Operating Losses in the NBA
From an article entitled “A confidential report shows nearly half the NBA lost money last season. Now what?” from ESPN.com:
Despite a flood of new national television cash, 14 of the NBA’s 30 teams lost money last season before collecting revenue-sharing payouts, and nine finished in the red even after accounting for those payments, according to confidential NBA financial records obtained by ESPN.com.
The article itself is very interesting and the authors touch on many things that I talk about in my Sports Economics classes. In any case, I am skeptical of the claims of widespread financial losses of major sports teams. The authors touch on this.
The players union and its economists have long claimed that teams use accounting techniques to make them appear less profitable than they really are. The union, which is focused on basketball-related income more than teams’ balance sheets because that is what determines their split, has the power to review some team’s books by conducting its own audit of five teams per season. It rarely exercised that power until 2015. According to several sources familiar with the matter, the union audited five teams for the 2016-17 season. The new CBA will allow it to audit 10 teams, starting this season.
Years ago, Deadspin obtained and published financial statements of so-called small market (i.e. small demand) baseball teams and showed, not surprisingly, that even teams from little markets make healthy profits despite claims to the contrary.
NBA link via Omoleso Ogunnowo.