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has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.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

Chris Paul scores 29, Clippers beat Jazz 98-93 to force Game 7

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SALT LAKE CITY (AP) — Clippers coach Doc Rivers put it simply when he said Chris Paul willed his team to victory with the season on the line.

Paul scored 29 points and the Los Angeles Clippers forced a Game 7 in their first-round series with a 98-93 victory over the Utah Jazz on Friday night.

The Clippers will host the only do-or-die game of the first round Sunday, with the winner advancing to face the Golden State Warriors.

“It’s just Chris,” Rivers said. “He is as competitive as a human being as I’ve ever been around. When you put that with the talent and the will, that’s why he has performances like this in big games.

“Chris was amazing. He just willed the game for us.”

Los Angeles began to edge away in the third quarter and appeared to be in control when Austin Rivers capped a 9-2 run with a step-back 3-pointer that pushed the lead to 91-77 with 3:58 remaining.

He hit another with 1:29 left to make it 96-86, but Gordon Hayward scored seven straight to bring the Jazz within three before Joe Johnson missed a 3-pointer in the waning seconds.

Paul pushed Los Angeles throughout the night and just wouldn’t let the Clippers lose. The nine-time All-Star dominated and finished with eight assists, three rebounds and two steals. DeAndre Jordan added 13 points and 18 rebounds.

“We do it together,” Paul said. “I came to (Jordan) during one of those timeouts in the fourth and said let’s find a way. We’ve been in these situations time and time again. Some of us since we were kids playing AAU. You’ve just been in that situation. High school basketball. College basketball. It’s the same game, it’s just a lot more people at the games. You just go out there and try to stay in the moment.”

The Clippers overcame a slow start to finish at 49 percent shooting from the field. The Jazz went in the opposite direction, getting sloppy with the ball in the third quarter and making numerous defensive mistakes. They also shot just 41.0 percent from the field and were 7 for 26 from behind the arc.

Hayward led the Jazz with 31 points, George Hill added 22 and Rudy Gobert finished with 15 points and nine rebounds.

“I thought we were competing,” Jazz coach Quin Snyder said. “I’m not sure if we got tired or got tired of missing. They were the more energetic team. Their physicality on the defensive end, we didn’t respond offensively the way that we needed to, or as forceful as we needed to be.

“When you’re not aggressive enough with your frame of mind, I don’t think you shoot the ball as well.”

The Clippers took a 47-45 lead into halftime after closing on an 8-2 run, including a pair of jumpers by Luc Mbah a Moute.

The Jazz jumped out to a 22-13 lead and looked to be on the brink blowing the game wide open before the offense went cold and the Clippers ripped off an 11-0 run. Utah shot just 3 for 13 from 3-point range in the first half and missed several wide-open attempts.

“Some days are diamonds, some days are stones,” Hayward said. “We didn’t shoot the ball well tonight. We got the looks we wanted, which is a positive thing for us. I think that’s the important part, we found the open shots, found the good looks.

“Dug ourselves a hole there and it’s hard to dig out of it. I don’t think we were nervous, we just couldn’t find it tonight.”

TIP-INS

Clippers: Austin Rivers started for the first time this series after missing the first four games with a hamstring injury. … Jordan’s six double-doubles in the first six games are a playoff high. … The Clippers held Johnson to 3-for-9 shooting.

Jazz: Utah is 5-1 all-time when leading a playoff series 3-2. … The Jazz opened the game as the only team in the playoffs ranking in the top three in field goal percentage and 3-point percentage.

GOBERT OK

Gobert was taken out of the game in the fourth quarter after suffering a mild left ankle sprain. X-rays were negative and he’s expected to be fine for Game 7.

PAINT POINTS

The team with the points-in-the-paint advantage won the first five games. That streak came to an end as the Jazz outscored the Clippers 42-36 in the paint.

Report: Magic will offer team president job to David Griffin after Cavaliers’ season ends

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David Griffin has been the man pulling  the strings for Cleveland since LeBron James returned to town — he made the trades for everyone from Kevin Love through Kyle Korver, he fired David Blatt mid-season to bring in Tyron Lue, and he locked up the Cavaliers’ core for years — but apparently that hasn’t been enough. Even with LeBron’s endorsement.

Griffin doesn’t have a contract past the end of this season in Cleveland.

