) to running the WNBA. He has cited overseas investments as expensive elements of the league's operations, for instance, and that's on the league office.