Simple Solution to NBA's Financial Woes: Contraction


On July 1, just over three months from now, we will have the answer to almost every pressing NBA question. Can the Heat put it together when it counts? Is Derrick Rose the MVP? Will the Lakers three-peat? Yet we still won’t know the answer to the most important question of all: will there be a season in 2011-12?

Unlike in the NFL, where the owners and players are making far too much money to forfeit a season’s worth of revenue, this is a legitimate question when it comes to the NBA. July 1 marks the expiration of the league’s collective bargaining agreement, and if a new deal cannot be reached by then, the NBA owners will almost certainly follow the lead of their NFL brethren and lock out the players. The NFL owners have taken criticism for failing to open their books, and for good reason—you can’t credibly argue that you’re not making money when you refuse to share financial information with the players.

While NBA owners have not fully disclosed their financial records with the players, they’ve shared more than the NFL, and even union boss Billy Hunter admits that several teams are losing money (commissioner David Stern contends that as many as 15 teams are in the red—that’s half the league). The financial health of the league will be the single most important issue in the negotiations this summer, and both sides certainly have their own ideas about how to fix the system.

The players argue that the league’s financial problems aren’t as bad as they seem, while Stern claimed the league lost $300 million last year during his state of the league address at the All-Star Game. The players’ union has repeatedly argued that Stern and the owners have exaggerated their losses, and with TV ratings soaring and the league’s popularity as high as it’s been since Jordan, it is hard to imagine that the league won’t be making money this season. The union has suggested that the league use revenue-sharing, similar to the system MLB has in place, to cover any losses that the smaller teams might incur. The league says that this simply won’t work due to the number of teams losing money, and that stricter measures, such as shorter and less expensive contracts and a hard salary cap, must be implemented.

However, there is another option, one which may be uncomfortable for players, fans, and owners to accept: contraction. Each side has valid reasons for wanting to take this step. For players and the union, contraction means fewer jobs; the fans of the contracted teams face the devastation of losing the NBA in their city; the owners lose TV markets, while the owners of the contracted teams lose their investment. But in the long run, contraction may be the best option for the league. Even with contraction, smaller contracts and revenue sharing may still be necessary to solve the league’s financial problems, but neither side would have to concede as much in negotiations as it would without contraction.

The main positive of contraction, aside from saving the league money, is that it raises the overall skill level of the league. Toronto, Washington, Cleveland, Sacramento, and Minnesota all have winning percentages below .300 this season. Among those teams, Washington is 1-33 on the road, and Cleveland may be the worst team of all time, losing an NBA-record 26 games in a row. These teams aren’t just bad—they’re historically bad. Contraction creates more competition for jobs and eliminates the league’s worst players, making every team better. There will always be bad teams in the NBA, but the worst teams in a 26-team league will always be better than the worst teams in a 30-team league.

So if the NBA were to contract, how many teams should go? One team wouldn’t really do anything, but to get rid of four or five teams right now seems a bit drastic. Contraction is a serious step—once the teams are gone, there’s not going back. That’s why it would make sense to begin with two teams. By contracting two teams, the league and the players would have the opportunity to review the new system and make their own judgments from there without the finality of a larger contraction.

As for which teams to contract, there are two obvious candidates: the Kings and the Hornets. The Kings, owned by the Maloof family, seem set to move to Anaheim next season (a decision must be made by April 18). The Hornets have been under league control since last year because former owner George Shinn could not find a buyer, the latest misfortune for a franchise that has been in trouble ever since Hurricane Katrina hit in 2005.

The Kings are currently on pace to finish in the league’s bottom two of attendance for the third consecutive year. The Hornets sit in 24th this season, and have not finished higher than 19th in the six seasons they’ve played fully in New Orleans (they split the 2005-06 and 2006-07 seasons between NO and Oklahoma City). At least Kings fans have an excuse—their team has been terrible recently. Hornets fans have no such luxury, as the team is currently set make the playoffs for the third time in four seasons. The Hornets had their best season in franchise history in 2007-08, winning 56 games behind a dynamic star player in Chris Paul, yet they drew just 14,181 fans per game, 26th in the league. Oh yeah, and they hosted the All-Star Game that year. If a season like that can’t energize a fan base, that city doesn’t deserve an NBA team. Given the league’s ownership of the Hornets and few appealing cities for relocation, the obvious move here is to contract the Hornets.

While the Kings, unlike the Hornets, have proven that they can sell out games when the team is good, the team is in desperate need of a new arena. Opened in 1988, Power Balance Pavilion (formerly known as ARCO Arena) is the league’s second smallest venue (behind only New Orleans Arena), and is tied for the third-oldest. The Maloofs have been unable to reach an agreement with Sacramento or the surrounding area for a new arena despite multiple attempts, and this has led to the Kings’ likely relocation to Anaheim. Instead of moving the Kings to a market that already has two NBA teams in the nearby Clippers and Lakers, it’s time for David Stern to get rid of the team. The Lakers are hugely popular and so the Kings are unlikely to gain any new fans there, and if you’re still a Clippers fan at this point, it’s going to take a lot more than a new team to get you to change colors, especially now that Blake Griffin’s in town.

Despite being founded in 1945 (among current NBA teams, only the Pistons franchise is older) the Kings franchise has been in a constant state of flux, calling no less than five different cities home in its 66-year history. Prior to moving to Sacramento, the Kings had never spent more than 15 years in one city, and now it appears the Kings’ 26-year reign in Sacramento will be coming to an end. Instead of moving the team to Anaheim and moving it again once it fails there, the league needs to put the franchise out of its misery and contract it. Like the potential contraction of the Hornets, getting rid of the Kings will be painful for the die-hard fans in Sacramento, but it is a step the league must take to improve its financial health. As it goes in any industry, the strong businesses will prosper while the weak get left behind, and at this point, the NBA simply doesn’t have the means to continually bail out its struggling franchises.


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