Sports

NBA Lockout Analysis: Questions Owners Should be Forced to Answer

| by Hoops Karma

Before anyone signs on the dotted line, NBA owners should answer a few general questions.

1) How much Roster Depreciation Allowance (RDA) they’re each claiming on their teams’ books. The RDA is a ridiculous but legal way for sports teams to claim financial losses for the depreciation of their players.

Considering the teams don’t own the players like livestock or company cars, nor do they actually lose any money for this sham of a write-off, it’s kind of insane this is allowed. Deadspin showed that the Nets had a team salary of $52.8 million in 2003-04 yet were able to write off $25.1 million of it because of the RDA. Considering New Jersey claimed losses of just over $27 million on the year, you can see how much BS went into that number just for this one loss that they never actually lost.

2) Who exactly owns the arenas the teams play in and how much rent is paid by the teams for their use each season. Many of the arenas are owned by the team or its owner, which means they can very easily manipulate the rent so that the team appears to be losing a ton of money that the team owners aren’t actually losing.

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What’s to stop Trail Blazers’ owner Paul Allen, who also owns The Rose Garden, from raising rent 500% so that Portland can continue to fall in the red on the books? Allen wouldn’t lose one cent on this sort of arrangement, but as an NBA owner he could say the team is down financially (The answer, by the way, is nothing). Just open up the books for real (not the Cliffs Note version given to the union some months ago that were quickly dismissed as cooked) and let us see what teams are paying for rent, and how different those amounts are between teams legitimately renting their arenas and the ones simply renting the building from themselves.

3) How much of their claimed losses have to do with ownership expenses and have nothing to do with basketball. It only makes sense that all the income and losses the league is talking about should actually have to do with basketball; owners should not be pushing for lower employee salaries because the teams are claiming losses on things like accrued interest from money borrowed to purchase the franchise, something the players have no control over.

Larry Coon wrote a great piece for ESPN in July in which he showed that the Nets found a way to rack up nearly $100 million in accounting losses over two seasons that were put there “simply to make the books balance” after the sale of the club in 2004. Again, fake losses that no one was writing a check for – just accounting magic that allows them to tell the union they’re losing money. For not being banks, it’s amazing how many clubs borrow and lend tens of millions of dollars, and the more haphazard they are about it, the more losses they can claim while trying to make the players pay for it. Open the books for real and let everyone see how much of these losses are simply ownership expenses because those are losses that should be eliminated before basketball players should have their salaries slashed due to owners’ non-basketball-related expenses.

4) Who exactly owns the local media outlets the teams appear on, and how are their deals structured. Numerous teams and owners own all or part of the local TV and radio outlets, and just like the situation with teams paying rent to themselves in #2 above, they can easily manipulate the system to look like their deals aren’t very good, allowing the franchises to claim losses that in no way affect the owners’ pocketbooks. Again, open up the books completely and let us see how the deals are structured for teams that have a hand in local media versus those that are making legitimate deals with the stations.

5) How exactly was the 43% of BRI that went to the teams being spent for the past 6 years. Under the old CBA that was in place for 6 years, teams received 43% of the BRI every year (57% went to player salaries), and the BRI kept rising due to more tickets being sold, higher ticket prices, more TV viewers, more international interest, etc. Somehow the teams didn’t seem to have many financial problems just a few years ago, but now that they’re making record amounts of money with their 43% split, the entire system is broken and they are collectively losing $350 million every season (eye roll). They can’t lose money on player salaries because that was a fixed expenditure each season; the only part the owners could really screw with to make things bad for themselves as a whole was that 43%.

Open the books and let us see what the clubs were doing with that 43%. We already know exactly where the other 57% went, so why don’t you show us what happened with that other portion, which again was getting bigger every season. It’s clear most of the franchises have no clue how to intelligently spend that 57%, so would it shock anyone if that 43% was being totally bungled while it got historically larger every year? Of course not.