NBA Lockout Rumors: Has David Stern Been Using Funny Math in Projecting Losses?

Allen KimSenior Analyst INovember 5, 2010

NBA Lockout Rumors: Has David Stern Been Using Funny Math in Projecting Losses?

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    LOS ANGELES, CA - OCTOBER 26:  Commissioner David Stern speaks to the crowd prior to presenting the 2009-2010 Championship Rings to the Los Angeles Lakers at Staples Center on October 26, 2010 in Los Angeles, California. NOTE TO USER: User expressly ackno
    Jeff Gross/Getty Images

    Negotiations over the Collective Bargaining Agreement have been contentious over the past few months, and it may very well continue into next summer.

    With a potential lockout looming for the NBA next season, David Stern has been doing everything in his authority to shift the balance of power and money away from the players and back to the owners.

    Stern has even gone as far as saying a number of teams are up for contraction, which would be a huge step backwards for the NBA.

    Commissioner Stern claims that owners took $370 million in losses last season, and are projected to take on a $350 million financial hit this season.

    Is this just a case of Stern being Stern? Or is the NBA in serious financial turmoil?

    Let's delve a little deeper into the matter at hand.

Sponsorship Deals

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    NBA / KIA Motors
    NBA / KIA Motors

    NBA players are some of the easiest athletes to market because of their inherent visibility on the court.

    Apparel giant, Nike, owes a lot of its success to the NBA and its star players.

    The same players who drive the popularity of the NBA also attract companies to the sport itself. Like the NFL, the NBA has its own set of official partners that they reap massive profits off of.

    While the NBA lost Southwest airlines as a sponsor, they renewed all their contracts with their biggest partners. Anheuser-Busch, Coca-Cola, Kia Motors, Right Guard and Cisco Systems all have new agreements in place with the NBA.

    To replace the loss of Southwest Airlines, the NBA signed the massive banking company, BBVA Group, as a new sponsor. The four-year deal is worth more than $100 million.

TV Ratings

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    BOCA RATON, FL - JULY 08:  LeBron James announces he will join the Miami Heat during a televised interview as fans look on at Duffy's July 8, 2010 in Boca Raton, Florida.  (Photo by Marc Serota/Getty Images)
    Marc Serota/Getty Images

    With High-Definition and 3-D TV sets becoming the norm, the tube becomes one of the most important mediums to deliver content to fans.

    The TV ratings for the 2010 NBA Finals were up 26 percent from the year before, and the highest since 2004.

    LeBron and ESPN's "The Decision"—while a poorly conceived idea—drew nearly 10 million viewers as it was easily the highest rated program of the night.

    The off-season free agency drew an absurd amount of attention to the NBA. While not all of it was good—with LeBron James being vilified—publicity is still publicity no matter how you look at it.

    The season opener between the Miami Heat and Boston Celtics was one of the most hyped matchups ever. The game drew a record crowd as it surpassed viewership for any game in NBA history on cable.

Ticket Sales

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    MIAMI - JUNE 15:  Miami Heat fan Frank Barballo shows his support for the team by holding up a game ticket before game 4 of the NBA Finals between Dallas Mavericks v Miami Heat on June 15 in Miami, Florida.  NOTE TO USER:  User expressly acknowledges and
    Carlo Allegri/Getty Images

    The NBA's spike in popularity has boosted season ticket sales to record revenues.

    According to Sports Business Journal, the NBA exceeded $100 million in full-season ticket revenues on opening night. That is a record for the league and the amount easily surpassed that of last season.

    Even smaller market teams like the Kings, Grizzlies and Bobcats have all sold at least 1,000 new full-season tickets.

    In total, the league has seen a 40 percent increase in season-ticket sales, as there are more than 50,000 new season-ticket holders.

New Owners

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    ARLINGTON, VA - NOVEMBER 09:  Ted Leonsis, owner of the Washington Capitols speaks during Microsoft's 'A Salute to Our Troops' Operation USO Care Package Day at Kettler Iceplex on November 9, 2009 in Arlington, Virginia.  (Photo by Jemal Countess/Getty Im
    Jemal Countess/Getty Images

    Two of the worst franchises in the league—the Wizards and Warriors—were recently purchased at record prices. The Washington Wizards and the accompanying Verizon Center were sold for $550 million to Ted Leonsis. The Golden State Warriors broke the record for a NBA franchise purchase, coming in at $450 million.

    Both sale prices went well above their estimated value.

    Washington has been horrible the past two years. Their combined record amounts to 45 wins and 119 losses.

    John Wall's arrival has brought some legitimate excitement back to the D.C. area, but the team is a work in progress and it will take time before it gets out of the bottom cellar of the league.

    The Warriors haven't been much better. They have amassed 55 wins and 109 losses in the last two seasons. Since 1994, the Warriors only have two winning seasons. They also only have one playoff berth in the last 16 years.

    That is not what you would call the ideal franchise to invest in, yet the Warriors were purchased at a record price.

    Businessmen who have that type of money generally make sound investments. After all, they didn't make that money by investing in losing assets. If the league was taking such heavy losses, why would these new owners invest into a sinking sport?

Free Agency

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    ATLANTA - OCTOBER 21:  Joe Johnson #2 of the Atlanta Hawks against the Miami Heat at Philips Arena on October 21, 2010 in Atlanta, Georgia.  (Photo by Kevin C. Cox/Getty Images)
    Kevin C. Cox/Getty Images

    One of the main issues being debated is rolling back the current player contracts.

    This demand comes on the heels of an off-season spending spree where owners collectively committed hundreds of millions of dollars in contracts.

    Here are the worst offenders: Joe Johnson (Six years, $124 million), Tyrus Thomas (Five years, $40 million), Brendan Haywood (Six years, $55 million), Wesley Matthews (Five years, $33.4 million), Travis Outlaw (Five years, $35 million), Drew Gooden (Five years, $32 million), Amir Johnson (Five years, $34 million), Darko Milicic (Four years, $20 million).

    If the owners were hurting so badly, how come they handed out large contracts in a time of turmoil?

    The NHL lost an entire season because the powers that be were trying to cut back on player salaries. With every week that passes by and no progress on a new deal, it's looking more and more likely that there may not be a NBA season to look forward to next year.

Closing Thoughts

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    SAN ANTONIO - APRIL 28:  A NBA basketball on the court during play between the Dallas Mavericks and the San Antonio Spurs in Game Five of the Western Conference Quarterfinals during the 2009 NBA Playoffs at AT&T Center on April 28, 2009 in San Antonio, Te
    Ronald Martinez/Getty Images

    All signs point to exaggerated and false claims by Commissioner Stern. He's playing a dangerous game right now and he may get burned in all of this.

    If a lockout were to happen, it would cripple the sport. You need not look any further than the NHL.

    When the lockout hit the NHL in 2005, its impact was devastating. The NHL has been clawing its way back to relevancy as interest and revenues were severely damaged in the wake of the lockout.

    The growth of the NBA has been tremendous in only a few short months. The popularity the NBA has garnered over this period would all go down the drain if there was any sort of work stoppage.

    David Stern may be leading a futile charge as the momentum the NBA has developed will all come to an abrupt halt, plunging the league into serious financial instability.

    Stern may have to wave the white flag if he wants to save the NBA from ruin.