NBA commissioner Adam Silver says a 'significant number' of teams are losing money
With a new TV deal that will average over $2 billion annually and a free agency period that saw teams spend $1.4 billion on the first day, it would appear that both owners and players are enjoying never-before-seen popularity and profitability.
However, after a Board of Governors meeting on Tuesday, NBA commissioner Adam Silver addressed the media and said "a significant number of teams" are losing money.
"I don't know the precise number and don't want to get into it, but a significant number of teams are continuing to lose money and they continue to lose money because their expenses exceed their revenue.
(...)
"Teams are spending enormous amounts of money on payroll. Some of the contracts we talked about. They still have enormous expenses in terms of arena costs. Teams are building new practice facilities. The cost of their infrastructure in terms of their sales people, marketing people, the infrastructure of the teams have gone up, and in some cases their local television is much smaller than in other markets."
There is a ton to decipher in the above quote, and it's obviously part of what makes the situation so complicated.
This would have been more believable four years ago. During the 2011 lockout, the NBA claimed that many of its teams were in bad financial shape, and the players, as a result, made several concessions. Players moved from a 57-43 revenue split to about 50-50. They also saw the length of max contracts shrink.
Since then, however, the NBA has seen the valuations of franchises skyrocket. Steve Ballmer bought the Los Angeles Clippers for $2 billion, and the Atlanta Hawks sold for $850 million this past spring after Forbes valued them at $425 million in 2014.
Revenue-sharing provides a boost to small-market teams that are undoubtedly fairing better than they were four years ago. This summer, five of the NBA's biggest free agents - LeBron James, Kevin Love, LaMarcus Aldridge, Marc Gasol, and Greg Monroe - signed with teams in Cleveland, San Antonio, Memphis, and Milwaukee, respectively.
The new TV deal will take the NBA's salary cap from $70 million this season (higher than the predicted $67 million) to $88 million in 2016 to $108 million in 2017. More than half of the league's teams will have money to spend on players!
Basically, nobody is buying the argument that the owners are broke. LeBron James didn't buy it in 2013 when the Sacramento Kings sold for $525 million, well before the Clippers sale or news of the new TV deal:
Other players don't believe it now:
Nor does the media:
And some won't take the excuse that owners are losing money from building new stadiums and practice facilities:
The latter argument is one of the current hot-button topics in the NBA after the Milwaukee Bucks owners threatened to move the team if they didn't get public funding for a new arena. Many people criticize the practice because taxpayers foot the bill while the owners collect the revenue from everything else related to the stadium. Additionally, several economists have debunked the idea that local sports teams provide much to the local economy. HBO's John Oliver recently had a brilliant take-down of public funding for sports venues.
Silver mentioned that he knows both the owners and the players want to avoid a work stoppage in 2017, when the players have an opt-out for the current collective bargaining agreement. That may be difficult to avoid if owners are crying poor at a time when players simply won't believe it.