ESPN.com Article on Sports Finance

[rmackman]

http://sports.espn.go.com/espn/page2/story...=simmons/090227

You've got to read this. Certain parts really stick out to me:

(On Thursday, we learned that 12 teams will accept the league's offer to borrow $200 million from JPMorgan Chase and Bank of America, with between $13 million and $20 million available to each team. I found this ironic after learning in Phoenix that David Stern and Jerry Colangelo blew a jaw-dropping $100 million on the entire Redeem Team process from beginning to end. My how times have changed.) We knew about layoffs of employees within the league and various franchises. We knew various local and national sponsors were bailing, most notably car companies and major banks (two staples for the NBA). We knew certain franchises were losing significant wads of money and reacting accordingly. (Details are still trickling out. For instance, after the trade deadline, The Sacramento Bee reported the Kings would have lost $25 million had they not dumped Brad Miller's salary and bought out Mikki Moore, and the newspaper's Kings blog reported team employees were no longer allowed to work overtime or eat dinner in the media room.) Even trade talk -- normally a staple of any All-Star Weekend -- revolved more around themes such as, "They have to cut payroll," "They can't take on any money right now" and "They're too terrified of the tax to do anything."

The numbers don't reflect any falloffs with parking money, concessions, merchandise and restaurant/bar revenue around arenas. (For instance, at least half the concession stands have been closed for every Clippers home game this season -- except when the Lakers or Celtics were the opponents.) They definitely don't reflect aggressive giveaways like Chicago's recent buy-one-get-one-free promotion or Memphis' Pepsi Family Plan Pack (four tickets, four Pepsis and four hot dogs for $48). When you hear the Grizzlies are averaging 12,600 a game, that's like Amazon.com bragging, "We sold 12,600 books this week" and glossing over the fact that 65 percent of them were bargain books for $3.99 or less. (Amazing but true fact confirmed to me by multiple people: Memphis makes about $300,000 per home game. That's gross, not net. Even more amazing, four or five other teams are within $100,000 of that number.)

Unless the players' association agrees to major concessions by the summer of 2011 -- highly doubtful because that would involve applying common sense -- the owners will happily lock out players as soon as the current CBA expires, then play the same devious waiting game from the summer of 1998. David Stern will grow another scruffy beard. The owners will plant their feet in the sand, grab the tug-of-war rope and dig in. Only this time, they KNOW they will win. See, we learned a dirty little secret in the last lockout: An inordinate number of NBA players live paycheck to paycheck. Yes, even the guys making eight figures a year. You can play high-stakes poker with them ? and you will win.

Quick tangent: You're asking yourself, "Wait, how can a dude making $8-10 million a year live paycheck to paycheck?" Easy. First, he's only banking 40 percent once the IRS and agents are done with him. Second, he's probably overpaying for multiple houses and luxury cars just to keep up with everyone else. Third, he's buying expensive clothes and dinners, chartering planes, buying expensive TVs, going to casinos, and paying for friends and family at every turn. Fourth, there's a decent chance he's supporting a bunch of people back home -- family and extended family -- and not just that, but he might have gotten roped into funding at least one dumb "investment" by a loser family member. ("Uncle Lenny, I thought you told me this nightclub couldn't miss?") Fifth, he is, um, "dating" frequently -- even if he's married -- and if you "date" frequently, mistakes might happen that lead to hospital bills and child support payments. (If you catch my drift.) And sixth, he's not adding these numbers up in his head because he's thinking, "I don't need to worry about money, I'm making $10 mil a year!" I know it sounds farfetched, but I've heard the Inexplicable Tale Of Financial Woe with NBA stars too many times to count ? and that doesn't include stars such as Scottie Pippen who were screwed by their financial advisers. It's a long and inglorious list, and if you don't think we're headed for 15 "Real Sports" segments in the next decade with Bernie Goldberg catching up with Broke Former NBA Superstar X, you're kidding yourself. Remember the lessons of the '99 lockout -- the players HAD to come back. And it wasn't because they missed playing.

