Photo: AP Images
If you ask Pacers’ star forward Danny Granger, the NBA isn’t fair.Granger is one of the best scorers in the NBA, but his small-market squad appears incapable of pairing him with a star sidekick. He thinks the problem is revenue sharing.
“It’s not fair,” Granger told CBSSports.com. “If everyone in the NBA and the owners all commit to this league to keep it going, you’ve got to share revenue. How can Milwaukee compete with Los Angeles? It just can’t. It never will. I don’t care if they sell out every game, L.A. is going to get mounds and mounds of more money. That’s what I think the big chip should be in the bargaining process.”
Of course, once he mentions “the bargaining process” the siren sounds. His stance is a position that the NBPA shares. Perhaps Granger is legitimately concerned about the Pacers’ and Bucks’ financials, but more likely, he’s focused on his own bank account. Revenue sharing, in theory, gives more teams a chance to bid on free agents, thereby driving up free agent salaries. Granger is just touting the NBPA agenda.
Actually, players aren’t the only ones who like the sound of revenue sharing. Fans and sponsors would welcome the extra competition, small market owners would welcome the extra cash, and even David Stern is keen on the concept. (In fact, the NBA has a small – OK, tiny – $49 million revenue sharing fund that it instituted in 2008, and gives a few million dollars to small-market teams.)
But the data shows that those deep-pocketed owners in New York and Los Angeles might as well keep their cash. The size of the market isn’t what makes teams profitable, and the size of the payroll isn’t what makes them winners.
According to Forbes data, four teams in top-15 U.S. markets lost a combined $125 million from 2005 to 2009, the last years of available information. Meanwhile, the Lakers and the Bulls made tens of millions, but so too did franchises in Sacramento, Utah, San Antonio, and Cleveland.
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As you can glean from these charts, no one statistic correlates with operating income. But you can be sure that spending more money than your competitors do to obtain fewer wins is an unprofitable proposition.
Washington, in the nation’s ninth largest media market, had a nearly identical won-loss record to Indiana over the five-year span, but earned $87 million more in operating income. The Wizards generated slightly more income, but also spent $7.6 million less each year on player expenses. If the Pacers simply reduced their payroll to equal that of the Wizards, their $26 million loss would transform into a $12 million profit.
In this five-year span, eight franchises – Phoenix, San Antonio, Denver, Detroit, New Jersey, New Orleans, Chicago, and Utah – finished with more wins than Indiana despite paying substantially less in player salaries between 2005 and 2009. Of those teams, only the Nets lost more than $1 million per year.
Photo: The Associated Press
Small market owners gripe that its impossible for them to stay afloat without sustained on-court success, while large-market teams rake in profits no matter what. But how does that explain the Dallas Mavericks? Mark Cuban’s $75 million loss dwarf those of Pacers’ owner Herb Simon.Sure, Mark Cuban and Knicks’ boss James Dolan can afford to incur those losses, but they are losses nonetheless. In essence, the Pacers, Bucks, and other small market teams are griping over rival owners’ riches.
And that’s the true inequity in NBA financials.
Some owners are willing to bankroll losses to assemble the best roster they can, while others aren’t. As shown in the chart above, Cuban will do whatever it takes to win.
But Donald Sterling doesn’t care about his team’s performance, and would rather sit back and collect profits in the league’s second-largest market. Only the Hawks and the expansion Bobcats spent less on players than he did during this time.
Until someone who is willing to lose money buys the team, small market franchises must behave efficiently to be viable. The other team to dominate the last decade wasn’t New York: it was San Antonio. One spends a lot, the other spends wisely.
Between the leaguewide salary cap and the standards of excellence set by the Spurs and Jazz, it’s clear that efficiency is attainable in any market. And with the exception of once-a-decade free agents like Shaquille O’Neal or LeBron James, a fat checkbook isn’t the key to success. Teams must draft well, scout meticulously, and unearth diamonds in the rough.
And that’s where many small-market teams have failed over the years. In 1998, the Bucks sent rookie Dirk Nowitzki to Dallas for Robert Traylor. That wasn’t big, bad Dallas wielding its power over the little guys in Milwaukee, forcing them to trade a future Hall-of-Famer. Nowitzki was signed on the cheap. The Bucks simply weren’t shrewd. Neither was Charlotte when it traded rookie Kobe Bryant to Los Angeles in 1996, and Indiana certainly wasn’t shrewd spending nearly $70 million to win less than half of its games. As we’ve seen in baseball, better revenue sharing will not solve these problems. It will merely force the New Yorks and Bostons of the league to pay a little bit more than they intended to sign coveted free agents. Small-market teams will always rely on efficient roster building to compete with the biggest spenders.
So until Milwaukee and Indiana figure out how to replicate the Spurs success – by the way, Mr. Simon, Mr. Kohl, I can be reached at the e-mail address below – those markets are best off hoping a billionaire with bottomless pockets has his or her eyes on the NBA executive suite.
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