However, the Orlando Magic plan to offer him one, reports Brian Windhorst of ESPN.

The Orlando Magic intend to offer their president of basketball operations position to Cleveland Cavaliers general manager David Griffin, multiple sources said.

The Magic can engage Griffin in contract talks at the conclusion of the Cavs’ season, sources said.

Griffin’s contract with Cleveland is up at the end of the season, and he and the team have not held meaningful discussions on an extension.

One of two things is happening here.

First, this could be a leak out of Griffin’s agent in an attempt to get the Cavaliers to pony up. The threat of competition might get Cleveland to up its offer, or at least to move more quickly than the very deliberate pace they are on now.

Second, the Magic are serious while the Cavaliers are ready to move on. To a degree what LeBron wants LeBron gets in Cleveland, but there could be dynamics pushing the Cavaliers to move on from Griffin. The fact there have been not substantial talks with Cleveland suggests a rift.

The Cavaliers can work out a deal quickly. The question is will they? It’s going to be an interesting summer on the lake.

Avery Bradley scores 23, Celtics eliminate Bulls 105-83

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CHICAGO (AP) — Avery Bradley scored 23 points, and the hot-shooting Boston Celtics pounded the Chicago Bulls 105-83 to win their first-round series 4-2 on Friday night.

The top-seeded Celtics simply torched Chicago to finish off a tougher-than-anticipated series and advance in the playoffs for the first time since 2012. Boston regrouped after dropping the first two games at home and will meet Washington in the Eastern Conference semifinals. Game 1 is Sunday.

Bradley finished one point shy of a playoff career high he set in Game 5. He nailed three 3-pointers and the Celtics hit 16 of 39 from long range.

Gerald Green scored 16 and Isaiah Thomas had 12 before heading home to Washington state for his sister Chyna’s funeral on Saturday. Her death in a car accident the day before the playoff opener dealt a blow to the Celtics. But Boston rallied around its star player and regrouped when it looked like the series might slip from reach.

Jimmy Butler led Chicago with 23 points. But the Bulls never really found their rhythm over the final four games with point guard Rajon Rondo sidelined by a broken right thumb.

Dwyane Wade shot just 1 of 10 in a two-point effort that could be his final appearance for the Bulls. He has a $23.8 million option on the two-year deal he signed last summer to leave Miami and come home to Chicago.

The Celtics led by 13 at the half and outscored the Bulls 34-18 in the third quarter to put this one away. Things got so bad that loud boos started ringing through the United Center.

TIP-INS

Celtics: Bradley said he was planning to attend Chyna Thomas’ funeral. That hinged on the flight options and whether the Celtics were playing on Sunday. “If I’m not able to be there I’m going to make sure I’m supporting him however I can to let him know I’m here for him during this time,” Bradley said.

Bulls: Hoiberg said there is no structural damage in Butler’s right knee. He also had this response when asked what soreness means: “Uh, that it hurts.” … New Bears QB Mitchell Trubisky, the No. 2 pick in the draft, got a rude welcome from the Chicago crowd. He was booed when he was shown on the videoboard in the third quarter.

“Fire Hoiberg” chants break out as Bulls eliminated from playoffs

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The problems with the Chicago Bulls — the ones that led to a mediocre season and a first-round exit from the playoffs after being up 2-0 on the Celtics — are certainly not all coach Fred Hoiberg’s fault. Blame starts with the roster that GarPax put together.

However, Hoiberg didn’t have the respect of his stars, his rotation management was bizarre at points, and there just seemed to be no consistent structure. What kind of team where the Bulls trying to be? What was Hoiberg doing to get them there?

As the Bulls were being eliminated by the Celtics Friday night, “Fire Hoiberg” chants broke out at the United Center.

Bulls fans are understandably frustrated, but they are not going to get this wish. Not this summer.

Hoiberg was the handpicked replacement for Tom Thibodeau, the guy Gar Forman and John Paxson — the Bulls front office brain trust — had their eye on and plucked out of the college coaching ranks. They bet big on him, and to admit that was a mistake after two years could endanger their jobs. So Hoiberg will stay.

What the Bulls roster will look like next season is another, more vexing question. Will Dwyane Wade be back? Jimmy Butler? With the seeming lack of a plan by GarPax, it’s all just speculation where they might go.

Whatever happens, Hoiberg will be coaching Chicago next season. Sorry Bulls fans.