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NBA Lockout Analysis: How True are David Stern's Claims?

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If you’ve been following the NBA lockout (or sports in general, for that matter), you know that one of the main claims of David Stern and the owners is that the league is losing hundreds of millions of dollars per year, and that over half the league’s teams are losing money (17 according to this article from January). Yet this summer alone, three teams have already been sold (or are very close to being sold). So what does this say about the NBA?

It says that three very smart men who have already made millions upon millions of dollars in other investments aren’t worried about the league’s financial woes. What it says to me is that if these new owners are willing to invest $300 million or more in the league right now, the NBA’s financial problems aren’t as severe as David Stern is letting on. So this week, we’re going to combine the Stupid NBA Move of the Week and Rogue of the Week and give them both to David Stern and the NBA’s owners.

Let’s start with the ownership news that broke last week announcing that California businessman Alex Meruelo bought 80% of the Hawks for $300 million—even though the Hawks lost over $7 million last year and are only worth $295 million according to the numbers from Forbes in the article above. This move, more than the other two, should be cause for concern for those who are apt to believe everything David Stern says.

When Stern uses the fact that teams are losing money as a major negotiating point against the players, it’s hard to believe him when he has new owners lining up to invest in the league. Either these new investors (and Stern) know something we don’t—namely that the NBA isn’t in nearly as bad shape as Stern would have us believe—or they’re crazy. Because who invests in something that is both losing money and will be faced with a new, as yet unknown, method of doing business that no one is prepared for at the moment (the new CBA)?

One way of looking at this situation from Meruelo’s point of view would be to liken the NBA’s current struggles as similar to a recession (and I am sure they are linked to the larger recession in the US), and Meruelo’s investment as a way to take advantage of the league’s situation. Meruelo might figure that with a young team that figures to be decent for a few years to come, the Hawks are bound to turn things around and make money, just as the league will turn things around and make money, as it has for much of its existence. Even so, I find it curious that Meruelo, as well as the new owners in Detroit and Philadelphia, chose to purchase their squads now and not, say, in February (or whenever the lockout is resolved), when they will have a better idea of the league structure under the new CBA.

Perhaps they figured that the cost would rise once a new CBA is reached, or perhaps the current owners were eager to sell (they are, after all, supposed to be losing money). But what it comes down to in the end is Stern trying to have his cake and eat it too. You simply can’t tell everyone your league has an unsustainable business model and that teams are losing money left and right when three teams have been sold to new owners since the end of the season.

My other issue with these sales (along with Meruelo, billionaire Tom Gores bought the Pistons in April, and a group led by Joshua Harris bought the 76ers last month) is one that I’ve raised before in this space—it downplays the seriousness of the current labor crisis. If Stern and the other owners were really committed to solving this lockout, shouldn’t that be their top priority? Doesn’t selling teams in the middle of a lockout make for confusing/impossible labor discussions? How can the Sixers’ owner have any input into a new CBA if the team is in the midst of an ownership change? I feel that if Stern truly meant business, then he would not be trying to negotiate a new CBA while simultaneously incorporating a slew of new owners.

Furthermore, Stern has tried to downplay the fact that some owners wield more power in these negotiations than others—yet there’s no way that the three new ownership groups will have the clout at the negotiating table of someone like Jerry Buss, owner of the Lakers. I understand that ownership changes are a part of sports, but these changes in the NBA right now seem ill-timed, and, more importantly, divert attention away from the CBA negotiations. Stern does have more on his plate than just CBA negotiations, but, as commissioner, resolving the lockout HAS to be number one on his list of priorities (by a long shot). And unfortunately, the sale of franchises is just the latest thing that’s shown that while the new CBA is important to Stern, he has plenty of time to attend to other matters. It simply can’t be that way, because every second Stern and the owners spend doing something else is a second closer to a Fall without the NBA.


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