Report: How NBA owners turn profits into paper losses

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UPDATE July 2, 11:10 am: We need to make you aware of some flaws in the accounting used by Deadspin (and repeated here) in their original post that was the basis of this one. However, I don not believe it changes the overall theme that completely legal and widely accepted general accounting principles allow an NBA team to inflate losses or even hide small profits, with the losses all being paper.

To the corrections. First, the loss on player contracts cited in this article of $25.1 million almost certainly was a buyout of Dikembe Mutombo. A legitimate loss to write off. That said, the RDA that allows owners to write off players depreciation is in place, legally allowed and used.

Also, the NBA does not include the amortization of losses on buildings in its figures. Finally, it should be noted the Nets owners at the time were forced to take out loans that year to cover the losses.

The examples used here turned out not to be ideal ones. But as anyone who has dealt with accounting like this before will tell you, there is a lot of way to move money around on paper — the Nets claimed losses of more than $100 million over a couple years, ESPN’s accountants looked at it and found closer to $24 million in actual losses. Still, those are actual losses, you understand the owners concerns about the financial system the game has been using. The point that one should be cautious with the claims of ownership about the size of the losses they incur remains valid, however. But we strive here to be accurate.

June 30, 2:36 pm: It simpler to explain cold fusion than to explain the finances of an NBA team.

But Deadspin has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.

Which would allow someone like David Stern to talk with a straight face about how 22 of the 30 teams are losing money, when in fact what you and I would consider the real numbers tell a different story in a number of those cases.

Deadspin’s Tommy Crags explains how the Nets lost $27.6 million in 2004:

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, or RDA.

Bear with me now. The RDA dates back to 1959, and was maybe Bill Veeck’s biggest hustle in a long lifetime of hustles. Veeck argued to the IRS that professional athletes, once they’ve been paid for, “waste away” like livestock. Therefore a sports team’s roster, like a farmer’s cattle or an office copy machine or a new Volvo, is a depreciable asset….

If we’re trying to arrive at some idea of how much money the Nets really made in 2004, we’ll need to do a little crude math. Knock out the $25.1 million RDA — a paper loss, remember — and add the $9.1 million in tax savings. Suddenly, that $27.6 million loss becomes a $6.6 million profit.

It gets more complex when teams are sold, as the Nets were, because the new owners get to write off part of the purchase price. Larry Coon does a good job explaining this over at ESPN. And then there are the other businesses tied to this an NBA team owner may also own — if he owns the building you can charge rent or not, do all sorts of things to move the money around on paper. There are countless other examples.

Nobody — not even the players — are arguing that some markets are not hurting and that the system does not need adjustments. It does. More than the players want to admit. Owners in the NBA should have a fair opportunity to turn a profit — but if you put a bad product out on the floor and do a poor job marketing, you should not be guaranteed a profit. Like any business, you should need to earn it.

What we’re saying here is don’t take the owners word on what they are losing as fact. It’s very complex and there are plenty of ways to hide profits on paper — all legally, under generally accepted accounting principles — and make things look worse than they are.

Report: Knicks’ Joakim Noah to be suspended 20 games for violating league drug policy

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Joakim Noah hasn’t set foot on an NBA court since Feb. 4, and his season was all but ended when he had knee surgery at the end of February. It was a $72 million gamble that has not worked, and left New York with an anchor o a

Tomorrow it will be official he is done for the season, but not because of the Knicks or his injury.

During his recovery, Noah violated the NBA’s drug policy and will pay for a 20-game suspension, reports Adrian Wojnarowski at The Vertical at Yahoo Sports.

Noah tested positive for an over-the-counter supplement that is prohibited under the outgoing Collective Bargaining Agreement, league sources said.

Noah, 32, is expected to serve 10 games of the suspension to finish out the 2016-17 regular season and 10 games to start the 2017-18 season, league sources said.

The National Basketball Players Association’s investigation concluded that Noah hadn’t “knowingly or willingly” violated the policy and cooperated fully with the league’s probe, league sources said.

Over-the-counter supplements could be something put in his regular workout recovery drinks that he was unaware of, although we are unsure of the details.

Traditionally, the player has to be healthy enough to play before the league starts the suspension. Noah has been out for more than a month, but if a league doctor says he is healthy enough to play the then the clock on the suspension can start. But that is interesting.

 

 

Devin Booker drops 70 points for Suns in loss to Celtics (VIDEO)

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Phoenix Suns guard Devin Booker is just 20 years old. He’s a League Pass favorite, and indeed he should be a favorite in Phoenix for years to come. On Friday, Booker dropped 70 points — yes, 70 — in a loss to the Boston Celtics.

Booker’s 70 points is the best outing of the season. It also made him the youngest player to ever reach 70 points.

His final stat line, as you might imagine, was ridiculous. Booker shot 21-of-40 from the field, going 4-of-11 on 3-pointers and a whopping 24-of-26 from the free-throw line. The Suns phenom also grabbed eight rebounds to go with six assists.

Despite the loss to Boston, 130-120, it’s still an incredible milestone for Phoenix and for Booker. There’s a bright spot out there for the Suns.

Magic’s Aaron Gordon skies to finish amazing alley-oop (VIDEO)

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Aaron Gordon may not have had the best dunk contest this year — apparently drones and dunks don’t mix well — but the guy can still get up and finish with the best in the league.

As he did on this alley-oop against Detroit.

Elfrid Payton had to throw a lob that would get over Andre Drummond, but how many guys in the league can get that high, reach back and finish that? Damn.

Former Hawk Pero Antic’s celebration accidentally punches teammate in face in Eruoleague (VIDEO)

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Former Atlanta Hawk Pero Antic is now playing for Turkish powerhouse Fenerbahce, in case you were not aware.

Fenerbahce was facing Anadolu Efes in a EuroLeague game, it was tight late and former NBA player Ekpe Udoh was at the free throw line for Fenerbahce. He missed his second shot, but the rebound caromed out-of-bounds off an Anadolu Efes player. Antic was pumped.

Maybe a little too pumped.

Ouch.

That was Nikola Kalinic, by the way, the guy Antic now owes dinner to. Kalinic would like the dinner more than the hug and kiss he got from Antic right after the play.

Also, Anadolu Efes held on to win 80-77.

(Hat tip to Ball Don’t Lie.)