Blogs My Two Cents

NBA owners report losses, blame CBA for lack of profits

By Aakash Jain ’14
THE ROUNDUP

Just a few weeks after Commissioner David Stern crowned Dirk Nowitzki and the Dallas Mavericks league champions, the National Basketball Association announced an indefinite lockout July 1 at 12:01 a.m.

Unable to successfully negotiate terms to a new Collective Bargaining Agreement with the National Basketball Player’s Association since the beginning of 2011, the NBA has essentially released all current players from their contracts.

Much of the dispute is founded on each party’s desire to maximize its own revenue. Such self-interest is expected in a business, but some NBA owners have resorted to intolerable methods of deceit in order to put more money in their pocketbooks.

While the association’s Nielsen ratings have been steadily climbing since 2007, 22 of the 30 NBA owners claim their organizations lost money last season and are blaming the terms of the last CBA as the root of the problem. Proposed modifications include a hard salary cap, a franchise tag and a revised owner-player breakdown of the Basketball-Related Income.

Despite supposed concerns for turning a profit, a great flurry of ownership changes has recently occurred in the NBA. The New Jersey Nets, Golden State Warriors, Washington Wizards, Charlotte Bobcats, Detroit Pistons, Atlanta Hawks and Philadelphia 76ers all have been transferred to new majority owners in the last two years, often for much higher prices than they were purchased. In fact, inflation alone does not account for such large increases in price; these franchises have certainly increased in value.

Perhaps owning an NBA team isn’t as horrible as fans are led to believe.

Rodney Fort, a sports economist from the University of Michigan, recently explained how the New Jersey Nets, and possibly other teams, could be misinforming us: “The first thing to do is toss out that $25 million loss. That’s not a real loss. That’s house money. The Nets didn’t have to write any checks for $25 million. What that $25 million represents is the amount by which Nets owners reduced their tax obligation under something called a roster depreciation allowance…”

The RDA dates back to 1959 and essentially represents the depreciation of an NBA team’s roster. The IRS recognizes the fact that players, as they age, decline in value to their owners, and it accordingly gives tax breaks.

According to Fort, franchises such as the New Jersey Nets are reporting these losses in player value as deficits in their overall incomes. By the same logic, why don’t they report player improvement and development as revenue?

Basketball is a team sport that emphasizes integrity and trust among players, but it seems that the NBA owners are intent on breaking the rules.

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