Small market owners are making the largest push to lockout the season due to terrible profit margin. Could and should contraction be an option for the NBA?
First, let me start out with this. If the owners lockout lasts long enough the owners will win whatever concessions they want. In the long run, they are offering the best deal in the world on salaries for basketball players even if they slash all salaries in half.
Let's assume the NBA contracts the Hornets because they own them and also buys out the next struggling owner looking to sell at a cheap price of around 300 million or less (Bobcats recently sold for 275, and the league was in for 300 million on the Hornets, both sales included more the assumption of debt than actual money moving to the previous owner).
If we assume the league can fold two teams in for 575 million than each owner will have chip in 20.5 million in order to buy out the teams. At first glance, I thought, why would the owners want to throw out 20.5 million a piece in order to buy out two franchises, but the deal actually makes quite a bit of sense for them.
Start with the national TV deal. The league signed a deal for 930 million per year which amounts to 31 million per team per year. Folding a team nets the remaining teams a bit over two million per year.
Presuming the TV deal rises with inflation fairly evenly canceling out the extra value of interest on the 20 million up front it will take ten years for the NBA to break even on contracting two teams. After which, they'll simply be banking tons of extra money.
There could be additional problems for teams locked into long term leases which would force the league to pay out cities. The length and terms of leases around the league vary while some teams are on year to year deals others are locked in for longer terms. Let's presume the NBA could negotiate its way around that with minimal extra pain though.
In the end, ten years is a fairly brief period of time to make up your initial investment. If the new TV deal rises considerably, as expected, then the length could be brought down to eight years and the existing owners will come out far ahead.
As for fans, contraction is great for everyone except the contracted teams. Quite simply, the quality of basketball rises as the talent is more tightly clustered. Two teams dispersing players may not make a huge difference in talent throughout the league, but it would improve it at least somewhat, especially at the bottom end.
The players would ultimately be hurt by contraction most in terms of jobs lost. There are 26 fewer spots in the NBA for players to go to. Of course, the average salary for existing players would rise under a similar BRI split, as BRI won't drop by 7% while losing 7% of the jobs.
In the end, I don't think anyone will seriously consider contraction, but if I owned a team I would. It simply makes financial sense for the owners to buy out the bad teams and take a greater share of TV money back.