Adam Silver faces first major challenges since taking office
Revenue Sharing:
As noted above several of the bottom teams (top lottery picks) are also among the richest in the league. Los Angeles Lakers and New York Knicks are among the richest teams in the NBA. Having a poor season does nothing to affect their bottom lines. So what incentive do these teams have to not tank?
ESPN’s Brian Windhorst and Zach Lowe blew the lid off how dire this situation in their article. Shockingly, almost half the league’s teams lost money last season – and this in what is deemed the profitable era of the NBA. After profit-sharing nine of the fourteen teams were still in the red. As per the article, the league netted $530 million in profits.
The 14 teams who lost money were:
- Atlanta Hawks
- Brooklyn Nets
- Charlotte Hornets
- Detroit Pistons
- Indiana Pacers
- Memphis Grizzlies
- Milwaukee Bucks
- Minnesota Timberwolves
- New Orleans Pelicans
- Orlando Magic
- Phoenix Suns
- Portland Trail Blazers
- Sacramento Kings
- Washington Wizards
After revenue sharing and luxury tax payments the Cleveland Cavaliers and San Antonio Spurs also fall into the unprofitable category, joining the teams in bold above. However, the Hornets, Pacers, Timberwolves, Pelicans, Suns, Trail Blazers and Kings become profitable after revenue sharing.
A great quote from the article:
"“Teams in small markets are told we need to run our businesses better so we can make money,” one ownership source told ESPN.com. “But teams in the largest markets can run their businesses poorly and still make money.”"
Where OKC Thunder fall in the mix:
In terms of the Thunder, the organization outperforms expectations which leads to the franchise paying into the system, as Windhorst and Lowe point out:
"If a team over performs expectations based on market size and past data, it effectively forfeits some of its revenue-sharing bounty. That is how the Thunder, playing in one of the NBA’s smallest markets, have paid into the system for six consecutive seasons, records show. The Spurs have, too. Meanwhile, the larger-market Nuggets were around the break-even mark by the league’s calculations but received an eight-figure check from their partners that pushed them deep into the black. The Nuggets’ total expense bill, including player salaries and administrative costs, was the lowest in the league, records show."
As long as teams like the Knicks and Lakers can wallow in the basement and remain highly profitable they have no reason to improve their business practices. Nor are teams like the Suns who actively tank, but end up flush after revenue sharing inspired to change their business practices.
Catch 22 as richest and poorest teams have no reason to change:
At some point profitable owners will tire of paying for teams like Memphis, despite the fact they operate to the best of their ability and consistently succeed. Tom Ziller of SB Nation offers the best take this scribe has read on the subject:
"This is a difficult dance, but there’s an opportunity here for the NBA to create a financial system that rewards effort and penalizes persistent mediocrity. The solution: Tilt the revenue-sharing system toward a scheme focused on rewarding success. No playoff team that manages expenses appropriately (including player payroll) should lose money while the third-worst team in the league turns a $100 million profit. Take more revenue from the highly profitable but lousy teams. This will encourage profitable teams like the Knicks to not just grow profits by raising ticket prices and expanding marketing, but to actually make smarter basketball decisions."
More from Thunderous Intentions
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- Should the OKC Thunder chase after a disgruntled hometown hero?
- 3 OKC Thunder players who can step up in Aleksej Pokusevski’s absence
- Aleksej Pokusevski sidelined approximately 6 weeks with ankle injury
- Damian Lillard does not fit with the OKC Thunder
Actions will define Adam Silver the Commissioner:
Enforcing healthy players suit up for nationally televised games to keep his new sponsors happy will be among Silver’s major mandates. Lottery reform will likely take several passes to fix. However, revenue sharing could potentially be a far greater obstacle for the commish to overcome.
Ultimately, Silver who has basked in the glow of prosperity and popularity enters the most trying period of his tenure. How he addresses each of these issues will have a far greater impact on how he is viewed league-wide.
It’s time for Silver to deliver on those promises he made for more revenue generation, openness in dealing with the Players Association, and greater accountability. All of this within the context of greater transparency.
Having secured TV contracts that afford the league the potential to grab the top spot among the major sports was the first step. However, the next three steps are gargantuan and may well solidify Adam Silver as the best Commissioner of sports. The alternative is something Adam Silver surely has no desire to consider.