Calling Foul On NBA’s Claims Of Financial Distress

by Nate Silver, The New York Times

At midnight on Thursday, the N.B.A. locked out its players in what could be the start of a long labor dispute. Some observers, like ESPN’s Michael Wilbon, believe the entire 2011-12 season could be threatened.

Such a move would not be without precedent: the N.H.L. canceled its 2004-5 season. But the

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N.B.A.’s current financial condition is different than the N.H.L.’s in one important respect. Whereas there was almost no doubt that the N.H.L. was in fact losing money in advance of its lockout — player salaries had mushroomed by more than 400 percent from 1994 to 2004, according to independent estimates — the N.B.A.’s claims of financial hardship should be viewed more skeptically.

Instead, independent estimates of the N.B.A. financial condition reflect a league that has grown at a somewhat tepid rate compared to other sports, and which has an uneven distribution of revenues between teams — but which is fundamentally a healthy and profitable business. In addition, it is not clear that growth in player salaries, which has been modest compared to other sports and which is strictly pegged to league revenue, is responsible for the league’s difficulties.

The table below reflects the N.B.A.’s financial condition from its 1989-90 through 2009-10 seasons, as according to estimates prepared by Forbes and Financial World magazines. (All figures are adjusted for inflation. Some data was not published by Forbes in some years and is therefore left blank.)



The first column is league’s gate receipts or ticket revenues; the Forbes data suggest this is one area of legitimate concern. Adjusted for inflation, ticket revenues are down 6 percent compared to five years ago, although they are up 22 percent compared to the 1999-2000 season.

Other revenues, like licensing and media rights, have increased at a healthier clip, because the N.B.A. is locked into long and lucrative television contracts. They have grown by 11 percent over five years, adjusted for inflation, or by 30 percent over 10 years.

The league’s primary expense is player salaries. Continue on to the rest of this incredibly informative article..

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