Quick Thoughts

by Harlan Schreiber

1.    Labor Crap: One of the more entertaining seasons in recent memory is over and we are left with a nasty hangover in the form of a likely prolonged labor dispute.  There already has been a lot of great stuff written about the dispute and the issues seem to have been well identified. Still, we will take our shot and see if we break any new or different ground.  It is complicated negotiation but let’s boil it down to its essence anyway:  the NBA states that most of its teams are not profitable and they want to impose a hard cap on salaries and renegotiate the revenue split (currently the players receive 57% of revenues).    Sounds pretty simple right?  Just pick some numbers in the middle and find a reasonable split and go play ball.  Not so fast.

The NBA has opened its books to show its calculations as to why it needs to change the system and shown losses of $360 million.  The players have taken the position that the losses of roughly $360 million are overstated and based upon creative accounting.  Specifically, the NBPA has argued that the losses are unfairly enhanced by about 150% based upon accounting tricks.  The NBPA says the losses are actually closer to $90 million because the NBA has counted amortization and depreciation of costs when teams are sold to create paper losses that don’t reflect the actual financial status of the teams.  Indeed, this week Nate Silver of the New York Times wrote an article that concluded, based upon number provided by Forbes, the NBA is, in fact, quite profitable. The NBA quickly responded stating that the Forbes data was totally wrong and that the losses projected were not related to any accounting tricks (Silver responded to the NBA noting that Forbes’ projections were relatively close to those seen in leaked financials of the New Orleans Hornets but conceding that without the actual data his projections did rest on assumptions that cannot be verified.  Continue reading Quick Thoughts…

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