THESE were the comments from commissioner Adam Silver this past week about the economic realities of the NBA – or, at least, the way that he wants to spin those economic realities. Remember, Silver is fundamentally a mouthpiece for the owners, and now that the NBA is on the verge of unprecedented revenue growth, after one of it’s most successful seasons ever, the owners immediately start to play coy and try to cry poor mouth. It’s an act which seems somewhat ridiculous, given that the NBA made $4.8 billion in revenues in its recently concluded fiscal year, and a new TV deal is about to kick in which offers up $24 billion in broadcast rights over nine years.
Sadly, Silver taking this tact isn’t really all that surprising, given that labor relations between the league and the players union have generally been terrible – there have been three work stoppages in 20 years for a reason. Given that revenues are going to soar, it also means the players’ share of the pot are going to soar as well. The NBA’s salary cap already jumped 10% this offseason, to $70 million, and as per the terms of the CBA, where the players get half the basketball-related income, the salary cap is only going to get bigger and bigger from hereon.
Which it should. As I’ve said before, when it comes to professional sports, I am purely a Marxist. I think the players should get everything, frankly, because no one goes to an NBA arena to watch an owner. Not even Mark Cuban. (Sorry, Mark.) And I agree with the general premise put forth in this 538 piece that the élite in the NBA are, in fact, underpaid relative to their importance – not just in terms of their on-court value, but in terms of their overall importance to the continued growth and popularity of the league as a whole. The NBA is a star-driven enterprise, and has been for decades. Even in this era, when we’ve seen the emergence of the Spurs and the Warriors as champions through an emphasis on sophisticated tactics and great team play, those principles are still centered on transcendent talents like Tim Duncan and Steph Curry making it possible. First and foremost, professional athletes are entertainers. They are artisans and thespians performing on society’s favorite stage. And as has pretty much always been true in the entertainment business, for every popular entertainer who makes a large sum of money for their performance, there is someone who isn’t performing at all who stands to make even more through riding their coattails.
And in the NBA, that would be the owners, all of whom are now sitting on a gold mine. Forbes recently pegged the average value of an NBA franchise at $1.1 billion. You can primarily blame Los Angeles for this sudden and ridiculous escalation, just as you can blame Los Angeles for pretty much every shift in the business of sport since the Dodgers left Brooklyn, as Steve Ballmer ponying up $2 billion to buy the historically- and comically-awful Clippers, thus taking Donald Sterling off the NBA’s hands, has led to a domino effect sending values of other franchises skyrocketing. Ballmer, of course, also played a large part in the $500 million bidding war over the Sacramento Kings, another event jacking up the NBA’s collective value: if the league is only as good as its worst franchise (which the Kings most certainly are, but more on those idiots in a moment), and its worst franchise can pull half a bil when it crosses the block, then the league’s not really doing too badly, now is it?
Notice how I am throwing the word ‘billion’ around a lot in this post. Well, you can bet the players union notices how often you use the words ‘NBA’ and ‘billion’ together in a sentence. The league and its players formed something of a unique partnership in the early 1980s, when the league truly was verging on collapse. Implicit in the agreement with David Stern to cap salaries and tie them to a percentage of a basketball revenues was the idea that, as the revenues for the league increased, the salaries would inherently increase as well. This was smart business at the time, to be sure, but time and again the crux of hostile labor negotiations has been that owners want to somehow welch on that promise. In the last labor dispute, a lockout which cost 16 games of the regular season, the NBA extracted a concession from the union whereby the players’ share of the revenues dropped from around 57% to the 49-51% range it is now. This was, in fact, a huge concession on the players’ part, one which ultimately stemmed from the fact that it didn’t matter what percentage of the revenues you were getting when you weren’t getting any at all, which is what was happening with no games go on.
It sucks that the union capulated at the time, but you can see why they did, and it’s hard not to be incredulous. The players were simply doing their jobs, showing up and playing and putting on a good show and doing their part to make the league successful, but the league was struggling, in part because of the economic downturn and, in part, because of bad business decisions made far over the players’ heads. The owners were essentially asking to be saved from themselves and asking the players to do it for them – and ‘asking’ is putting it kindly.
So now the NBA stands on the verge of spectacular growth and prosperity, and you already have the owners and their mouthpiece Adam Silver talking about franchises losing money and the league having to write big cheques to cover expenses. This is all preemptive posturing for a CBA which isn’t going to expire for another few years. The players, of course, aren’t buying it.
