Posts Tagged ‘Lockout’

NBA Reaches 9-Year, $24 Billion Media Rights Deal with ESPN/ABC, TNT

October 6th, 2014 No comments
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I have a request. I write posts which I believe are unique, more in depth and more insightful than I can otherwise find elsewhere. I hope you agree. I therefore ask that you please not simply copy my ideas without proper sourcing. It feels rather awful to see my work being exploited. If just you ask, I am more than willing to help out anyone and everyone. 

The central question of the 2011 lockout, endlessly paltered, parsed and probed was whether the league was actually losing money. While it was a key point of negotiation, its importance was somewhat overstated. A new CBA shapes the future of the league; it doesn’t necessarily need to address the past. It must be asked: How much of the lockout, then, was about owners feeling poor in 2011, and how much of it was about owners trying to get rich in 2016?

2016 is when the NBA’s current national TV deals expire – eight-year agreements that promise pro basketball a total of $7.44 billion from Disney (ESPN/ABC) and Turner (TNT) starting with the 2008-09 season and running through 2015-16, an average of $930 million per year. The deals were originally signed in June 2007.

The NBA was cratering back then. New stars had struggled to grow in the darkness of Michael Jordan’s ever-enveloping shadow. The Shaq-Kobe drama had breathed temporary life into the league, but their eventual break up left the NBA to slowly wither in its wake. Big market teams like the Lakers, Knicks, Celtics and Bulls were brands lacking a product, with no signs of future improvement. The Spurs had just pummeled LeBron’s Cavaliers in the finals, a dismal four-game extermination that limped its way into the record books as the lowest-rated series in NBA Finals history. Things were getting ugly.

An eight-year, $930-million-per-year combined deal? Sold!

Then-commissioner David Stern had negotiated for an increase of more than 20% from the previous average of $767 million despite declining viewership (which itself represented a nearly 25% increase over the $614 million per-year deal signed in 2002, then, also, despite declining viewership). The networks were more than willing to comply with what amounted to a modest 2.5% compounded annual growth rate in rights fees in exchange for an atypically long eight-year deal. The preceding six-year 2002 deal had been the longest one Stern had ever signed.

The agreement looked even better for Stern and the league as the economy got even worse. In 2008, credit froze because mortgage insanity stirred by (us) Wall Street evil-doers planted massive hidden debts packaged in complex synthetic financial products throughout the business world. The ensuing global economic meltdown blazed its way into the NBA, spurring widespread layoffs and igniting fears that league revenues could collapse by, as Stern described it, “maybe as much as 10%.” The league seemed fortunate to be able to cling to a $930 million lifeline every year.

Times have certainly changed.  Read more…

The Changing Landscape of the NBA

May 11th, 2014 6 comments
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The NBA is thriving!

Just three years removed from a time when we were all seduced by claims of poverty from owners facing supposed losses that were mounting so quickly and so heavily that they forced a nasty lockout that nearly cost us the entire 2011-12 NBA season, we’ve entered into a period of unprecedented success for a league which has never been stronger.

Profits are soaring.

Just about every team in the NBA that wants to be profitable can now be profitable, and without taking drastic Jeffrey-Loria-like actions that adversely affect their fan bases in doing so (here’s to you, Miguel Cabrera!).(1) Teams aren’t just profitable; they’re wildly profitable. The league as a whole projects to generate roughly $300 million in basketball profit this year. More than half of the league’s teams should produce eight-figure profits. One or two could touch $100 million!

Rising profitability means rising team valuations.

Just last year, the Maloof family sold a 65% stake in the Sacramento Kings along with Sleep Train Arena to a group led by tech entrepreneur Vivek Ranadive at an all-time record valuation of $534 million, despite the team playing in one of the league’s smallest markets. And that was after owners blocked the Maloofs’ agreement with investor Chris Hansen to buy and relocate the Kings to Seattle at a total franchise valuation of $625 million.

That all-time record valuation was eclipsed earlier this month, when Herb Kohl sold the Milwaukee Bucks, widely considering the least valuable team in the league, to hedge-fund billionaires Wesley Edens and Marc Lasry for $550 million (without an accompanying arena), a price which would likely have been significantly higher had Kohl, who paid just $18 million for the team in 1985, not required as a condition to the sale that the team remain in the city and with the fans of Milwaukee. It was a stunning amount for the Bucks, who are universally regarded as having the worst financial situation of any NBA team. And yet, Dallas Mavericks owner Mark Cuban called the purchase price a bargain, suggesting that even the least valuable NBA franchises are truly worth more than $1 billion.

That newly-minted all-time record valuation is about to get shattered. The impending forced sale of the Los Angeles Clippers, who play in the second largest market in the NBA, is about to multiply the current record times four! Former Microsoft executive Steve Ballmer has agreed to buy the team for a whopping $2 billion! That’s the second highest price ever paid for any professional sports franchise. The Dodgers baseball team, also of Los Angeles, were sold to the Guggenheim Group for $2.15 billion in 2012, but that price included land, parking lots and TV deals. The only real estate involved in the Clippers deal is for their training facility in Playa Vista. So, not a bad return on a $12.5 million investment by Donald Sterling in 1981. The deal has been submitted to the league for final approval.

Why the massive change?  Read more…

NBA’s Construct Promotes Pat Riley’s Vision

November 26th, 2011 2 comments
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It took a 15-hour session pitched between the NBA and player representatives in New York that spilled over from Friday into early Saturday morning. It took nearly half a year, from pre-draft negotiations in early summer spread nearly into the precipice of a chilly East Coast winter. But it’s over. The NBA and its players have come to a tentative agreement, and the NBA lockout is over.

