NBA lays off 11 percent of its work force

The NBA has laid off 114 employees accounting for 11% of its workforce. The layoffs are not a direct result of the lockout but meant to attack the same underlying issue of expenses outstripping revenues.

Full story from the Trib here.

NEW YORK — The NBA laid off about 114 people over the last two days, planned cost-cutting moves that a league spokesman said Thursday are "not a direct result of the lockout."

The laid off employees represent about 11 percent of the league office workforce in New York, New Jersey and internationally.

Spokesman Mike Bass told The Associated Press the layoffs are "not a direct result of the lockout but rather a response to the same underlying issue; that is, the league's expenses far outpace our revenues."

"The roughly 11 percent reduction in headcount from the league office is part of larger cost-cutting measures to reduce our costs by $50 million across all areas of our business," Bass said.

I was initially fairly strongly on the players side of things, but more and more evidence is mounting that the league has real issues that do need to be resolved through a very significant rollback of salaries.

RDA was shown to not be the major factor it was once thought of as deadspin had to retract their article.

The other depreciation they show on the balance sheet appears to be legitimate depreciation on capital assets for stadiums, practice facilities, and legitimate business expenses.

The NBA clearly needs to do a much better job running itself than it is. The NHL isn't in this same boat despite the owners splitting up 30 million less per team than the NBA while having no reason to have considerably greater expenses than the NBA does.

However, the NBA has laid off 275 people over the last three years, they've shut down some of their global offices, and appear to be looking internally to fix their cost situation as well as asking the players to take a hit.

In the end, I still maintain that they won't get a deal done without a missed season until the owners offer the players a percentage of league revenue going forward rather than simply offering them a flat rate with no growth potential with league revenue growth.

The players won't (and shouldn't) stand for a deal that leaves them at 36% of BRI by the end of the CBA. However, a 50/50 revenue split would rollback 300 million from the players to the owners. An amount which would have made the league profitable (even after depreciation/interest) over the last CBA.

While some teams would certainly still show a balance sheet loss, almost every team would have positive cash flow. Factor other cost savings into the picture, and the NBA is in good shape again.

Of course, their present stance is to play hardball and absolutely crush the players to ensure billions in operating profit every year.

Their present 45 million dollar hard cap that doesn't adjust for inflation with a 33% rollback on present salaries would push the league to 22% of BRI by the end of the deal. A number which is absolutely ridiculous relative to any other sport given that no other major professional sport is presently under 55% of revenue.

Their previous 62 million flex cap offer would have pushed BRI to 36% by the end of the deal. It was a deal that was plausible in the short term, but meant way too big a shift in revenue by the end of the deal as it would cost the players 8 billion over the life of the deal.

If the players agree to give back one billion over the next five seasons [approximately double what they've offered so far and about 1/4 what the owners are asking for], the owners should jump on it. Its a number that should push all but the mostly poorly run teams into a land of operating profits without any revenue sharing.

It would also give them a far better five year profit model than four years of basketball on a better deal after losing a season of the NBA where revenues would likely decline considerable and one season would have none at all.

Given the players initial negotiating stance with little pressure on the negotiations wasn't miles off from that point, it seems likely that there's room to get there without a missed season, but it's the owners who need to do the serious moving on their position to make it happen.

Like any negotiation, both sides will need to meet in the middle, but the owners will need to cover 75% of the gap because their initial stance was so far from reasonable that meeting in the exact middle isn't going to get a deal done.

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  • "The NBA clearly needs to do a much better job running itself than it is. The NHL isn't in this same boat despite the owners splitting up 30 million less per team than the NBA while having no reason to have considerably greater expenses than the NBA does."

    Is that before or after the NHL lost a season and reduced player salaries by a huge percentage?

  • In reply to bullshooter:

    The NHL right now gives players 57% of revenue (same as the NBA), their huge lockout was to get to where the NBA already is. They play a similar number of games, and have similar stadium needs.

    The revenue for owners in hockey is 1 billion less.

