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Wednesday, October 26th, 2011 at 9:15 am  |  26 responses

Small Market Owners Driving the NBA Lockout?


NBA team owners in the smaller markets insist that they’re losing a ton of money each year, and have been moaning about it for years. And even though they haven’t made their finances public to prove just how bad things are, raising serious doubts about their claims as a result, they’re the ones who are holding things up in this latest lockout. ESPN explains: “A couple of days before the start of training camp in 2006, David Stern received an uncomfortable letter at the NBA’s New York offices. Eight owners signed a petition that demanded Stern address the small market/big market financial disparity they felt was a serious and growing problem. Obviously, they didn’t need to write him a letter like he was their local representative in Congress; he works for them. They did so to make a symbolic point and then released the letter to some media outlets to make sure the issue became public. It read: ‘We are asking you to embrace this issue because the hard truth is that our current economic system works only for larger-market teams and a few teams that have extraordinary success on the court and for the latter group of teams, only when they experience extraordinary success. The rest of us are looking at significant and unacceptable annual financial losses.’ The authors of the letter were Paul Allen of Portland, Herb Simon on Indiana, Bob Johnson of Charlotte, George Shinn of New Orleans, Larry Miller of Utah, Michael Heisley of Memphis, Glen Taylor of Minnesota and Herb Kohl of Milwaukee. Johnson and Shinn have since sold their teams and Miller has passed away, giving way to his son, Greg. But the situations in those markets haven’t changed. In essence, that letter is the root of the current lockout. And, it is turning out, perhaps a core reason the owners can’t make a deal with the players after more than two years of negotiations … They are furious that the players are getting paid so much. They are furious that the NBA’s current revenue sharing ($60 million a year) is worth less than half of a league like the NHL ($137 million). And they are trying to take advantage of throwing their new weight around. This is what deputy commissioner Adam Silver was referring to last week when he mentioned ‘robust’ discussions about revenue sharing at recent owners’ meetings. This is also what Hunter has been referring to when he’s described a fracture within the ownership ranks. At the heart of this labor dispute is money, of course. But there’s that other classic element at play as well: power. And who has it among the ownership ranks is changing.”

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  • Kilo

    See how the majority of those owners writing the letter are losers? They aren’t wimming and there are giving out bad contracts as they do it.

  • Kilo

    Winning, I meant

  • http://www.slamonline.com UNFROZEN CAVEMAN LAWYER

    HERE IS AN IDEA: DONT TRY TO MAKE A PROFIT SOLELY OFF A PROFESSIONAL SPORTS TEAM IN A SMALL MARKET. DO SOME RESEARCH BEFORE YOU SPEND HUNDREDS OF MILLIONS AND INEXPICABLY EXPECT A FAST PROFIT.
    THAT SAID, I RESERVE MY DOUBTS AS TO WHETHER EVEN THE SMALL MARKET TEAMS ARE TRULY LOSING MONEY. MAYBE STRICTLY WITHIN THE TEAM THEY ARE LOSING MONEY, BUT WHEN TV DEALS, ARENA NAMING RIGHTS, FOOD AND DRINKS, OTHER NEARBY BUSINESSES OWNED BY THE TEAM OWNER, ETC, ARE CONSIDERED, IM QUITE CERTAIN MONEY IS BEING MADE. OTHERWISE, WHY WOULD THEY CONTINUE THEIR OPERATIONS FOR SO LONG?

  • http://www.slamonline.com UNFROZEN CAVEMAN LAWYER

    INEXPLICABLY

  • http://www.optimabbc.be Max

    Agree with UCL

  • Sean B

    These owners are a joke… who really buys a professional sports team with the goal of making money? Sure if you’re successful you expect to turn a profit, but I hardly doubt that these rich ass guys are sitting around believing they can make hella money off of an NBA franchise. Maybe in the NFL… but the reason these guys buy these teams is because of an ego boost. To them it’s a real sign of their wealth.

  • CubicleWorker

    Caveman, because there was a CBA in place.. now there’s not, hence lockout. And Kilo, when you think of the “bad contracts” in the NBA I don’t think about any players on those teams..

  • CubicleWorker

    Do you think you really need an ego boost when you already have everything in the world? It’s probably being fun to be an owner, picture playing NBA2k but real life.. but if it costs you $25M/year to play that game I’m sure its less fun

  • http://slamonline.com YKnoT

    The article should be titled “Small minded owners driving the NBA lockout”

  • http://slamonline.com Allenp

    When you think about bad contracts you don’t think about the Grizzlies, Bucks, Bobcats, Hornets, Timberwolves and Pacers?
    Really?
    Wow.
    Drew Gooden, Tyson Chandler, Emeka Okafor, Darko, T.J. Ford, Dahntay Jones, Corey Maggette, John Salmons, Mike Conley, Stephen Jackson, Gerald Wallace, Tyrus Thomas, Michael Redd
    Those are all players that signed horrible deals with one of the teams on that list at some point. And those are just the obviously horrible contracts, not the ones where owners overpaid but it was somewhat acceptable, like what Memphis did with Rudy Gay and Randolph.
    And that was off the top of my head.

