To match Interview NBA/STERN

Report: How NBA owners turn profits into paper losses

19 Comments

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has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.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

Kevin Durant leads USA to second exhibition rout, 106-57 over China

1 Comment

LOS ANGELES (AP) – Kevin Durant scored 19 points, Klay Thompson added 17 and the U.S. basketball team rolled to a second straight blowout exhibition victory, 106-57 over China on Sunday night.

DeMar DeRozan scored 13 points in his hometown, and DeMarcus Cousins had 12 points and seven rebounds in another impressive performance to open the Americans’ pre-Olympic tour. While they’re still learning their teammates’ tendencies and solidifying player rotations, the newly assembled U.S. team looked remarkably cohesive for long stretches against an overmatched opponent with no current NBA players.

Los Angeles Clippers center DeAndre Jordan scored 12 points and led a strong defensive effort with three blocks for the Americans, who held the Chinese to 30.9 percent shooting.

After opening their showcase tour by trouncing Argentina in Las Vegas on Friday night, the U.S. team posted another rout at a packed Staples Center.

The Americans haven’t lost a game since the 2006 world championships. They’re 47-1 in exhibitions since NBA stars took over the roster in 1992, going undefeated since 2004.

Anthony was the only holdover in the Americans’ starting lineup from Las Vegas. Krzyzewski put Paul George in with Anthony, Jordan, Kyle Lowry and DeRozan, whose family watched from courtside.

Jordan got the exhibition off to a rousing start with a blocked shot on China’s first possession and an alley-oop dunk on the other end for the Americans’ first points.

Both teams had early shooting struggles, but the Americans took charge with impressive speed late in the first quarter.

Durant, one of the two returning American gold medalists from London, heard boos from the LA crowd during pregame introductions. He quickly found his outside stroke with 14 points and four assists in the first half, and Cousins overpowered the Chinese down low for 12 first-half points on the way to a 55-29 halftime lead.

The Chinese team’s most recognizable name to North Americans is Yi Jianlian, the Milwaukee Bucks’ choice with the No. 6 overall pick in the 2007 draft. He spent five seasons with four NBA teams before heading back to the Guangdong Southern Tigers.

Yi led the Chinese with 18 points. Zhou Qi, the 7-foot-2 center drafted by the Houston Rockets in the second round last month, scored two points on 1-for-6 shooting. Exciting guard Zhao Jiwei scored 14 points.

The teams meet again Tuesday in Oakland, where Durant will play in front of his new home fans for the first time since defecting from Oklahoma City to the Golden State Warriors earlier this month.

They’ll also meet Aug. 6 in the opening game of Olympic competition in Brazil.

No. 39 pick David Michineau not joining Clippers this season

TREVISO, ITALY - JUNE 12:   David Michineau in action during Adidas Eurocamp Day Three at La Ghirada sports center on June 12, 2016 in Treviso, Italy.  (Photo by Roberto Serra/Iguana Press/Getty Images for Adidas)
Roberto Serra/Iguana Press/Getty Images for Adidas
Leave a comment

Clippers president/coach Doc Rivers said he expected all three of his 2016 draft picks to join the team this season.

The Clippers signed No. 25 pick Brice Johnson and No. 40 pick Diamond Stone.

But No. 39 pick David Michineau will remain in France.

Eurobasket:

Hyeres-Toulon Var Basket (ProA) inked 22-year old point guard David Michineau (191-94). He has played for the last two years at ES Chalon-Sur-Saone in the ProA.

Michineau is a 6-foot-4 point guard with some intriguing physical sills, but he’s not ready to run an NBA offense. Plus, the Clippers already re-signed Austin Rivers and signed Raymond Felton to back up Chris Paul.

The Clippers have one roster spot left. They’re better off using that on a veteran who can help now than Michineau.

DeMarre Carroll: Jae Crowder’s Raptors criticism due to playoff naïveté

TORONTO, ON - MAY 15:  DeMarre Carroll #5 of the Toronto Raptors dribbles the ball in the first half of Game Seven of the Eastern Conference Quarterfinals against the Miami Heat during the 2016 NBA Playoffs at the Air Canada Centre on May 15, 2016 in Toronto, Ontario, Canada.  NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Vaughn Ridley/Getty Images)
Vaughn Ridley/Getty Images
1 Comment

Celtics forward Jae Crowder — between criticizing Kevin Durant signing with the Warriors and Al Horford considering the Wizards — took aim at the Raptors.

“Toronto is not a team we’re worried about,” Crowder said.

Raptors forward DeMarre Carroll, via CSN New England:

“It’s a comment from a person who hasn’t really been in the playoffs that much. That’s how I reacted to that type of comment. When you haven’t been on that level and you don’t understand what it takes to get to that level. Myself going to back-to-back Eastern Conference Finals, I understand what it takes,”Carroll said on SportsNet.ca. “It’s a comment from a guy who hasn’t been on that level, who hasn’t played on that level. It sounds like a young comment.”

“We’ll let Jae Crowder do all the talking,” Carroll said. “We’ll just fly under the radar and do what we’re supposed to do.”

Carroll is right. Crowder has never won a playoff series — though I’m not sure advancing in the postseason will make him any less brash.

Carroll’s credentials here also aren’t impeccable. He helped the Hawks in 2015 and Raptors in 2016 make relatively uninspiring runs to the Eastern Conference finals.

Still, that’s more than Crowder has accomplished. If Carroll wants to use that experience to shoot back at Crowder, more power to him.

For what it’s worth, I’ll take the Celtics over the Raptors next season — though Toronto is close enough that Boston shouldn’t look past its neighbor to the north.

Luis Scola to carry Argentina’s flag in Olympic opening ceremony

LAS VEGAS, NV - JULY 22:  Luis Scola #4 of Argentina brings the ball up the court against the United States during a USA Basketball showcase exhibition game at T-Mobile Arena on July 22, 2016 in Las Vegas, Nevada. The United States won 111-74.  (Photo by Ethan Miller/Getty Images)
Ethan Miller/Getty Images
1 Comment

Pau Gasol carried Spain’s flag and Yi Jianlian carried China’s flag for the 2012 Olympics.

The NBA will once again be prominently represented in the opening ceremony this year — with new Net Luis Scola.

Brian Mahoney of the Associated Press:

Argentina is back in the Olympics, and this time Scola isn’t just leading the basketball team.

He’s leading the whole delegation.

The veteran forward will carry the flag in the opening ceremony

Scola will team with Manu Ginobili to try stopping Argentina’s Olympic slide — gold in 2004, bronze in 2008, fourth in 2012.