A confidential report obtained by ESPN.com’s Zach Lowe and Brian Windhorst shows that nearly half of the NBA’s teams reported net losses last season. Though this field dwindles down to nine when taking into account the league’s revenue-sharing program, roughly one-third of the Association still finishes in the red.
Here’s more from Lowe and Windhorst:
The nine teams that lost money, by the league’s accounting for net income (which includes revenue sharing and luxury tax payments), were the Atlanta Hawks, Brooklyn Nets, Cleveland Cavaliers, Detroit Pistons, Memphis Grizzlies, Milwaukee Bucks, Orlando Magic, San Antonio Spurs and Washington Wizards. Sources pointed out that by a different accounting measure the league tabulates — operating income, which discards various debt obligations — only 10 teams (rather than 14) lost money before accounting for revenue sharing.
“Teams in small markets are told we need to run our businesses better so we can make money,” one ownership source told ESPN.com. “But teams in the largest markets can run their businesses poorly and still make money.”
Changes to the current revenue-sharing model—which Lowe and Windhorst note is complex—could be in the works as a result of the latest returns. But some teams are also making a case to change it so the most profitable organizations, and the biggest markets, don’t have to sacrifice as much of their own returns.
This issue is a convoluted one, and it’ll be interesting to see what the NBA’s board of governors come up with when they meet at the end of the month. It’s also important to note that these red-line/green-line figures aren’t end-all reports. As Lowe and Windhorst note, profits from non-basketball-related activities aren’t included, so some teams that claimed losses own their arenas and are able to capitalize on other events (such as concerts). They’re not bleeding as much money as you think.
Still, it appears some change will be made to the revenue-sharing program anyway. Maybe it won’t be as drastic as guaranteeing every team a flat-rate profit, but the league probably won’t stand for the optics that accompany this news. Yes, the NBA is in a great place, and most are smart enough to know all these owners aren’t being unfairly hammered. But that likely won’t stop the Association from trying to find a way to maximize perception. And short of expansion or incumbent-team relocation, tweaking the revenue-sharing model is the best way to even the playing field, keep small-market franchises happy and continue to give off the appearance of irreversible growth.