  • LA Huey

    Cubicle Worker, I disagree. I feel rich folks are even more prone to a need to stroke their ego. I think most owners see their NBA teams a status symbol and a way to compete amongst their peers (like a fancy sports car). I believe they’re totally entitled to pursue a profit while doing so but if that’s their primary concern, there are other businesses and industries out there that are easier to run and from which they can profit. And as we’ve seen recently, there are plenty of billionaires champing at the bit to buy those teams from them if they don’t like the business and wanna make some money.

  • http://slamonline.com Allenp

    It’s amazing how many of the NBA teams are/were family businesses.
    Like Stan Kroenke turning over the Nuggets to his 30-year old son Josh. Or Larry Miller’s son getting the team. Or the Davidson family and Pollin families before the sales.
    And Mickey Arison said he bought the Heat so and his son could bond over basketball. Jerry Buss and the Buss children. Herb Kohl. It’s really interesting.

  • http://slamonline.com Allenp

    Also, one more point. The article actually notes that the small market teams were pushing for better revenue sharing. But when that was a non-starter, the discussion turned to breaking the CBA.

  • CubicleWorker

    “Drew Gooden, Tyson Chandler, Emeka Okafor, Darko, T.J. Ford, Dahntay Jones, Corey Maggette, John Salmons, Mike Conley, Stephen Jackson, Gerald Wallace, Tyrus Thomas, Michael Redd

    Tyson Chandler was a crucial peice to a championship team, Emeka is a solid center, T.J. Ford is a decent PG, Stephen Jackson is solid, Gerald Wallace is solid, Redd was averaging 20+ ppg at one point. If all of these players are overpaid then thank you Allenp for finally recognizing all along that NBA players are overpaid. Seriously, none of these guys have outrageous contracts compared to players of similar value. That’s why the system is broken, you have TJ Ford making more than an owner. Seriously, You could give the top three guys on every team $50 M, the rest $1M and that would be representative of their actual values to the team.

  • CubicleWorker

    With the exception of the top 10 players in the league the rest is pretty much dispensable. That’s the ENTIRE point, a guy who averages 15 ppg shouldn’t be making $12/season but that’s what the current CBA allows for and that’s why these teams are pushing for reform in the league.

  • CubicleWorker

    LA Huey I agree, but if you want to say that owning an NBA team isn’t strictly a business, you can’t say that it’s strictly a luxury item either. There’s no reason that EVERYBODY involved in the NBA shouldn’t be able to make money. Not when the overall business generates $4.3B in revenue. The players seem to want to allow owners to breakeven which just isn’t acceptable. Short of contraction the best option here is to have a 50/50 split (which i’ve said since June), increased revenue sharing among teams, steap luxury tax fines (which are distributed), some type of player restrictment clause whether thats a franchise tag or no sign and trade, and guaranteed contracts but one year shorter than the current system.

  • LA Huey

    I agree with a shorter max length on contracts, removing the S&T, increased revenue sharing, and a luxury tax system that gets progressively more punitive the further past the cap you get. 50/50 split on the BRI seems fair but I’m certain the owners would ask for more during the next CBA so I understand the players unwillingness to budge on 53%. I don’t like restricting player movement the way the NFL does their franchise tag. If a player is an unrestricted FA and they want to play elsewhere for less money, they shouldn’t be forced to stay (they already did that on their rookie contract). I also propose that you only get Bird rights if you signed your current contract with the team you currently play for and if you earned All-NBA, All-Defense, All-Star honors within the past three years.

  • http://slamonline.com Allenp

    Tyson Chandler did not deserve the massive contract he received. That was ridiculous.
    Michael Redd scored 20ppg, that should never equal a max contract. Max contracts should only go to players who are legit superstars and can carry your team on the floor and at the box office. Period.
    Gerald Wallace got damn near a max deal as well at one point.
    The players in the NBA have decided they are willing to take less money at the top of the pile in order to allow the cats lower on the totem pole to make more money. Besides, if you spent $50 on the top three players and $1 million on the rest, you would still have team salaries at the current rates. It would not create a change at all, it would just remove the ability to redistribute wealth.
    Your argument is that because the system in a capitalist society ALLOWS someone to make a certain amount of money there is a problem? Not that the system FORCES someone to earn that amount, but just ALLOWS it?
    Do you really see what you’re arguing? It’s wild. You’re saying that players should not be ALLOWED to earn as much money as possible even if somebody wants to pay them. That’s hilarious.
    I mean, there are 30 teams in the League. There are probably fewer than 10 true Franchise players. Another 15-20 serious stars. There is no way that you can have a serious basketball league with only 30 players.
    The “role” players are just as important to the success of the NBA and each NBA team as the stars because as history has proven without the right mix of role players around franchise stars you don’t win anything, and if you’re not contending it’s very hard to make money consistently. Fan want the possibility of a championship if they are going to keep spending money. Unfortunately, that requires General Managers and owners who understand how to manage their rosters by either drafting well, or handing out reasonable contracts to a collection of good talent.
    Too few teams have the patience and experience to do that, and thus their teams suck. And that’s the problem. Period.

