October 24, 2017

The list of the most profitable NBA teams (and franchises that lost the most money)

2017/09/24 2:49 pm 2:49 pm2:49 pm0 0 comments

After ESPN reported that nearly half the NBA lost money last season — many fans were left scratching their heads. But what does it really mean?

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In short, it’s complicated. Calculating the total income and revenue for each NBA team isn’t as easy as one would assume. Each franchise is essentially a major corporation, so trying to figure out which teams are most and least profitable has to take into consideration a variety of factors. Those factors include luxury tax payments, revenue sharing from the league, merchandise sales, TV deals, debt obligations and other considerations that affect the balance sheet.

We won’t get into a discussion into the nitty-gritty details, so we’ll just report on how the league calculates net income and rank the teams based on the most-profitable to the least by trying to populate it from #1 to #30.

The Most Profitable NBA Teams
Rank Team Net Profit/Loss
1 Los Angeles Lakers +$115.4m
2 Golden State Warriors +$91.9m
/ Houston Rockets +$53.1m
/ New York Knicks +profit
/ Chicago Bulls +profit
/ 15 OTHER NBA TEAMS +/-
/ Cleveland Cavs -$18.3m
/ Atlanta Hawks -loss
/ Milwaukee Bucks -loss
/ Orlando Magic -loss
/ San Antonio Spurs -loss
/ Washington Wizards -loss
28 Memphis Grizzlies -$39.0m*
29 Brooklyn Nets -$44.1m
30 Detroit Pistons -$45.1m

As extensive as the ESPN article was in covering many of the bases, what it didn’t provide was the numbers for all 30 teams. The longform piece teased us with the top two teams and the bottom two teams. We were able to come up with three other teams’ (Rockets, Cavs and Grizzlies) approximate income by reading between the lines and doing some back-of-the-napkin math.

To try and complete this list, we had to make some assumptions based on the information that was available. Starting with the assumption that the Grizzlies were #28 on this list based on the $5m that separated them. In the article, the Grizzlies “lost nearly $40 million” quote and since we know that the Brooklyn Nets lost $44.1 million, we thought that was safe. We populated the seven other teams, in alphabetical order, that were widely reported to have also lost money.

On the top of the list, we added in the New York Knicks and Chicago Bulls below the Houston Rockets due to the huge markets that they play in — more on that in a minute — it’s another safe assumption that those two teams are somewhere in the top 8-10 teams in terms of operating in the black. For the rest? Your guess is as good as mine. You can see we added a row for the remaining 15 NBA teams not explicitly called out.

Until ESPN releases the data in the report, this is what we got.

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Why are NBA Teams Losing Money?

When all said and done, there were nine teams that had a net loss after the 2016-17 NBA season. Those teams were the Atlanta Hawks, Brooklyn Nets, Cleveland Cavaliers, Detroit Pistons, Memphis Grizzlies, Milwaukee Bucks, Orlando Magic, San Antonio Spurs and Washington Wizards.

You might be asking yourself how can a team like the Cleveland Cavs and San Antonio Spurs lose money after a successful 2016-17 season? In partiuclar, how can the Cleveland Cavs lose money with LeBron James and Kyrie Irving suiting up for them during a championship run? And how much would they have lost had the Cavs been a lottery team with no superstar draw?

When it comes down to it, it’s the size of the market that the team plays in that determines their financial performance – not how the team is run. “Teams in small markets are told we need to run our businesses better so we can make money,” one ownership source told ESPN.com. “But teams in the largest markets can run their businesses poorly and still make money.”

These are the NBA’s smallest markets ranked by their Nielsen rank:

Nielsen's Smallest NBA Markets
NBA Rank NBA Team TV Homes Nielsen Rank
30 Memphis Grizzlies 633,920 51
29 New Orleans Pelicans 641,620 50
28 Oklahoma City Thunder 722,140 41
27 Milwaukee Bucks 895,700 35
26 Utah Jazz 916,960 34
25 San Antonio Spurs 938,660 31
24 Indiana Pacers 1,086,310 27
23 Portland Trailblazers 1,143,670 25
22 Charlotte Hornets 1,189,950 22
21 Sacramento Kings 1,379,770 20

On the other hand, here’s the NBA’s biggest markets.

Nielsen's Biggest NBA Markets
Rank Market TV Homes
1 New York 7,348,620
2 Los Angeles 5,476,830
3 Chicago 3,463,060
4 Philadelphia 2,942,800
5 Dallas-Ft. Worth 2,713,380
6 San Francisco-Oak-San Jose 2,488,090
7 Washington, D.C. (Hagrstwn) 2,476,680
8 Houston 2,450,800
9 Boston (Manchester) 2,424,240
10 Atlanta 2,412,730

It’s no coincidence that the majority of the teams that profited are found in the largest markets (what’s your excuse Atlanta and D.C.?), and many of the teams that lost money are playing to smaller markets. Smaller markets equals less demand across the board. For the NBA, that means the fewer people there are to support the team buying tickets, concessions, merchandise and things worth money (which also means less people want to see them play on TV), the less cash the franchise brings in.

The New York Knicks are the perfect example of how playing in a large market matters — not necessarily wins or losses or how efficient it runs the team. The Knicks has been a bumbling team mired in mediocrity for fifteen seasons. They’ve won more than 41 games twice since 2002 and made the playoffs just four times in that span. The biggest highlight since the turn of the century?It’s probably Jeremy Lin‘s 15 game run (which is great, but it was 15 games). And we haven’t even mentioned the dysfunctional eras of James Dolan, Isiah Thomas and Phil Jackson. Yikes. Despite all that, the team profits immensely losing season after losing season after losing season due to the New York City market.

And that’s just going to be the case until the NBA figures out how to better take care of their smaller market teams.

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