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NBA AM: NBA Denies Being Profitable
Posted By Lang Greene On July 6, 2011 @ 8:03 am In All,NBA | No Comments
Even though the popularity and worldwide profile of the NBA is arguably at an all-time high, the league has remained firm that the vast majority of its teams have been operating with significant losses year to year.
However, Forbes Magazine recently released a detailed analysis which insinuated that the NBA actually turned more than a $180 million dollar profit during the 2010 campaign.
Potential evidence of a profit would go against the very foundation of what’s being championed by the leagues owners – that the association has lost money in every year of the current collective bargaining agreement (CBA).
Nate Silver of the New York Times utilized the Forbes analysis and came to the conclusion the league has grown at a tepid rate and raised the question whether player salaries, which are strictly tied to league revenues, are actually the cause of the financial burden the association is experiencing.
Following the release of the Times article, NBA spokesman Tim Frank released an e-mail statement which vehemently denied both the data and analysis of both Forbes and the New York Times, which also included the allegation that the league has used a variety of accounting techniques to calculate their unfavorable profit position.
Below is the excerpt containing the original statements from Forbes and/or the New York Times, followed by the league’s refuting statement delivered by Frank:
#1 Overall League Profitability
Forbes/NYT: [The N.B.A.] is a fundamentally healthy and profitable business
League Response: The league lost money every year of the just expiring CBA. During these years, the league has never had positive Net Income, EBITDA or Operating Income.
# 2 The Use Of Various Accounting Techniques To Manipulate Profit and Loss Statements
Forbes/NYT: Many of the purported losses result from an unusual accounting treatment related to depreciation and amortization when a team is sold.
League Response: We use the conventional and generally accepted accounting (GAAP) approach and include in our financial reporting the depreciation of the capital expenditures made in the normal course of business by the teams as they are a substantial and necessary cost of doing business.
We do not include purchase price amortization from when a team is sold or under any circumstances in any of our reported losses. Put simply, none of the league losses are related to team purchase or sale accounting.
# 3 Redistributing Revenues to Other Business Channels
Forbes/NYT: Another trick [used] … moving income from the team’s balance sheet to that of a related business like a cable network.
League Response: All revenues included in Basketball Related Income (“BRI”) and reported in our financial statements have been audited by an accounting firm jointly engaged by the players’ union and the league. They include basketball revenues reported on related entities’ books.
# 4 Rapid Ticket Growth Rates Over The Past 10 Years
Forbes/NYT: Ticket revenues … are up 22% compared to 1999-2000 season
League Response: Ticket revenues have increased 12% over the 10 year period, not the 22% reported.
# 5 While Teams Are Losing Money, Impact Is Being Overstated
Forbes/NYT: 17 teams lost money according to Forbes … Most of these losses were small.
League Response: Forbes’s claim is inaccurate. In 2009-10, 23 teams had net income losses. The losses were in no way “small” as 11 teams lost more than $20M each on a net income basis.
# 6 Big Market Team Revenues Can Cover Unprofitable Smaller Market Franchises
Forbes/NYT: The profits made by the Knicks, Bulls and Lakers alone would be enough to cover the losses of all 17 unprofitable teams.
League Response: The Knicks’, Bulls’ and Lakers’ combined net income for 2009-10 does not cover the losses of the 23 unprofitable teams. Our net loss for that year, including the gains from the seven profitable teams, was -$340 million.
# 7 Is The League Actually Turning A Profit; But Still Claiming Losses?
Forbes/NYT: Forbes’s estimates – a $183 million profit for the NBA in 2009-10, and those issued by the league, which claim a $370M loss.
League Response: Forbes’s data is inaccurate. Our losses for 2009-10 were -$340 million, not -$370 million as the article states.
# 8 What About The Leaked New Orleans Hornets Financial Statements?
Forbes/NYT: The leaked financial statements for one team, the New Orleans Hornets, closely matched the Forbes data.
League Response: This is not an accurate statement as operating income in the latest Forbes data (2009-10) is $5M greater than what is reported in the Hornets audited financials.
Nene and the Nuggets:
Nene has been a fixture of the Denver Nuggets franchise since the 2003 season and the club’s longtime starting center. Even though Nene’s career hasn’t produced an All-Star appearance up until this point he has been a major contributing factor in the team’s consecutive playoff streak which has spanned eight seasons.
Last week the Brazilian center surprised Denver’s front office and opted out of the final year of his deal, worth $11.6 million, to test the free agent waters whenever the lockout comes to a conclusion.
But Nene hasn’t ruled out a return to Denver and according to Woody Paige of the Denver Post actually wants to retire as a Nugget.
Nene is expected to one of the most sought after centers in free agency this offseason. HOOPSWORLD has the 28 year old ranked number two behind Dallas’ Tyson Chandler in our Top Free Agent Center list.
It seems as though Nene’s free agent quest is more about long term financial stability due to his well-documented injury and health history.
In fact, Nene’s public message hasn’t changed since early March of this year when he also told HOOPSWORLD he wanted to be a Nugget forever.
The question is what direction will the Nuggets’ front office lean.
The team has a plethora of free agent issues to clear up before the start of next season.
Kenyon Martin, J.R. Smith and Nene are the main unrestricted free agents from last year, while Wilson Chandler and Arron Afflalo are restricted meaning the club will be able to match any offer.
While the team had an unbelievable run to end the regular season after dealing franchise player Carmelo Anthony at the trade deadline, the organization is still at a major crossroads in regards to choosing the identity of the team in future years.
Should the Nuggets keep the current nucleus intact despite the lack of star power in a star powered league or position themselves from a salary standpoint to land another proven franchise player?
One thing is for certain; Nene wants to be included in those plans but fully expects to be well compensated in return.
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