Saturday, February 25, 2012
League: Not making money yet
By Henry Abbott
David Stern was all smiles in Orlando on Saturday: "We've had a great All-Star week so far. In addition to last night's Celebrity Game and the BBVA Rising Stars Competition, we had the two highest ratings in the history of those events, which is really keeping track with what's been going on this season ... all indexes are great with respect to attendance, with respect to ratings, with respect to sales, with respect to column inches, blogs, you name it. Instant messaging, Tweets, likes, and YouTube videos."
And then he added: "Everything is good."
This is an enormous change from a summer's talk of unsustainable business models and $300 million annual losses.
All of the indexes he described suggest the promise of a better bottom line to come. Not to mention, thanks to the new collective bargaining agreement, this year owners have slashed player costs from 57 percent of basketball-related income to 51.15 percent.
That's like found money, on top of which the league is literally more popular than ever.
And yet, shortly after Stern's statement, deputy commissioner Adam Silver explains the league is still not out of the woods.
"The league will not make money this year," Silver says. And next year? "Maybe."
How can the league be so shockingly popular this season, and not yet profiting?
The league's books are not public, and thus there is not an independent answer.
The explanation from the league is that the cuts in player costs roughly match the losses from last year. But this year the league says there were an additional $200 million in losses related to the lockout, for instance due to lost ticket revenue and corporate sponsorships that didn't happen.
More importantly, popularity only equals big changes in revenue over years. The most obvious way that happens is with more lucrative national TV deals, but the old deals are still in place for two more years. High TV ratings have not meant new TV revenues for the league. Corporate sponsorships similarly take time to develop.
And according to the league, the popularity is nice, but not yet a cure for the league's financial distress.