If the NBA is in such financial bad shape that they need to lockout the players for a year, they should open up the books to everyone including reporters. Otherwise, I cry bullshit on how much financial pain they are in. I also would like to see what their ideas are for additional revenue sharing and it should be inconjugation with the negotiation with the players. Owners have said "no" to this and again I cry bullshit. And no, saying "bullshit" isn't as good as watching FA unfold, let alone watching games, but I have to call them like I see them. Anyway, it's not like my opinion is going to effect the players even I stated they should be happy with 2/3 of the money they are used to.
I'm just thinking aloud here. The fact that a number of franchises may be in default on non-basketball related debts and essentially owned by lenders could work both ways. If you were a lender and were worried about trying to get the best value for a franchise and had credit available to invest in the project, you'd may want to strangle the players in this CBA. I think there are circumstances where you would take an additional 100, 150 million dollar hit over the course of a season to better position your asset for sale. The question of whether credit is available and its terms will probably define the length of the lockout as much as anything.
You can only hope that owners like Cuban and Buss and others that are doing very, very well and want to see ball and move the ball a touch on the revenue sharing. And Stern cares about his legacy. The players are already to give the owners a bigger share of the pie than in any sport. There is no good reason other than greed for a lost season.
Cuban's not doing well financially. He's losing money. He just doesn't care about losing money. Cuban might even benefit from expanded revenue sharing...something that probably drives other owners against the whole proposition. Last I heard, the NBA players were willing to drop their % to 54.5% of BRI. The current NFL agreement calls for approximately a 60%-40% split favoring the players, but that's after the owners get the first $1billion as "expense credits." This is actually about a 53%-47% players-owners split. Last I heard, the NFL owners were looking for no worse than a 50-50 split and a continuation of their hard cap. The NHL revenue split is 54%-46% in favor of the players, but includes a hard cap. If the NBA players were to propose a 50% revenue split and agree to a $60MM hard cap, my guess is that this labor dispute is over. This said, having been responsible for labor negotiations, now is not the time to make your breakthrough proposal. The right time is in September. If something doesn't get done in September, this will get ugly.
We're all talking a little bit out of our asses here because we have no idea about the underlying assets and financials. I would suspect that part of the reason the Tribune was able to borrow so much is because they had assets that were relatively easily movable in the case of default. Many of these old legacy companies own real estate and buildings; and the cubs always seemed like an easy sell to me. This is beside the point to an extent too. It was dumb to extend the tribune 8.2 billion just like it was dumb to offer the Hornets 100 million. The thing about the loan to the Hornets that bothers me is that they are a consistently mildly unprofitable franchise with few prospects for improvement. They are the only team in the league, I think, that had a true blue chip superstar and still couldn't get people out to the arena. They don't own any hard assets, like the Pistons and the Palace or the Nets and the Barclays Center, so essentially the loan was made against the opportunity to own the franchise for glamour purposes. Whichever bank made that loan was completely up the creek when the Hornets defaulted. A refinancing wouldn't provide any better assurances that Shinn would be able to repay, or even want to repay, because at the end of the day, the lender couldn't liquidate the business for anything. What's a bank going to do with an NBA franchise? In those circumstances I think loaning a franchise half of its value is insane.
Transplant: What's the actual percentage of BRI that NBA players make (including the salary payments that are over the soft cap)?
http://sports.espn.go.com/nba/columns/story?columnist=coon_larry&page=NBAFinancials-110630 I have to laugh at the owners saying, "we showed you our tax returns" as if they're any kind of proof the owners or teams are in some sort of financial trouble. Businesses keep three sets of books. Tax returns, you want to show big losses so you avoid paying taxes as much as possible. Financial statements, you want to show your investors with big profits. And the cash flow type of financials that only the guys running the company see.
Currently 57%. Players have 8% of their salaries deducted and put in an escrow fund. If actual salaries and benefits exceed 57%, the teams are reimbursed from the escrow fund. If actual salary and benefits fall below 57%, the owners have to cut the players a check for the difference.