“All of the data we have access to indicates that our business is thriving and will continue to do so in the near future. We agreed not to debate some of the finer points of negotiation in public, and aren’t going to change that approach now in response to some remarks from the Commissioner on Tuesday. We are, however, going to take him up on his offer to share the audited financials with the union. We also want to ensure that everyone understands the facts of this business: Under the CBA, we do not have a gross compensation system. The players’ 50% share is calculated net of a substantial amount of expenses and deductions. New and renovated arenas around the league have proven to be revenue drivers, profit centers, and franchise valuation boosters. That has been the case over the past few years in Orlando, Brooklyn, and New York, to name a few. In some instances, owners receive arena revenues that are not included in BRI. Many teams also receive generous arena subsidies, loans and other incentives from state and local governments as part of their arena deals. Virtually every business metric demonstrates that our business is healthy. Gate receipts, merchandise sales and TV ratings are all at an all-time high. Franchise values have risen exponentially in recent years, and the NBA has enjoyed high single digit revenue growth since 2010-11.” – Michelle Roberts, NBPA chief
And they shouldn’t buy it, because while half of the basketball related revenues are going to the players, it’s pretty apparent that there is a good amount of tangential revenue which is not going to the players. There is a fundamental dishonesty to all of this posturing going on by the league. Silver, meanwhile, pretty much directly contradicted himself in further statements about the state of the business of the game:
“The goal, of course, is to have a robust 30-team league, not just a league where teams … in large markets or owners who are willing to lose lots of money can have top-notch payrolls. So I think it’s very positive. The league is very healthy. I think owners recognize that are our owners are extremely competitive.”
So, it’s a healthy league with ‘signficant’ numbers of teams losing money? Hmm, those two notions don’t seem to jibe.
Now, I will freely admit that I am an NBA skeptic, and have done so countless times before. Being a former Sonics season-ticket holder will make you one. Emotions aside, however, the NBA made what were, in my opinion, two horrible long-term business decisions in a) permitting the Sonics to be stolen – yes, stolen – from Seattle and moved to Oklahoma City by Clay Bennett and his merry band of robber barons; and b) going above and beyond to prevent the acquisition and relocation of the Sacramento Kings to Seattle and going so far as to allow them to be sold to a guy who so far has proven to be an incompetent nutjob. The main reason for David Stern’s distaste for Seattle, of course, is that the little Napoleon and some of his enterprise’s dubious business practices got called out onto the carpet by a good number of political officials in the city of Seattle and the state of Washington – most notably, the need to extort municipalities for sweet arena deals financed with taxpayer money. Without going into great detail the economics and ethics of spending taxpayer money in such a fashion – I personally don’t mind it, but can understand why others do – posturing for what amounts to public subsidies is a hard-sell during times of greater fiscal austerity, and it’s even more of a hard-sell when it comes from an enterprise that it literally making billions and billions of dollars.
But that’s precisely what’s going on in the state of Wisconsin, where amid all of his efforts to gut the state budget, the would-be presidential candidate governor hasn’t seen fit to prevent the Milwaukee Bucks from further bleeding the public coffers. These should be the salad days for the NBA, yet this continual asking for public handouts would suggest that some of the franchises are as droopy as wilted lettuce.
The Bucks say they need a new deal, they need a new building, they need more revenue sources so that they can compete – and by ‘compete,’ of course, they mean competing in terms of profit margins and franchise values. And there is, in fact, some merit to this idea. It’s not complete nonsense. As I’ve explained previously, a great misunderstanding about salary caps is that a cap number is applied across the board – every team will have up to $70 million to spend next year – but the amount of revenue is vastly different from team to team. The Lakers’ newest broadcast deal, for example, is worth 10 times that of the Miami Heat’s. The operating costs of doing business in Milwaukee are therefore necessarily going to take up a larger percentage of your revenues than they are in a place like L.A. or New York.
But see, that fact alone is why emptying the Seattle market was, in the long term, a stupid move. Seattle is the 13th-largest television market in the country, and also one of the richest cities in the nation. By moving that franchise to Oklahoma City, and then keeping another franchise in Sacramento, you’re essentially stubbing your toes, since sheer demographics tell you that a healthy franchise in either of those two cities can never ultimately generate the sorts of revenues that one could in Seattle. Instead, Seattle is now the perfect talking point whenever an owner of an NBA franchise wants to posture for a new building. The Bucks’ brass made a point of saying that if they didn’t get a new deal, they’d look to move to Seattle in a couple of years – which was news to everyone in Seattle, of course, since no one there took the idea of the Bucks relocating there with more than a grain of salt. The fact is that arena deals grow stale, and building go out of date, remarkably quickly. They are little more than smash-and-grab jobs, quick infusions of cash for enterprises which often then go about squandering that cash rather quickly.
And the NBA, as an entity, stands to make untold billions over the next decade – and also stands to squander enormous amounts of it. The salary cap is, first and foremost, a method at cost-control – an effort on the part of the league to prevent itself from letting its own bad business practices run amok. Even within that salary cap, which is essentially a glorified series of accounting tricks, there are all sorts of provisions which essentially give franchises relief when they make bad decisions: the amnesty clause lets you essentially pay players to go away and free up the same sum to sign someone else; the stretch provision lets you pay a player to go away over twice the length of their contract plus one year (i.e., instead of paying them $10 million over two years, paying them $4 million over five). The league has also invented revenue-sharing measures for teams in supposedly smaller markets (which freeloaders have OKC have made a point of taking advantage of) and a luxury tax system which is actually quite steep, whereby violating the salary cap leads to enormous financial penalties – but teams that want to win, and have the financial resources to do so, really don’t care much about that. The Warriors payroll for next season was verging on $100 million before they traded David Lee. Given that they just won the NBA championship, and are working on a new arena in San Francisco which,
I haven’t seen an entity more infatuated with its own accounting than the NBA since I stopped working for nonprofits. There isn’t a single discussion about a player that doesn’t ultimately devolve into a discussion about that player’s contract. But the league has gone about doing this to itself over the past 30 years. The fact is that there is plenty of money to be had in the NBA, but money can’t buy you love and it also can’t buy you a clue. A great deal of the stories and the articles about the NBA over the past year make reference to how the business of the league is going to change once the new TV money kicks in. Why anyone thinks it’s going to actually change is beyond me. Just having more money at your disposal affords a franchise that doesn’t know what it’s doing even more opportunities to misuse it. Bad franchises are going to continue to be bad and, if anything, the amount of dollars being squandered will make those mistakes seem even larger than they actually are – which, in a P.R.-driven entity like the NBA, is actually the worst sort of mistake to make.
