SAN FRANCISCO — With the NBA’s Board of Governors meeting this week in New York, there will be plenty of talk regarding draft lottery reform, a hot topic around the league. But another subject — revenue sharing — will be both far more difficult to figure out and of greater importance to the league’s future.
“I would say it is going to be contentious,” Golden State Warriors owner Joe Lacob told The Washington Post last week, “as far as how this is resolved.”
Lacob is undoubtedly right. An ESPN report last week showed that 14 of the league’s 30 teams lost money before revenue sharing payments were sent out — and that nine did so even after revenue sharing was included.
This wasn’t supposed to be the case in the NBA any longer. With the introduction of a massive new television contract beginning last season, there was going to be more than enough money to go around to make everyone profitable. Instead, this week’s meetings — which conclude Thursday — were set to include revenue sharing talks that undoubtedly would feature several vastly different viewpoints.
One of those, of course, will be presented by Lacob, a member of the league’s planning committee and who, along with co-owner Peter Guber, sits at the helm of one of the league’s most profitable franchises. That’s despite playing at Oakland’s Oracle Arena, easily the league’s oldest arena — at least until they move into the under-construction Chase Center, which will sit a few blocks from AT&T Park, the home of the San Francisco Giants. It should be a cash cow.
Even without the luxury of a modern arena, the Warriors likely would be among the league’s most profitable teams. The combination of playing in one of the league’s bigger — and richer — markets while having a team that’s won two of the last three championships (and is favored to win another this year) is a pretty good foundation for having a profitable organization.
Lacob would agree, but he also would argue that his team is run quite well, and maximizes the opportunities presented to it — something that can’t necessarily be said for all 30 NBA teams.
“We are operating efficiently,” he said. “We have a good product. We try to deliver a great experience. We hire great people, and I would like to think we are doing a job, and frankly, we have to in order to pay for this arena, to be very frank. So we are doing well, and hopefully we will do even better in a new arena, no question about it.
“It is true we are large contributors currently, based on our success. Some of the teams [in the league] need that. … There are teams that are not doing that well. I think it’s a question as to why more teams aren’t making more money pre-revenue sharing.
“Some would say it’s their market. Others might say they might need to operate better. They need to hire people and be in the modern age. There are some sports teams that don’t operate as well, without naming names. So it’s complicated. It’s a complicated issue.”
It’s hard to argue. Take, for example, the teams at the top of the heap. Four teams — the Warriors, Los Angeles Lakers, New York Knicks and Chicago Bulls — contributed the lion’s share of the money to the league’s revenue sharing program, and all are in good health financially.
One of those teams — Golden State — won the championship, and is considered to be one of the greatest collections of talent of all time. One of them — Chicago — barely made the playoffs, and lost in the first round. The other two didn’t come close to making the playoffs, and both have whiffed for the past four years. That doesn’t preclude either team from making boatloads of money, though, because they have massive television contracts that make them immensely profitable practically no matter what they do.
Small market teams such as the Memphis Grizzlies — another team prominently mentioned in that ESPN report — don’t have the same opportunities from a revenue standpoint. Despite being universally hailed as an organization that’s maximized everything it can get out of one of the league’s smaller markets and having a team that’s made the playoffs seven years in a row, Memphis lost $40 million last season.
And, more importantly, the Grizzlies’ local media rights deals are more than 15 times smaller than the ones the Lakers have created. That is a disparity that, no matter what Memphis does, it has no chance of remotely erasing.
Some teams in similar situations are searching for ways to fix their issues. The Detroit Pistons, for example, are moving into a new downtown arena, as opposed to playing in The Palace of Auburn Hills, a massive venue far out in Detroit’s northern suburbs, after losing barrels of cash last season.
But not all teams can make such a move. That leads to a larger question about places such as Memphis and New Orleans: Can small markets be viable, productive fits within the NBA?
“That’s a longer-term question,” Lacob said. “I think all leagues, and all commissioners, should be looking at those kinds of issues all the time. There certainly probably are some markets that not only in the NBA but maybe in the other sports, that maybe shouldn’t be NBA markets. There’s a possibility. That has to be looked at. And the NBA is really well run, and they are looking at those things all the time.
“So, over time, sure, if a team isn’t able to perform, we have to be able to look at other markets. However, it also is the job, I must say, of existing management teams and the NBA to maximize the potential for the teams wherever they are. Because the NBA is a really good product. So yes … all the markets are not equal, but also maybe all the management teams are not equal.
“So these are all things that you have to look at: management teams and how they execute, you have to look at the markets all the time, and there could be one or two markets that over time maybe the NBA does determine shouldn’t be markets, and others should be. That’s really not something I can answer today, or should answer or even want to answer. But it’s something that we should always be looking at it.”
None of these questions has easy answers — precisely why the discussions this week will undoubtedly be as contentious as Lacob predicted — but the questions demand answers. Because for as much money as Lacob’s Warriors are making, and teams such as the Lakers, Knicks and Bulls will seemingly always be able to, they’ll always need other teams to play against.
And as it stands now, there are several that are failing to keep up.
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