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has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.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

Stan Van Gundy speaks out again in support of protesting athletes

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WASHINGTON (AP) — Detroit Pistons coach Stan Van Gundy used his team’s trip to Washington to again voice his support for athletes who kneel during the national anthem and his opposition to President Donald Trump.

Van Gundy was asked before Friday night’s game against the Wizards what he hoped would result from the president’s criticism of NFL players who refuse to stand for the anthem and the resulting national dialogue about political activism by professional athletes.

“I don’t know what good can come out of anything the president has said,” Van Gundy said. “As far as the athletes’ protest, I hope people would pay attention to the issues that caused the protest in the first place and realize that we have problem disproportionately with police brutality towards men of color.”

Van Gundy also criticized fans who have booed those athletes because they believe the gesture is disrespectful to the United States military.

“I thought that one of the things the military is fighting for is the American way of life and our values, which I think starts with freedom of speech,” Van Gundy said. “Our country was founded on protest. Otherwise, we would still be a colony of England. You would think people would appreciate non-violent protests that will be made.

“If you don’t stand for freedom of speech and you don’t think those players have the right to freedom of speech, what American values are you for?”

It was not the first time Van Gundy has spoken out on these issues. When Trump was elected last November, Van Gundy told the Detroit Free Press it was the first time he had been “ashamed” of his country.

Last month on the team’s media day, he read a prepared statement in support of athletes who use their visibility for political purposes, including protests during the anthem. The NBA has a policy requiring that players stand for the anthem.

The Pistons’ visit to Washington was their first since Jan. 21, one day after Trump’s inauguration.

More NBA basketball: https://apnews.com/tag/NBAbasketball

Cavaliers’ Derrick Rose out Saturday with sprained left ankle

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CLEVELAND (AP) — Cavaliers point guard Derrick Rose was held out of Saturday night’s game against the Orlando Magic because of a sprained left ankle.

Rose twisted his ankle after being fouled by Milwaukee’s Greg Monroe while driving to the basket in the fourth quarter on Friday. Monroe grabbed Rose by his neck and pulled him to the floor.

Rose landed awkwardly, but stayed in the game to shoot two free throws before going to the bench. The play was originally called a common foul but was upgraded to a flagrant 1 Saturday by the NBA.

Jose Calderon started at point guard Saturday for the Cavaliers, who have won their first two games.

Rose signed a one-year contract with Cleveland in July. He became the team’s starter when Kyrie Irving was traded to Boston. Rose was named the league’s MVP in 2011 while with the Chicago Bulls, but has battled injuries since.

 

Kyrie Irving, any regrets about using profanity toward fan? “Hell no.”

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Fans yelling obscenities at NBA players and trying to goad them into a response — always while camera phones are recording — has become a thing. DeMarcus Cousins will be paying $25,000 for responding to a fan cursing at him in Memphis.

Kyrie Irving is likely going to get fined for an incident Friday night after the Celtics knocked off the Sixers in Philadephia. It made the rounds on social media Friday night, with a fan yelling at Irving as he leaves the court “Kyrie, where’s LeBron?” and Irving responding with a crude phrase. Here is the exchange as Irving leaves the court (NOTE: The language is NSFW, if offended don’t watch the video).

Saturday Irving was asked about the incident, and he admitted he should have bit his tongue, but he has no regrets, as reported by A. Sherrod Blakely of NBC Sports Boston.

“Hell no,” Irving said (when asked if he had regrets). “Man enough to record it on video, that’s on him. I’m glad he got his ad name out there, and his five seconds of fame and it’s gone viral. That’s the social media platform we live on.

Irving added, “I take full responsibility for what I said. You move on.”

Irving also addressed the bigger issue, something Cousins discussed when talking about his fine. Via Chris Forsberg at ESPN.

“At the end of the day, we’re human. It’s in heat of the moment and frustrations arise, we were at halftime, we were down by 4, in an environment, a season-opener in Philly. Being with a young team like we have here and staying composed, handling that before we go in the locker room and addressing what we have to do in the locker room and going out and handling business and getting the W, that’s really the only thing that matters to me.

“It’s up to the league at this point. But, like I said, I’m going to take full responsibility for what I said. I don’t have any regrets for it.”

Irving is going to get fined. The league has issues with its players cursing at fans. Understandably.

That said, the league may need to step back on consider situations like this. If fans are taunting players, at what point should a player be able to respond to the fan? Should arena security (at the request of the officials, or maybe a player) intervene? Players should not be asked to bite their tongue no matter what is said, and even if a fan paid for a ticket it doesn’t give them the right to cross any line. As more fans seem to go after their 15 minutes of social media fame baiting players, the league may need to reconsider where it draws its lines.

Reports: Pelicans to sign Jameer Nelson with Rondo out

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With Rajon Rondo out 4-6 weeks with a sports hernia, the New Orleans Pelicans were looking for a solid backup point guard.

This week, to make room to sign Richard Jefferson, the Denver Nuggets waived veteran Jameer Nelson.

While other teams such as the Rockets were calling, the Pelicans and Nelson have reached a deal, reports both Adrian Wojnarowski of ESPN.

Shams Charania of The Vertical at Yahoo Sports added this.

Nelson, in his 14th NBA season, became the top free agent on the market and received interest from contenders such as the Houston Rockets and Oklahoma City Thunder and several other franchises that hoped to add the respected and accomplished veteran. But for Nelson, the Pelicans represent an opportunity to play significant minutes and provide leadership.

The Pelicans had a full roster of 15 players, they could have waited until next Tuesday and gotten a disabled player exception to add a 16th player, but they decided to go with something more permanent.

Jrue Holiday starts at the point for the Pelicans but with Rondo out — he was supposed to start next to Holiday — there is no depth at the position. The Pelicans can have Nelson step in and get minutes from the first time he steps on the court.

Nelson is still a solid pick-and-roll point guard, but what he brings to the table the Pelicans need more is shooting — he shot 38.8 percent from three last season and is a good spot up player. He can penetrate and make plays off handoffs as well, but it’s his shooting on a team that needs it that will be most valued.

The Pelicans have started the season 0-2 with losses to Memphis and Golden State. They take on the Lakers in Los Angeles Sunday night.