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I caught this article about a week ago. I believe in the 1980's the league almost collapsed but Stern saved it.
League needs to assist its small-market teams
By Percy Allen
Seattle Times NBA reporter
David Stern
The so-called small-market teams are dying a slow death, and the NBA's economic plan can't save them.
After 23 years, the league's salary cap, heralded when introduced in 1983 as the perfect hybrid to the NFL's hard cap and Major League Baseball's free spending, is antiquated and fails to address the needs of small-market teams.
"We need to look into and see what we can do to help all of our teams and not just those that are in the smaller markets," commissioner David Stern said last month at the NBA Board of Governors meeting. "We tried to tackle many of those concerns in this version of the CBA."
In the first year of the current collective bargaining agreement in 2005-06, the league reported a profit of $46 million, which was a significant increase compared to the previous season, when it lost nearly $3 million.
Despite substantial gains, only 17 of the league's 30 teams were profitable after luxury-tax payments and nearly one third of the league owners reported heavy financial losses.
Minnesota could lose $30 million between the 2005-06 season and this season. Paul Allen surrendered the Rose Garden to Portland in 2004 by declaring it bankrupt and expects $100 million in losses the next three years. Utah claims to have lost $25 million the past two seasons.
Before selling to Oklahoma City investors, the former Sonics ownership group said it lost more than $60 million the past five seasons. Memphis owner Michael Heisley agreed to sell his 70 percent share of his team. Comcast-Spectacor, which owns the Philadelphia 76ers, recently entertained bids.
Understandably it's difficult for the average fan who shells out $160 for a pair of decent tickets to feel the least bit of pity or remorse for billionaire owners, who claim they're losing money.
OK, I get that. But consider this: the product is suffering.
You'll never hear the NBA say that, but it is. The league has stagnated and is predictable. Each season, only a handful of teams have a legitimate chance of winning the championship, which is never good for business.
In the last 27 years, since the Bird-Magic era began in 1979, only eight teams have won the title. The Los Angeles Lakers (three) and San Antonio (three) have won six of the past eight titles.
That type of predictability has as much to do with a broken economic structure that forces teams to give the lion's share of their salary cap to one or two players, while everyone else earns significantly less.
Still, the most damning evidence on the failures of the NBA's salary cap is the admission by owners who are desperate for a change.
The Times obtained portions of a letter dated Sept. 29, 2006 from eight NBA owners who pleaded with Stern to adopt revenue sharing.
The letter states: "We are asking you to embrace this issue because the hard truth is that our current economic system works only for larger-market teams and a few teams that have extraordinary success on the court and for the latter group of teams, only when they experience extraordinary success. The rest of us are looking at significant and unacceptable annual financial losses."
The disparity is created because teams are able to keep the profits generated from local broadcast and cable TV. Those teams in the large markets such as New York, Los Angeles and Chicago reap profits ranging from $20 million to $30 million whereas the small-market teams are believed to be around $10 million.
Also, league-wide profits are expected to decrease this season because the NBA received a one-time consent fee of $22 million from Adidas last year. Without that windfall, small-market teams are looking at higher losses.
The letter to Stern also says: "If appropriately managed teams can't break even, let alone make a profit, we have an economic system that requires correction. The needed correction is serious revenue sharing not just modest revenue assistance and we urge you to address this issue on an urgent basis this year."
Allen, Heisley, Charlotte owner Bob Johnson, Milwaukee owner Herb Kohl, Utah owner Larry Miller, New Orleans owner George Shinn, Indiana owner Herb Simon and Minnesota owner Glen Taylor each signed the letter.
Stern needs to listen to the dissident group of owners. He has got a few years until the current CBA expires and he would do well to settle the peace before it becomes corrosive and negatively affects the next negotiations with the players union.
Stern also knows that the last thing the NBA needs is more owners selling their teams, which gives the impression that the league is unstable.
His solution is to invade the international markets and pump new revenue streams into the sport, which is a bold and innovative concept.
Still, it's strange he views the foreign markets as one big cash cow that's divided evenly among teams and yet he views the domestic markets as individual entities where the leagues takes a hands-off approach.
It's that kind of backward thinking that has created the gulf between so-called small-market teams and big-market teams.
Stern needs to know that revenue sharing isn't a nouveau concept, nor is it a four-letter dirty word as some owners would lead you to believe.
But that's what happens when you have 30 ultra-competitive people competing against each other. They forget that they're also on the same team.