No amount of money from a tricked-out new arena or a new broadcast deal is suddenly going to make the Sacramento Kings less stupid. The Kings recently made one of the worst trades imaginable, shifting three players they didn’t want to the 76ers, who also got a first round pick and the right to swap draft positions with the Kings twice. The Kings did this so as to free up some cap space to pursue some free agents – most of whom, of course, had no interest in playing for the Kings. Remember the principles of Edmonton Disease here – if dollars are essentially equal (and a salary cap makes that the case) then why would a player willingly go to a franchise that sucks? (Monta Ellis actually took less money to go to Indiana.) After all that, the Kings signed a couple of bit players and then signed Rajon Rondo to a 1-year deal, in the hopes he will magically resurrect his career, but if Rondo does, in fact, do that, then a year from now, he will almost certainly try to go elsewhere, given that the Kings are likely to be terrible for the foreseeable future – a fact which the 76ers are banking on in obtaining the rights to swap draft positions. Of course, cashing in on that would also necessitate the 76ers improving. They’ve been a joke of a team on the court and given precisely zero fucks about it, made a million deals and have positioned themselves to have as many as four 1st-round picks in next year’s draft, but given Sam Hinkie’s track record with the draft in Philly – willingly taking on two guys who were hurt and couldn’t play, one of which, Joel Embiid, still isn’t playing, and also drafting Michael Carter-Williams whom they promptly traded a season after they picked him – I’m not sure the 76ers having four 1st-round picks is necessarily a good thing.They’ve shown an aptitude for being bad, but it’s easy to be bad. Actually being good is another question entirely.
What the Kings and the 76ers have in common is that they’ve sunken to the bottom of the heap in the NBA through being incompetent. Whereas Edmonton Disease speaks to the nature that some markets are more attractive than others, it also speaks to the idea that, as attractive as the idea is to want to ply your wares in New York or Los Angeles, being on a terrible team in a great place to live still constituted less-than-ideal working conditions. No legit free agent wants any part of the Lakers until Kobe is gone, nor the Knicks until the Zen master gets hold of how to actually run a professional basketball franchise in this day and age. You’ve seen free agents of some quality signing this offseason with places like Milwaukee and San Antonio, and also with the Lakers’ crosstown rivals the Clippers, because players know they’re going to get paid regardless and they want to win. No one wants to be second-fiddle to Kobe for a year with a Lakers club that looks to be a 55-60 loss team.
It shouldn’t be lost on people that two of the Warriors’ highest-paid players this past season – David Lee and Andre Iguodala – were rendered bench players and didn’t bitch about it. The weren’t happy about it, of course, but the Warriors went nuts and they went along for the ride – and, in the case of NBA Finals MVP Iguodala, he stepped up when needed. They wanted to win. Along with being quick to cast the players as superstar entertainers, the league has never done anything to disparage the perception that players are greedy and selfish and care only themselves. In fact, it’s often the opposite that’s true. In this labor-management dynamic, it really isn’t the labor that are the greedy ones.
Silver’s posturing in the press this past week should serve to remind us that, even with money raining down from the sky and growing on trees, it’s still business as usual in the NBA – which is too bad, really, since great commercial success over the years has afforded cover to an entity whose business often makes no sense and whose missteps are almost entirely self-created along the way. This is a league where teams routinely and willingly makes trades for guys they don’t want, knowing it will make them worse; where three head coaches got fired from playoff teams after the season, yet somehow Byron Scott and Derek Fischer still have a gig; and where franchises willingly tank entire seasons, and sometimes two seasons, in preparation for some sort of possible talent bonanza that rarely, if ever, comes to fruition. It’s all nuts, and it’s a testament to the quality on the court that this mad circus carries on.
Whereas you can argue about whether the EPL or La Liga or Bundesliga reigns supreme in the soccer world, there is no debate in basketball. The NBA has the best players and the best clubs, and the massive revenues to back that up. It would do well not to go about killing the golden goose. You’d like to think that labor troubles can be averted in the future. It’s an awfully big pie where talking about here, and as much as the two sides want to squabble about the pieces they get, they should at least all agree that they’re all going to eat the damn pie and go from there.
Mmm, pie … I haven’t had lunch yet … now I’m hungry …