Well, assuming they showed their full tax returns and not just the taxable income number, there's a lot of very useful information relating to the health of a business to be found and the non-cash expenses (depreciation and amortization) are clearly identified. I guess what I'm saying is that I didn't find it funny.
GE's financials show a nice profit. Their tax returns show they owe $0. The discrepancy is huge. What's funny is the owners think the players are stupid, or the public is stupid enough to believe they're as "open komodo" as they claim. As Coon points out, the tax returns show things like depreciation of good will and other expenses related to the purchase of the team.
This is slightly off topic, but one of the areas where my very limited knowledge of M&A clashes with published reports is that all of the news articles seem to say that depreciation due to the sale of a franchise only allows teams to show artificial losses for four or five years. I just do what the accountants tell me, but I do know that a company's intellectual property is depreciated over the course of twenty years after a sale. For most companies this doesn't matter because you just undervalue your intellectual property assets and overvalue your other assets so that you are able to depreciate your assets sooner rather than later. But if a substantive piece of your income comes from the licensing of your team brands (which as NBA 2K11 tells me before I play every game are owned by the individual teams and not the NBA) than you don't have that flexibility. So, the tax returns of any team that has been sold in the last twenty years, not the last four or five years, will show artificial losses.
Okay, how would a hard cap make a difference then? It wouldn't change the overall amount the teams collectively pay the players, would it?
A hard cap protects poor owners who dislike luxury tax, and gives them more of a competitive advantage (like in the NFL) by preventing large payrolls. One of the reasons LA got Pau Gasol is because Buss was willing to go into Luxury tax.
This is also pretty much how I see it. Fans hear "hard cap" and think it's purely a way to keep player salaries down. However, mid-market teams see it as a way to enable them to better compete on the court by preventing big market teams from grossly outspending them. As the theory goes, equal spending leads to a more even distribution of talent. This leads to competitive parity which results in a more exciting product where each franchise has a reasonable chance of contending for a title (and maximizing their revenue). It's worked for the NFL and the NHL believes that it's now beginning to work for them as well.
A hard cap is going to lead to Arenas type situations, where a team cannot keep a player because they are unable to cut enough salary to make him a competitive offer. The past CBA was terrible for Basketball, the product. A guy like Jalen Rose or Antonio Davis earns a big contract and before the contract runs out, their level of play drops. So teams have these overpaid guys on the roster eating up cap space and the team is hamstrung to keep the young players it develops. Meanwhile, we fans get to watch crappy play when those guys play. It's nobody's fault that a guy like Brandon Roy got hurt after signing a deserved big contract. A hard cap is going to royally screw the Blazers and other teams that find themselves in similar situations. A hard cap is still going to favor big market teams, because if the wage scale is low everywhere, then the ideal destinations will be where the shoe contracts pay the most.
What you describe is true, but owners would say, "then give us the hard cap and non-guaranteed contracts...problem solved." I'd be surprised if the maximum length of guaranteed contracts isn't shortened to 4 years in the new CBA, but I don't blame the players for telling the owners to go shit in their hats insofar as eliminating guaranteed contracts altogether. Just a crazy idea, but I wouldn't mind seeing some sort of escrow account or insurance fund developed where funds are made available to offset the cost of buying out a player whose productivity has significantly diminished due to injury (but not age). The league (or in the case of an insured fund, the insurance claims staff) would have to determine in which cases this fund could be tapped, and unlike normal buyouts where the full value of the buy out continues to count against a team's cap, full or partial cap relief would be granted.
I like the idea of half-guaranteed contracts. Either the first two or last two years of a 4 year deal. Last two, a guy like Joe Johnson signs. They're not going to cut him the first two years... If you have a pre-injury Brandon Roy, getting his first big contract, you guarantee the first two. He's young, and you expect to pay him years 3&4 just to keep your superstar. While I am on the players' side, I am not in favor of guys making big paychecks who don't deserve it. It takes away from other players' ability to get paid their worth...
Thinking about it from a player perspective, I'd rather give in on shortening the maximum length of a contract than mandating team option years in all/most contracts. If you're only going to guarantee me 2 years, I want to be a FA after those 2 years.
