Google+
Close

Right Field

Brief chronicles of our sporting times.

NBA’s Lockout May Be Exacerbated By New Financial Information



Text  



Though I speculated earlier that the NBA’s work-stoppage seems to be less painful than what the NFL is currently going through, ESPN’s Michael Wilbon thinks the entire season may be threatened.

The NBA is going to miss games, and the smart money is on the league missing lots of games. A new group of owners who paid a ton of money for their franchises since the last work stoppage 13 years ago are ready to sacrifice the season. The six owners who have both NHL and NBA teams saw first-hand how sacrificing essentially an entire season led to an overhauled NHL with slashed costs, and they’re drooling over the prospect of an NBA with similar cost certainty.

The NBA owners, like he NFL owners, think themselves to be well-positioned to survive a lockout. They think they’re more sympathetic, because there really are NBA teams losing money. They’re trying to leverage what they consider a superior bargaining position into the players’ accepting a smaller proportion of revenues in salary. The NBA owners who see themselves as analogous to the NHL owners who “won” their lockout a few years ago may be making a mistake, as Nate Silver analyzes:

It is not clear, however, how much player salaries are to blame for the N.B.A.’s having failed to achieve an N.F.L.-like level of profit. Between 2000 and 2009, player salaries in the N.F.L. represented an average of 56 percent of league revenues, and that total averaged 58 percent in Major League Baseball — both close to the 57 percent target enshrined under the N.B.A.’s current deal. By contrast, when the N.H.L. locked out its players and was losing money, player salaries made up 66 of league revenue. (They have since fallen to about 54 percent.)

The NHL lockout was an easy win for owners because players’ salaries were disproportionately high compared to other major sports. That’s just not the case with the NBA, and they’ll have a tougher sell with the players and, possibly, the public.

What’s also become apparent is that the NBA’s public claims of incredible losses league-wide may be partly a product of unique (but perfectly acceptable) accounting. Some teams are counting the purchase price of the team, expensed on a year-to-year basis, as part of their expenses.

More importantly, as Deadspin reported, all teams get to count player payroll as depreciating assets, like a company car or a computer. They can write off the depreciation as an expense. This is a product of a carve-out from the 1950s, where the IRS decided to allow sports teams to count players as depreciating assets. As far as I know, professional sports is the only industry in which firms can treat human beings as depreciating assets.

Now this is all legal, and part of generally accepted accounting practices, but it does mean that the public books don’t truly represent the value of the franchises.

Players’ Association President Billy Hunter counters the NBA owners’ claims of hardship.

Hunter is privy to current documents for all 30 teams and claims that at least $250 million of the league’s $370 million loss comes from these sorts of accounting quirks.

Obviously Hunter has an interest in deflating the league’s claimed losses. What’s been discovered in recent documents, though, strengthens the players’ argument that the owners’ position isn’t as strong as they think it is. With more details leaking out, Wilbon’s assessment that the NBA is in for a long, angry, protracted dispute could come to pass.


Tags: NBA


Text  


Subscribe to National Review