Will the league survive a yearlong disappearance? What about two years? We're less than 29 months from starting to find out. If you think it's a good idea to disappear for even six months in shaky economic times, ask any Writers Guild member how that turns out. These wealthy or used-to-be-wealthy owners don't want to keep losing money just to feed their ego by continuing to own a basketball team. They will make other arrangements, the same way they would arrange to sell their favorite yacht because they didn't feel like splurging on gasoline anymore. These guys don't want to fix the system; they want to reinvent it.

Franchise Hot Potato hinges on five factors in all, although only three need to be in play. You need a team with a dwindling fan base and/or bailing sponsors and suite/courtside customers. (I count 11: Indiana, Memphis, Milwaukee, Sacramento, New Jersey, New Orleans, Miami, Orlando, Minnesota, Charlotte and Philly.) You need a team trapped in an aging stadium that can't drum up local money for a new one. (I count three: Sacramento, Jersey and Milwaukee.) You need an owner who purchased his team because he was worth a ton of money ON PAPER ? only now, he's worth significantly less and might even be worth $10 for all we know. (Consensus candidates for this list: Phoenix, Hijack City, Jersey, Memphis, Indiana, Atlanta, Milwaukee, Charlotte ? and, surprisingly, Sacramento and Cleveland.) You need cities with NBA-ready, modern arenas either finished or about to be finished that would love nothing more than stealing a team. (Definitely Kansas City, Anaheim, San Jose, Louisville, Tulsa and Pittsburgh; possibly Columbus, St. Louis; and just for fun, let's throw in Montreal and London.) And you need a struggling team that can actually extricate itself from its lease.

Looking at the next 15 months only, the consensus of people in the know was that multiple NBA franchises (guesses ranged from three to eight) will move cities, get sold to new owners or throw themselves on the mercy of the league (meaning the NBA would effectively take over operations of that franchise, kinda like what happens in the MLS or WNBA). Nobody believes the league will contract or merge two franchises, simply because Stern is stubborn that way; that would be an undeniable sign of weakness in his eyes. (If you don't believe me, I have five words for you: Season 13 of the WNBA.)

Looking at the big picture, the league won't struggle even 1/10th as much as the NHL in years to come -- of all the wildest predictions I heard in Phoenix, the craziest came from a connected executive who predicted that fifteen NHL teams would go under within the next two years (and was dead serious) -- and Major League Baseball is about to get creamed beyond belief. Other than the NFL, the NBA will emerge from this financial quagmire in the best shape of any professional sport; not just because its billion-dollar deals with Disney and Turner (inked fortuitously in the summer of 2007) run through the 2015-16 season but because the Lockout That Hasn't Happened Yet will ultimately solve every major league issue except its stupefyingly dreadful officiating.

[dfwabel]

"BgMack27", I am glad that you posted this story. honestly, the NBA is the most out of whack salary structure on North American sport. I would also include the MLS, but they have some guys who get paid $10-15,000/year.

For facility financing, please visit: Field of Schemes- Sport Facility Financing Site

That said, you can also look at the NBA pages on ESPN just to see how much money the 8th, 9th, and 10th player on NBA benches made each year. Divide that by 82 games and you will see that some marginal players make in upwards of $40,000/game!

Orlando's facility has broken ground, but in this economy, where are teams going to move? The cities with newer facilities are even worse off than the existing towns, e.g. Kansas City, St. Louis, and even San Jose.

[Gothamite]

Okay, MLS couldn't take advantage of the NHL lockout. Let's see if they can become the fourth major sport if/when the NBA shuts down for a while.

And I totally believe that an NBA player can earn $10M a year and still live paycheck to paycheck.

[Brass]

Hmm, very intriguing!

Thanks for the interesting read, BgMack27!

[BJ Sands]

A very insightful column from The Sports Guy.

[Gothamite]

A very insightful column from The Sports Guy.

Which is itself a very rare bird.

[infrared41]

Okay, MLS couldn't take advantage of the NHL lockout. Let's see if they can become the fourth major sport if/when the NBA shuts down for a while.

And I totally believe that an NBA player can earn $10M a year and still live paycheck to paycheck.

I think it's safe to say that soccer is probably about as popular as it's going to get in The U.S. In the highly unlikely event that the NBA shuts down, MLS isn't going to take it's place. We'll simply have three major sports.