  • http://slamonline.com Allenp

    And as I said on another post, the owners, with robust revenue sharing, could do far more than break even with a 53 percent split and definitely with a 50 percent split under the exact same “system.”
    they don’t want the same system, and they dont’ want robust revenue sharing. There is no reason they haven’t established a revenue sharing plan yet except for the fact that they want to get as much as possible from players so they have to divide the pie less.
    It’s obvious.

  • CubicleWorker

    Fair enough that you need more than stars to have a league, but my point is you can replace everybody from 6-15 on the rosters with players from elsewhere (a few exceptions apply of course). Allenp you are truly ridiculous, you argue that players should be able to earn as much as possible because of capitalism but that owners shouldn’t be able to utilize the benefits of capitalism in terms of HR? As in, if an employee isn’t performing you should be able to fire them. Obviously that can’t happen in the NBA. It’s funny how you compare things that are favourable to your argument but disregard the contrary point of view using the same analogies.

  • CubicleWorker

    “And as I said on another post, the owners, with robust revenue sharing, could do far more than break even with a 53 percent split and definitely with a 50 percent split under the exact same “system.”
    they don’t want the same system, and they dont’ want robust revenue sharing. There is no reason they haven’t established a revenue sharing plan yet except for the fact that they want to get as much as possible from players so they have to divide the pie less.
    It’s obvious”

    Refer to my point above, if you want to consider revenue sharing among owners then consider endorsement sharing among players. If everybody split the endorsements players could earn more than 50% in a 50/50 split

  • CubicleWorker

    “And as I said on another post, the owners, with robust revenue sharing, could do far more than break even with a 53 percent split and definitely with a 50 percent split under the exact same “system.”
    they don’t want the same system, and they dont’ want robust revenue sharing. There is no reason they haven’t established a revenue sharing plan yet except for the fact that they want to get as much as possible from players so they have to divide the pie less.
    It’s obvious. ”

    Same as this, if players accepted a 50/50 then had “endorsement sharing” players could make 53%

  • CubicleWorker

    “that requires General Managers and owners who understand how to manage their rosters by either drafting well, or handing out reasonable contracts to a collection of good talent.
    Too few teams have the patience and experience to do that, and thus their teams suck. ”

    I’m assuming you’re not going to reply in this thread anymore but Ill humour you here… what’s the “model NBA franchise” who satisfies this description?

  • LA Huey

    “…you argue that players should be able to earn as much as possible because of capitalism but that owners shouldn’t be able to utilize the benefits of capitalism in terms of HR? As in, if an employee isn’t performing you should be able to fire them.”
    Dude, teams have every right to waive a player if they don’t want them anymore. But if the team negotiated a contract that guaranteed a certain amount of money, isn’t the player still entitled to that amount even if they get ‘fired’? As a fellow fan, I understand your frustration with players not producing relative to their salary but it’s just as much on the team that asked him to sign.

  • http://slamonline.com Allenp

    Cubicle
    You can’t fire employees under contract for a set amount of time unless the grossly underperform or violate company rules.
    That’s why coaches keep getting paid. And general managers. And ESPN talking heads and writers.
    And every other employee with the juice to either include a guaranteed contract or generous severance package in any deal they sign.
    Capitalism doesn’t mean the boss has all the power. It means that the person with the most valuable supply has all the power. The question is whose supply is more valuable when you compare owners to players.
    My personal opinion is that as a whole, the two groups are about equal as far as value, and therefore should be close to equal in their split of overall revenue.
    You clearly disagree, which is fine, but your argument boils down to “Well they spend all the money and take all the risks.” This would be true if their entire business wasn’t dependent on the performance of the players, particularly the most popular ones. Without them, the owners cannot make big profits. It’s impossible. Nobody watches the D-League because nobody is wasting large sums of disposable income on inferior professional basketball. Period.
    San Antonio and OKC are model franchises from the drafting and cap management standpoint. Miami from the talent assembling standpoint as well as the Lakers.
    Detroit with their championship contending squads was a model. Phoenix had great talent as well, although the way they managed their draft choices was horrible.
    Memphis has done a good job in drafting and signing players, but their re-signings have been too expensive. They completely overbid for Conley, which was their biggest mistake. If you’re going to overspend, do it on someone like Rudy Gay, MAYBE ZBo. Not on Conley or Gasol or Mayo.
    Lots of teams in the League spend big money on players just to make a spalsh. It’s stupid.

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