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has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.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

Thunder’s Russell Westbrook, Kevin Durant put on first-half show at Warriors’ expense

2 Comments

I’d say Warriors fans are stunned, but more than that Warriors players look stunned — they are getting steamrolled by Oklahoma City again, giving up 72 first half points and being down by 19.

I guess we tell Warriors’ fans what we have told the fans of teams they have steamrolled the past couple years — enjoy the show, you don’t get to see many like this.

Above was a Kevin Durant to Russell Westbrook fastbreak assist and bucket. Now check out the fantastic Steven Adams pass, and a highlight package of Westbrook dropping 16 in the second quarter on the Warriors (21 in the first half).

 

Charles Barkley: “I’ve never seen the NBA as bad as it is”

HOUSTON, TEXAS - APRIL 04:  Former NBA player and commentator Charles Barkley looks on prior to the 2016 NCAA Men's Final Four National Championship game between the Villanova Wildcats and the North Carolina Tar Heels at NRG Stadium on April 4, 2016 in Houston, Texas.  (Photo by Scott Halleran/Getty Images)
Getty Images
6 Comments

Charles Barkley is walking entertainment and the brilliant Inside the NBA would not be the same without him and his off-the-cuff opinions (which is a great thing in sports talk, not so much with national policy).

But he remains the leader of the annoying #getoffmylawn crew of older players who don’t like today’s game.

Barkley was on the Bickley and Marotta on Arizona Sports 98.7 FM last week and went off again on the state of the game, (hat tip For The Win).

“People think us old guys hate when we talk about it. It has nothing to do with the Warriors’ greatness, LeBron’s greatness. But I’ve never seen the NBA as bad as it is, and I’ve been saying it the last three or four years. We’ve got too many young players coming out of college that don’t know how to play. It’s frustrating for me because I want to see competitive basketball.

“We took a survey on our crew … How many actual NBA teams would you buy season tickets for?” he added. “Four in the west and Cleveland obviously in the east. That’s not good for our league.”

To be fair, Barkley speaks for a lot of people here.

I think they are all wrong, but he speaks for them. And I think they are a plurality. Based on television ratings going up even as streaming of live games spikes (as someone who works for Comcast/NBC, I can say the in-market streaming of CSN teams such as the Warriors, Celtics, Wizards, etc. did well this year and grew faster than projections), as I look at the crossover appeal of Stephen Curry, the sendoff Kobe Bryant got, the popularity of LeBron James and Kevin Durant etc, the league is doing well by any measure.

But more than that, the game now is more entertaining than it’s been in years. Tell me how grabbing some guy on the perimeter, the clutching and clawing to slow the game down in the 1990s leading to 86-82 slogs, was more fun than the skill being shown today. Jordan was must watch, frankly Barkley was fun, but Mike Fratello’s Cavaliers teams? The Mavericks and Clippers of that era? I think Barkley and others look at the past through some Mr. Magoo glasses, but that is their prerogative. I loved 80s basketball. I liked 90s basketball. But to constantly dismiss the game today just sounds like someone clinging to the past.

Ex-NBA player Kermit Washington arrested in Los Angeles

ASHEVILLE, NC - APRIL 16:  Assistant coach Kermit Washington of the Asheville Altitude reacts to a call during the game against the Huntsville Flight in the NBDL semifinal playoff game at the Asheville Civic Center on April 16, 2005 in Asheville, North Carolina. The Altitude won 90-86 to advance to the championship game. 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.  Mandatory Copyright Notice: Copyright 2005 NBAE (Photo by Joe Murphy/NBAE via Getty Images)
Getty Images
4 Comments

LOS ANGELES (AP) — Kermit Washington, a former NBA player who notoriously gave a bone-breaking face punch to the Houston Rockets’ Rudy Tomjanovich during a 1977 Lakers game, has been arrested by federal agents.

Washington was arrested on a warrant Tuesday in Los Angeles. It’s unknown if he has a lawyer.

Officials won’t discuss the arrest, but they have set a news conference for Wednesday in Kansas City, Missouri.

That’s where football Hall of Famer Ron Mix pleaded guilty Monday to filing false tax returns.

Authorities say Mix, a San Diego-area lawyer, paid someone to refer clients to him in return for donations to the charity Contact Project Africa.

Prosecutors say Mix paid $155,000, but the money went into his associate’s pocket.

Washington founded the charity, which is no longer functioning.

Dwyane Wade creates tie, sale proceeds benefit Craig Sager’s foundation

PHOENIX - FEBRUARY 13:  Assistant coach Dwyane Wade of the Rookie team is interviewed by Craig Sager during the T-Mobile Rookie Challenge & Youth Jam part of 2009 NBA All-Star Weekend at US Airways Center on February 13, 2009 in Phoenix, Arizona.  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 Ronald Martinez/Getty Images)
Getty Images
1 Comment

Sager Strong.

Despite undergoing chemotherapy to battle the acute myeloid leukemia that has returned to his body, Sager has been a sideline reporter for TNT through these playoffs and the Western Conference Finals, doing as many games as he can. He’s been an inspiration to everyone in the business, and to fans. Dwight Howard put together a blood drive in his honor.

Now, Dwyane Wade has partnered with The Tie Rack, creating a tie where the proceeds of the sale go the SAGERSTRONG Foundation, created by Sager.

From the Tie Rack page:

Proceeds from the sale of this tie will be donated directly to the SAGERSTRONG Foundation, Inc., founded in support of TNT sports personality Craig Sager. SAGERSTRONG works with various charitable partners to support the treatment of those suffering from blood cancers and AML.

“Together, we can play defense on cancer, one tie at a time.” Much love, Dwyane Wade.

The tie sells for $25 (and you can get a matching pocket square for $15). If you wear ties, you can join me in picking one up and helping out a good cause.

(Hat tip Eye on Basketball)