The NBA was taking direct aim at the Miami Heat when it issued, if you believe Commissioner David Stern’s stern ultimatum, its final collective bargaining agreement proposal. Michael Jordan and his roving gang of hard-line scallywags were trying their damndest to force Pat Riley to break apart his creation.

In an ironic twist of fate, though, the agreement that was struck not only fails to prevent such a construct in the future, it actually encourages it.

The tentative deal makes it expensive – prohibitively expensive – for teams to spend beyond the tax threshold. It also forces certain teams that use certain exceptions to stop spending entirely, under any circumstances. It’s essentially a hard salary cap in disguise. Ah, the financial parity!

But this isn’t the NFL. There aren’t 53 guys on an active roster. There aren’t 26 different positions to consider. There are as few as 13 guys, playing five positions. True, game-changing talent is sparse. Each one has an enormous impact.

Think for a moment about what could happen under such a construct.

If, for example, every team in the league were given exactly $60 million to spend, how would you spend it? Would you give 13 mid-level talent guys mid-level money? Or would you give three maximum talent guys maximum contracts and fill out the roster with throw-ins?

The Heat is proving out a new construct for success in today’s NBA. Grab a legitimate grouping of three superstars and all else you need is a cast of marginally-talented three-point-shooting throw-ins to let them maneuver in space, some of whom occasionally play a little defense, and you’ve got yourself a legitimate title contender. Teams have a very healthy fear of the Heat, and a realistic understanding of how difficult it is to beat them four times in seven games. They seem to get how little a non-star player really affects those odds.

Of course, the joining of forces of three game-changing talents is an exceedingly rare thing. It requires not only the desire of three such players, but also the foresight of a team to clear enough salary to even make it possible. It might happen but once a decade… or not at all.

The point, however, is that it is possible – even more possible under the current deal than it was under the last collectively bargained deal.  Read more…

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NBA Lockout Appears Inevitable

April 16th, 2011 No comments
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This Miami Heat team is positively thrilling. And while they don’t enter the playoffs tonight without flaws, they also have a legitimate shot at marching through the Sixers, Celtics, and Bulls all the way to the NBA Finals. Yet thanks to the squabbling of millionaires and billionaires over how to divide a $4 billion industry, this may be the last time for a long time to enjoy it.

Negotiations surrounding a new NBA collective bargaining agreement to replace the current six-year deal that expires on June 30 are not just in a stalemate. They’re turning nasty. A lockout seems inevitable. And it could last a while. It could wipe out the entire 2011-12 season.

The information, misinformation, accusations and counter-accusations are flying so fast and furious that you need an accounting degree and a decade of practical experience under your belt to actually be able to make sense of it all.

The two sides remain deeply divided over what percentage of revenue the players should receive and how owners should share their money.

Players currently receive not less than 57% of every dollar generated by the NBA in salaries and benefits. Players have no costs. Every dollar they make, they get to take home (excluding withholding taxes, of course).

Owners need to net their 43% share of revenues against all the costs of fielding their teams. According to Commissioner David Stern, the NBA will lose roughly $300 million this season. That’s actually better than the $340 million in losses last year and even better than the $370 million in losses the year before that. Stern has also spoken of losses of at least $200 million in each of the first three seasons of the current agreement.

That’s $1.6 billion in losses in six years. That’s huge! And the league has sent both audited financial data and tax returns to the player’s association to substantiate the losses.

The NBA is claiming the business model is broken.

Owners are seeking a complete overhaul of the league’s financial system, and have submitted proposals to the players that feature a hard salary cap, rollbacks to existing player salaries, shorter contract lengths, reduced annual raises, and the reduction of the players’ share of revenues from the current 57% to less than 40%.

But the players disagree with the story the numbers tell.

The players contend that the vast majority of the so-called losses is the result of creative accounting and tax loopholes. They contend that only a small number of teams are suffering, and that their problems can be addressed primarily through enhanced revenue sharing. Read more…

Could the NBA actually prefer a lockout?

June 17th, 2010 2 comments
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I’ve received several emails from readers requesting an explanation of the impact of the expiration of the collective bargaining agreement on player movement that I keep referring to. Below I provide my own (controversial) thoughts.

Incidentally, if you have any questions you’d like my perspective on, please feel free to email me and I will either answer them individually or incorporate them into a post.

For the past several months, we South Floridians have had our heads in the clouds, scheming about all the different ways Heat management can build a winner in the off-season. We’ve been educating ourselves on the rules and regulations in order to figure out what’s possible. We’ve made ESPN’s Trade Machine our best friend. But is it possible that we’ve overlooked the biggest story of all – perhaps the biggest of the decade for the sport of basketball?

Over the course of the past season, we’ve seen a flurry of predictable contract-related activity. Brandon Roy, Kobe Bryant, LaMarcus Aldrige, Marcus Camby, Pao Gasol and Rajon Rondo have all agreed to extensions. And Dwyane Wade, LeBron James, Chris Bosh, Amare Stoudemire have all announced their intentions to opt out of their contracts in favor of new, long-term deals.

We’ve also seen the mind-boggling.

Dirk Nowitski, Tyson Chandler, Yao Ming. Each threatening to leave their cities, sacrificing big dollars in the pursuit of long-term security.

A whopping 103 early entry players initially declared their names for the 2010 NBA Draft (Heat hopeful Eric Bledsoe, with nary a single season under his belt playing the point, among them). Add to that a number of draft-worthy seniors. Sixty will be selected. Thirty will receive guaranteed contracts.

Why are they doing this? What has everyone so spooked? Read more…

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