The NBA system is not broken, says NBPA vice president Mo Evans. Owners are not losing money, he claims. And Malcolm Gladwell explored the New Jersey Nets’ financial situation for a Grantland piece, concluding that the benefits of owning the Nets (and other NBA teams) extend far beyond the revenues reported on the team’s bottom line.
Deadspin previously examined New Jersey Nets ownership as part of its own investigation into NBA owners’ claims of losing money, reaching the same conclusion as Gladwell: even the Nets, who Gladwell writes are being used by David Stern as “a case study of basketball’s impoverishment,” are substantially profitable. The NBA would like us to believe that NBA teams lose money, but in reality, owners benefit from their franchises in dozens of ways that have nothing to do with ticket sales, sponsorship deals or apparel purchases. Read Gladwell’s piece to find more of the auxiliary benefits of owning an NBA franchise.
The most important point is that owners profit off their teams because of deals related to the teams or deals that were made possible because of the ownership. Gladwell writes about former Nets owner Bruce Ratner, who leveraged his Nets ownership into receiving an eminent domain mandate from Brooklyn, which allowed Ratner to expropriate land from current owners and begin building a $4 billion real estate development, made possible by the fact that Ratner would include a basketball arena and would agree to move the Nets to Brooklyn. Ratner isn’t alone in leveraging NBA ownership into enormous business deals. ESPN reporter Brian Windhorst pointed out that Dan Gilbert used the Cleveland Cavaliers’ Lebron-era success to convince voters to give him a “sweetheart” casino deal. Largely because of his two new casinos, Gilbert’s net worth has increased by approximately 50% in the past year. He was recently named to the Forbes 400, a list of America’s 400 richest people, for the first time since 2007, and he is joined on the list by 12 other NBA owners.
Realistically, the NBA has suffered from the recession just like any other business. Revenues are up (league-wide revenues reached an all-time high in 2011) but expenses have ballooned and basketball-related income has decreased as a result. That part of Stern’s tale is true. But it is difficult to believe that owners are in any way hurting because of a broken NBA system when being an NBA owner opens revenue streams that otherwise would remain closed. Without the Celtics, Wyc Grousbeck would not be looking forward to owning 20% of Comcast SportsNet New England. Without the Nets, Mikhail Prokhorov would not own part of a $1 billion arena, nor would he have made whispers in 2010 about building an office center near the new Brooklyn stadium that has “explosive profit potential.”
Still, David Stern would like us to believe that NBA franchises are draining money from the owners’ pockets. NBA owners are searching to reinvent the entire NBA system in their favor, and the only way to convince the players to overhaul the current system is by arguing that the NBA is a struggling business. As Gladwell finishes his piece, “In the end, this is the lesson of the NBA lockout. A man buys a basketball team as insurance on a real estate project, flips the franchise to a Russian billionaire when he wins the deal, and then — as both parties happily count their winnings — what lesson are we asked to draw? The players are greedy.”