NBA PM: Is it Salaries or Expenses?
As we discussed in last Friday’s NBA PM, the players’ salaries might not be the real culprit if, in fact, the league’s claims of $300 million in losses is true (something the players’ union and The New York Times’ Nate Silver dispute wholeheartedly).
The league has accrued around $3.8 billion in basketball related income for the 2010-2011 campaign. The players’ cut—57 percent—is nothing to sneeze at and may require some adjustment for the sustainability of the league. But the massive overhaul the NBA is proposing (hard salary cap and a significant reduction in the players’ take of BRI), might not be addressing a central issue: the owners could be overspending on everything besides the players.
The league’s non-player expenses are being brought under the spotlight by the likes of Matt Moore of CBSsports.com and SBNation’s Tom Ziller. The latter looked at the NBA’s audited financials and discovered the “other” expenses outpaced payroll expenses and revenue growth from 2006 until 2009, and only in 2010 did the league see a reduction in “other” expenses.
In 2007, 2008 and 2009 “other expenses” grew more than revenue or payroll did. From 2006 to 2007, revenue and payroll each grew 6.6 percent. Given the NBA’s claimed losses, non-payroll expenses grew 9.8 percent between those seasons…
If you adjust to keep non-payroll expense growth at the same level as revenue growth—essentially coupling claimed expenses with revenue, which isn’t an actual suggestion for a new CBA but an exercise to show the impact of rapidly growing non-salary costs—you’d knock around $340 million off of the league’s reported losses over the past five years. That doesn’t fix the problem entirely—remember, the league says it lost $1.5 billion over that span—but it’s something worth keeping in mind.
That doesn’t absolve the players from having to adjust their take (57 percent of $3.8 billion is a lot, even if they are the reason we’re watching) but Ziller’s work suggests the owners would do well to rein in their own spending too (as for what the “other” expenses are, that’s anyone’s guess—can we get rid of all mascots, cheerleaders and non-basketball entertainment?)
Of course the league has recently cut staff and closed offices in Paris and Tokyo in addition to the aforementioned reduction in “other” expenses that occurred in 2010, so the owners are at least somewhat cognizant of this. But there’s still so much ambiguity. Are the owners’ books right, or are the players’ questions over financial statements valid? And if the numbers are inaccurate, is it the players or the owners that ultimately have to make the biggest adjustment?
As always, perception is a large component. The players could be shamed into agreeing to the owners’ terms if the public thought they were simply overpaid, spoiled athletes. But if NBA audiences sided with the players, choosing to believe that league should operate on the remaining 43 percent of BRI, could the owners be motivated to adjust their terms as well?
For the fans, this might come down to a simple question of “Who do you trust?” And if that’s the case, the league doesn’t stand a chance.
The fans know the players—or at least they know them more than they know the owners.
Fans see the intense looks on the faces of Kevin Garnett, Kobe Bryant and Dwyane Wade. They know the precise manner with which Ray Allen runs a curl around an off-ball pick. Fans are exposed to players’ disappointments, triumphs and every grueling moment in between.
What fans don’t see—and frankly don’t want to see—is businessmen and women handling everything behind the curtain. To fans, commissioner David Stern is a waiter; someone who serves up portions of Blake Griffin and Tim Duncan, but who can’t really take credit for the quality of the meal. The waiter can certainly screw up the dinner, but if and when the consumer is happy, he or she passes their compliments on to the chef, not the wait staff.
No, it’s not fair. The NBA has worked hard to find new revenue streams and essentially propel the league and the sport into an international phenomenon. The work of Stern and Co. has been critical to the financial success of the players, but if the league is willing to wage a popularity war with the men who wear the uniform, it is going to lose 10 out of 10 times.
Simply releasing some financial statements and claiming $300 million in losses won’t satisfy the public because the league is far too popular not to be profitable. Fans don’t read audits. They watch the games, often times in packed arenas, and they’re starting to wonder where their hard-earned money is going.
Mark Bartelstein: It Begins
Agent Mark Bartelstein (president of Priority Sports and Entertainment) has a dog in this labor fight, and it isn’t David Stern. So when he does comment on the subject—as he did with Liz Mullen of Sporting News—his words are coming from a somewhat biased place. But that doesn’t mean he’s wrong. After all, Bartelstein is one of the most influential owners in basketball, and he certainly understands what players are going through right now.
Now that Deron Williams and several other NBA stars are prepared to go overseas to play professionally, Bartelstein is going on record as saying this is more than just a trend.
“We are having a lot of conversations with [European] teams,” he told Mullen. “The European market is in full force right now and I think [signings] will be an everyday occurrence.”
Bartelstein already brokered a deal for his client Darius Songaila to play with Turkey’s Galatasaray.
Durant, Others to Play in Philippines
Oklahoma City forward Kevin Durant will reportedly play with Kobe Bryant, Chris Paul, Derrick Rose, Derek Fisher, James Harden and Derrick Williams for two games in the Philippines on July 23 and 24 at the Araneta Coliseum in Quezon City, according to a report by Joey Villar of Philstar.com. Apparently the American stars will scrimmage two Pilipino teams, one is described as a “PBA selection team” while the other is a “Rajko Roroman-mentored Smart Gilas squad.”
With China’s interest in the NBA up in the air following Yao Ming’s retirement, the Philippines (a country of over 94 million people) could be the next great market for the game. In the past former NBA stars were brought to the country for scrimmages such as this, but now the game’s popularity in the Philippines seems to be growing at a tremendous pace.
Besiktas Holding off on Bryant?
Besiktas, the unwanted step child of Istanbul hoops which somehow signed Nets point guard Deron Williams, is no longer in pursuit of Lakers shooting guard Kobe Bryant, according to ESPN.com’s Marc Stein and Turkey’s NTV Spor. Due to a match-fixing scandal in the Turkish soccer league, in which Besiktas also has a team, there isn’t enough leftover funds to pursue Bryant. The club reportedly was prepared to pay Bryant $500,000 per month, while Bryant reportedly wants double that amount.
Schedule to be Released Tuesday
The NBA will release the 2011-2012 schedule on Tuesday, but, as you may have heard the league is currently having a bit of a labor issue, so nothing is set in stone.
Ben Wallace Leaves One Court for Another
Pistons legend Ben Wallace is interested in heading to law school, writes Terry Foster of The Detroit News. His basketball future may be up in the air, but Wallace thinks he has an opportunity to help troubled youth as a mentor and as a lawyer.
Check Out: The Drew League
Los Angeles’ Drew League has featured DeMar DeRozan, James Harden, Austin Daye and Dorrell Wright (among others) this summer, which makes it be best American basketball league that doesn’t have any labor issues. Pedro Moura wrote an interesting piece on everyone from the NBA stars to the guys who are just trying to make it for ESPNLosAngeles.com and it is definitely worth a read.