  • In reply to DougThonus:

    Do the NBA and NHL both calculate revenue the same way?

  • Doug, losses are shown on the income statement not the balance sheet, you can show a net loss on the income statement and show positive cash flow. The league said they had negative EBITDA, which essentially is cash flow, it earnings before interest, taxes, depreciation and amortization, and that is what alarms me more than anything. I believe that most teams have "goodwill" on their balance sheets. Goodwill is the amount paid for the franchise over and above the fair market value of the identifiable assets. It is essentially the value of the assets that cannot be ordinarily quantified (i.e. team name recognition, customer service, etc.). You can only have goodwill on your books though if the franchise has been purchased, so teams under their original ownership wouldn't apply. But like I said before most teams would have this as they have been bought and sold at least once. Also, once goodwill has been locked in, it cannot change unless another purchase of the team is made. Now, I said all that to say this. Every year teams must evaluate their goodwill to see if it is impared, basically they would have their assets (identifiable tangible and intangible [i.e. patents, trademarks]) reappraised and if the appraisal value of the assets is less than the book value of all assets (including goodwill) then goodwill impairment is said to have occured. The team can then reduce the value of goodwill on the balance sheet and take a loss on the income statement, note that the actual imparment test is way more complicated but is way too technical for this space. Teams can manage their earnings because they can show huge amounts of goodwill impairment losses (especially now-a-days given the rough economy) and pretty well be justified, I would be interested to see how much of the $300MM is due to "goodwill impairment" and I would also like to know how much EBITDA was for last year because goodwill impairment losses are not cash items and would be added back to determine EBITDA.

  • Honestly, are die hard NBA fans really supposed to be able to digest the economic intricacies/difficulites of the sport they love on their own? ESPN/ABC, TNT, and now NBC owning Comcast Sports all supposed major sources of news fans rely on for the NBA all own the product. Is this really a recipe for objective reporting that will get to the heart of the issue? Hoopsworld and CBSSportsline have both had some interesting analysis of the lockout, and subsequent NBA financial disfunction. Still, with their access somewhat dependent on the league, and "scoops" furnished to the owners of the product(ESPN, TNT, ABC/TNT) they are somewhat pawns in an already restricted/colluded news market.

    Similar to analyzing ominously powerful institutions such as Congress, it would be crucially important if there were news sources who were subsidized for the public good, and not tainted by profit to cover America's pasttimes(pro sports). I just don't feel like everything is out there from an investigative reporting standpoint. Are there no bad guys in this whole mess other then Congress/the U.S. economic collapse based on bank and loan fraud? Has revenue sharing been horribly sup-par compared to other pro sports? If all these teams have been losing money for so long, why not air this more publicly with small market owners to mid level(20 of 30) who are bleeding red going to 60 Minutes or whatever else independent news sources who are left out there, and making it clear how. the Lakers and Bulls are raking in hundreds of Millions in profit while they are collpasing. Contrarily, should some of these franchises even exist/are they even economically viable? I just don't see all this closed ranks lack of communication, and submission to one "comissioner"/dictator in David Stern being good for anyone. Is there no burden here for one hell of a financial mess? There's no doubt in my mind that f-bomb throwing, maniacle czar unchallenged for decades hasn't been part of this cloistered, unhealthily KGB'd cone of silence economic mess.

    If revenue sharing, shared gate with visiting small fry teams when playing L.A. or Chicago etc. are viable options/precedents with say the NFL which is a 60-40 split, why not have suffering owners communicating this instead of an umbrella of colluded silence? My instincts from everything I'm reading say this just isn't the player's fault or even the economy. It's greed and a lack of transparency/shared power.

  • I paid $32.67 for a XBOX 360 and my mom got a 17 inch Toshiba laptop for $94.83 being delivered to our house tomorrow by FedEX. I will never again pay expensive retail prices at stores. I even sold a 46 inch HDTV to my boss for $650 and it only cost me $52.78 to get. Here is the website we using to get all this stuff, GrabPenny.com

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