The Heat Will Not Go Undefeated This Season

In case you went to bed early last night, the NBA season began and the “feature game” saw the Boston Celtics beat the Miami LeBrons. Here is the best news to come out of that game:

    All speculation about an undefeated season for Miami has been dashed.

    Writers on deadline with no good ideas about what to say will not be able to go to the Miami Heat schedule to project when they will lose their first game.

Here is the reality of the Miami Heat:

    They are going to be very good for one simple reason. An NBA team with two superstar players is a very good team. The Heat have two superstar players and one star player.

The start of the NBA season gives me the opportunity to comment on recent proclamations by David Stern regarding the NBA and its need for changes in the new CBA. Last year, David Stern foreshadowed the league negotiation position when he said the NBA could lose $300 – 400M last year. Over time, that figure has been “refined” and now the position is that the league as a whole is losing $340M.

I need to interject here some analysis of that basic premise for the league’s negotiating position. I do not doubt for an instant that the NBA is less profitable than it was several years ago. David Stern once used the phrase that some owners were in a “diseconomic situation” and were spewing red ink all over the place. Well, if in fact the NBA is losing $340M as a whole (I do not believe that.) then some of the teams must be losing a bundle because there are some teams that are doing well.

The reason I am convinced that league profitability is not what it was – - prior to the “economic dislocation of 2008” – - is evident to me every time I tune into an NBA game. I see more empty seats now than I used to see. For example, the Philadelphia 76ers play in an arena that seats something north of 20,000 folks for a basketball game. When I watched the team play last year, the arena looked to be at least one-third empty and maybe 40% empty – - and I am not talking about just one game. That means there were at least 7,000 seats left unsold.

The NY Knicks never played to an empty seat in Madison Square Garden unless there were 18 inches of snow on the ground and 4 more on the way. Tune into a Garden game this year and you will see plenty of empty seats.

The reason that is important is that those empty seats are not all in the nosebleed sections where the face price of the ticket is $22. There are plenty of empty seats in the sections where face value on the ticket is in the $60 – 100 range. That means that 7000 empty seats equates to about a half a million dollars in gate revenue that goes unrealized for perhaps as many as 30 games a year. Add to the loss of $15M there, the uncaptured revenue that those 7000 folks would spend on food, drink and souvenirs at the arena and suddenly you can see that lots of teams are nowhere near maxing out on revenues.

The estimated total for salaries/benefits for NBA players is in the neighborhood of $2.3B per year according to David Stern. Even giving him the benefit of the doubt on how that is calculated, it is probably safe to say that “player costs” for the NBA are $2B or slightly more. So, if the NBA is going to “break even” as a whole, it needs to shed $340M in costs and that equates to player salaries and benefits – -because no other expense area comes close to that kind of number. Moreover, to become profitable with a tidy return on investment, the league would need to shed another $350M in costs so the league as a whole would be in fat city. That is where the goal of cutting player salaries/benefits by $700M comes from.

Time for another interjection here… David Stern is “negotiating through the media” here; in such cases, the best you can hope for is that there is a kernel of truth in his statements surrounded only by the direst of projections regarding the future viability of the NBA. Even Forest Gump would recognize that this position consisted of the truth, the whole truth and nothing but the truth.

Then, just to be sure that everyone gets a feeling for how precarious the economic position of the NBA is, David Stern throws out the word “contraction”. Anyone who has read these rants for the last decade knows that I am all in favor of contraction but not for economic reasons; I favor contraction because it would concentrate the talent on fewer teams making all the games better than they are. However, contraction as an economic measure does not make much sense to me.

The Golden State Warriors – - hardly one of the premiere teams in the NBA – - recently sold for a reported $450M which is a record price for an NBA franchise. So consider the possibility of “contracting” six of the “less than profitable” franchises. Those owners will have to be bought out and with a recent price tag of $450M for a middle-of-the-road franchise on the record, said owners would probably want $400M each for their teams. OK, let us assume someone talks them down to $350M per team and they accept that without a flurry of lawsuits. The “contraction price tag” comes to $2.1B – - or the amount that the league now pays its players per year. That contraction would save 20% on the annual player costs/benefits because there would be 20% fewer players meaning that the union would then have to swallow additional pay cuts on top of losing jobs for 20% of its members.

I am sorry to have to report to you that will be a very “tough sell”.

There is a nagging voice in the back of my head telling me that a lot of what David Stern is trying to sell here is chocolate-covered buncombe. When he is not holding a press conference to announce the dire economic straits of the NBA, David Stern is actively engaged in finding ways for the NBA to partner with a variety of entities in foreign countries. He is dedicated to “globalization” about as much as anyone I know. So, how does he convince all these foreign entities to join forces with an NBA whose economic condition is on life-support at best and has received the last rites at the worst? What is the pitch? Hey, join up with us and we can all go down in flames together?

I don’t think so.

So here we stand. The league has set out its bargaining posture. The union trots out its standard wail that the league will not show them the books so they can see that there are losses and until they see them they will not believe they are there. [Aside: Players unions everywhere take this position with the same certainty as Thomas the Apostle in the Bible because they know they will never have to confront “the books” because the books are cooked.]

However, if David Stern wants some “talking points” on the contraction scenario that is never going to happen but might be used to garner some public support for his position, let me suggest:

    Improved talent for each of the teams left standing

    Fewer owners bitching about economics to scam a new arena deal from local pols who do not mind a bit dipping into the pockets of area residents

    Fewer prima donna players bitching about every foul call

    “Gear” from contracted teams immediately becomes collectible.

Hey, it’s the 2010 version of “a chicken in every pot…”

No need to thank me…

Finally, an NBA note from Dwight Perry in the Seattle Times:

“With carrot-topped Brian Scalabrine now plying his NBA trade in Chicago, how long before he’s endorsing Red Bull?”

But don’t get me wrong, I love sports…

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Comments

  • Ed  On October 27, 2010 at 1:58 pm

    I believe you mant even Forrest Gump would see Stern’s position was NOT the truth, the whole truth, and nothing but the truth.

    Then again, Stern is a lawyer – the truth, the whole truth, and nothing but the truth are 3 different things to him

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