League needs to assist its small-market teams
By Percy Allen
Seattle Times NBA reporter
David Stern
The so-called small-market teams are dying a slow death, and the NBA's economic plan can't save them.
After 23 years, the league's salary cap, heralded when introduced in 1983 as the perfect hybrid to the NFL's hard cap and Major League Baseball's free spending, is antiquated and fails to address the needs of small-market teams.
"We need to look into and see what we can do to help all of our teams and not just those that are in the smaller markets," commissioner David Stern said last month at the NBA Board of Governors meeting. "We tried to tackle many of those concerns in this version of the CBA."
In the first year of the current collective bargaining agreement in 2005-06, the league reported a profit of $46 million, which was a significant increase compared to the previous season, when it lost nearly $3 million.
Despite substantial gains, only 17 of the league's 30 teams were profitable after luxury-tax payments and nearly one third of the league owners reported heavy financial losses.
Minnesota could lose $30 million between the 2005-06 season and this season. Paul Allen surrendered the Rose Garden to Portland in 2004 by declaring it bankrupt and expects $100 million in losses the next three years. Utah claims to have lost $25 million the past two seasons.
Before selling to Oklahoma City investors, the former Sonics ownership group said it lost more than $60 million the past five seasons. Memphis owner Michael Heisley agreed to sell his 70 percent share of his team. Comcast-Spectacor, which owns the Philadelphia 76ers, recently entertained bids.
Understandably it's difficult for the average fan who shells out $160 for a pair of decent tickets to feel the least bit of pity or remorse for billionaire owners, who claim they're losing money.
OK, I get that. But consider this: the product is suffering.
You'll never hear the NBA say that, but it is. The league has stagnated and is predictable. Each season, only a handful of teams have a legitimate chance of winning the championship, which is never good for business.
In the last 27 years, since the Bird-Magic era began in 1979, only eight teams have won the title. The Los Angeles Lakers (three) and San Antonio (three) have won six of the past eight titles.
That type of predictability has as much to do with a broken economic structure that forces teams to give the lion's share of their salary cap to one or two players, while everyone else earns significantly less.
Still, the most damning evidence on the failures of the NBA's salary cap is the admission by owners who are desperate for a change.
The Times obtained portions of a letter dated Sept. 29, 2006 from eight NBA owners who pleaded with Stern to adopt revenue sharing.
The letter states: "We are asking you to embrace this issue because the hard truth is that our current economic system works only for larger-market teams and a few teams that have extraordinary success on the court and for the latter group of teams, only when they experience extraordinary success. The rest of us are looking at significant and unacceptable annual financial losses."
The disparity is created because teams are able to keep the profits generated from local broadcast and cable TV. Those teams in the large markets such as New York, Los Angeles and Chicago reap profits ranging from $20 million to $30 million whereas the small-market teams are believed to be around $10 million.
Also, league-wide profits are expected to decrease this season because the NBA received a one-time consent fee of $22 million from Adidas last year. Without that windfall, small-market teams are looking at higher losses.
The letter to Stern also says: "If appropriately managed teams can't break even, let alone make a profit, we have an economic system that requires correction. The needed correction is serious revenue sharing not just modest revenue assistance and we urge you to address this issue on an urgent basis this year."
Allen, Heisley, Charlotte owner Bob Johnson, Milwaukee owner Herb Kohl, Utah owner Larry Miller, New Orleans owner George Shinn, Indiana owner Herb Simon and Minnesota owner Glen Taylor each signed the letter.
Stern needs to listen to the dissident group of owners. He has got a few years until the current CBA expires and he would do well to settle the peace before it becomes corrosive and negatively affects the next negotiations with the players union.
Stern also knows that the last thing the NBA needs is more owners selling their teams, which gives the impression that the league is unstable.
His solution is to invade the international markets and pump new revenue streams into the sport, which is a bold and innovative concept.
Still, it's strange he views the foreign markets as one big cash cow that's divided evenly among teams and yet he views the domestic markets as individual entities where the leagues takes a hands-off approach.
It's that kind of backward thinking that has created the gulf between so-called small-market teams and big-market teams.
Stern needs to know that revenue sharing isn't a nouveau concept, nor is it a four-letter dirty word as some owners would lead you to believe.
But that's what happens when you have 30 ultra-competitive people competing against each other. They forget that they're also on the same team.
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